23 Jul Why the wealthy are leaving the UK
In recent months, headlines have increasingly reported a trend: wealthy and ultra-wealthy individuals are leaving the United Kingdom. What’s really happening? Is this simple tax avoidance—or is there something deeper going on?
The short answer: the UK is turning into a Tax Hell now even for the rich.
And while the term may sound dramatic, there’s data to back it up. The Tax Hell Index from The 1841 Foundation—which combines quantitative variables (rates, revenue, tax structure) and qualitative factors (complexity, stability, treatment of taxpayers)—has placed the UK at a total score of 8 (and this score has been stable since the beginning of the Index in 2022), comparable to countries like Brazil or Colombia. That’s not the kind of company a global financial hub wants to keep.
What’s Changing in the UK?
For years, the UK was an attractive destination for high-net-worth individuals—especially thanks to the non-dom regime, which allowed non-domiciled residents to avoid taxes on their global income. That era is now ending.
Key recent and upcoming tax changes include:
- End of the non-dom regime (April 2025): After four years of UK residency, individuals must now pay tax on all global income. After ten years, they’ll also face a 40% inheritance tax on worldwide assets.
- Income tax threshold freeze (until 2028): In real terms, this means more people will be pushed into higher tax brackets, generating an estimated £8–25 billion in additional annual revenue.
- Capital Gains Tax (CGT) increases: From October 2024, rates will rise from 10% → 18% and 20% → 24%. Carried interest for fund managers will increase to 32% from April 2025.
- New tax on agricultural estates: Starting in 2026, rural inheritances over £1 million will face a 20% CGT, ending previous full exemptions.
- New levies on wealth and luxury: Higher VAT on private schools, increased stamp duty on second homes (+2 percentage points from October 2024), and upcoming taxes on electric vehicles and premium air travel.
Redistribution—or Repulsion?
These reforms aim to achieve two goals:
- Increase government revenue.
- Align the tax burden on the wealthy more closely with that of the middle class, who historically have had fewer ways to defer or avoid taxes.
But here’s the issue: the capital—and the people—are already moving.
High-net-worth individuals don’t typically wait for tax changes to fully kick in. With top-tier legal and financial advisors, they tend to act early. And that’s exactly what’s happening: tax relocations, foreign residency applications, new trusts and offshore structures—all before April 2025. It’s a quiet, strategic exodus.
The Bigger Lesson
Many countries fall into the trap of offering temporary tax incentives to attract capital. But once those incentives are removed, capital doesn’t stay out of loyalty. It leaves. Worse still: maintaining tax loopholes for the wealthy while the majority of the population faces a heavy tax burden is socially and politically unsustainable. Eventually, there’s a correction—and as we’re seeing in the UK, that correction can be fast and painful.
What’s Next?
The UK should be a cautionary tale for other countries competing for capital. In a world of high mobility—for both wealth and people—poorly designed incentives may win the short-term race but lose the long-term game.
We believe it would be much better to implement a low flat tax system for all, with fewer taxes, and less if any loopholes at all.
Sometimes, it is better to redesign the tax system than to keep patching it up.
Written by Pablo De Corral – Director of The 1841 Foundation