Several billionaires have left the United Kingdom in recent months over fears that Chancellor Rachel Reeves may bring in new taxes on the rich in today’s Budget. Banasree Purkayastha looks at what’s prompting the UK government to consider this move & its potential impact on London’s ability to attract the rich
Lakshmi Mittal latest to leave the UK
Indian-born steel magnate Lakshmi Mittal is reportedly the latest to join the list of several billionaires quitting the UK over apprehensions that the Labour government will impose further taxes on the super-rich. According to The Sunday Times, Mittal, chairman of ArcelorMittal which generated $62.4 billion in revenue last year, will now divide his time between Switzerland and Dubai. His personal net worth is around $21.4 billion.
The UK has already increased capital gains tax, reduced relief for entrepreneurs and enterprises, and changed rules governing the transfer of family businesses. Reports suggest stiffer tax measures may follow, including an “exit tax” on wealthy individuals leaving the UK.
As per the report, inheritance tax was the trigger for Mittal’s exit. Many wealthy foreign residents, it said, “cannot understand why all of their assets worldwide should fall under UK inheritance tax,” forcing them to consider moving out. Inheritance tax can apply to global assets depending on residency and domicile status.
Growing list of super-rich moving out
Earlier this month, Herman Narula, the British Indian founder of tech firm Improbable, announced he is shifting to Dubai citing the reported plans to impose an exit tax on wealthy people leaving the UK. Recently, former England footballer Rio Ferdinand and Revolut co-founder Nik Storonsky moved to Dubai, citing taxes. Egyptian billionaire Nassef Sawiris moved his residency to Italy and the United Arab Emirates (UAE) earlier this year for the same reasons. Norwegian-Cypriot shipping magnate John Fredriksen and South Africa-born vice president of Goldman Sachs Richard Gnodde also figure on this list. Bharti Airtel founder Sunil Mittal’s son, Shravin Mittal, the top shareholder in UK telecommunications giant BT Group Plc, currently lists the UAE as his residence after previously listing the UK, Bloomberg reported, citing registry filings. Business and Trade Secretary Peter Kyle has expressed worry over these high-profile exits.
A wealth tax or an exit tax, or both?
The current exodus is linked to the Labour government’s attempts to plug a £20 billion gap in national finances. Chancellor Rachel Reeves has said both tax rises and spending cuts are options in the November 26 Autumn Budget. She is likely to announce fresh levies, including a 20% exit tax on entrepreneurs to dissuade them from shifting wealth to low-tax jurisdictions, as well as a mansion tax on expensive homes. In an interview with the Guardian last month, Reeves had indicated that higher taxes on the wealthy will be part of her Budget story. Her 2024 Budget had abolished the non-domicile tax regime and stopped use of offshore trusts to avoid the UK’s 40% inheritance tax. However, at a Labour Party conference in September, Reeves had appeared to rule out a specific tax on wealth. She told Bloomberg TV: “We already have taxes on wealthy people; I don’t think we need a standalone wealth tax.”
Can such taxes solve the UK’s financial woes?
Introduction of an annual wealth tax is a subject of much debate in the UK — the Wealth Tax Commission in 2020 estimated that an annual wealth tax of 1.12% on assets over £10 million could bring in £10 billion a year. There are 150-odd billionaires living in the UK, and thousands with more than £100 million: thus a wealth tax is touted as a quick-fix solution to its fund woes.
Most 2024 Labour and Green voters say the fund issues facing public services can be solved solely by raising taxes on the rich, found a recent YouGov survey. Most citizens think more money would be raised by raising taxes on the super-rich than by lowering them — but even if raising such taxes lost the Treasury money overall, a plurality would still want to go ahead, it said.
Meanwhile, many millionaires, too, are in favour of a wealth tax. Campaign group Patriotic Millionaires UK, which has over 85 millionaires among its members, is calling for a 2% tax on wealth over £10 million.
Will London lose its edge?
The UK’s flexible tax regime for high-net-worth individuals has long attracted the wealthy from around the world to make the island nation their home and London a crucial hub for their business empires. Public infrastructure, political and economic stability, legal systems, and schools have also made their stay sticky.
A 2024 London School of Economics study found that the capital’s cultural infrastructure, private health services and schools, and the ability to maintain social ties were keeping ultra-wealthy families there despite the fears of rising taxes. It’s those who have companies or homes abroad or plan to sell their holdings in the next few years and do not want to pay capital gains tax on sales who are shifting elsewhere.
A second cohort is professionals and investors who have payouts from private equity or hedge funds and want to avoid income tax. Meanwhile, cities such as Dublin and Dubai are gaining at London’s expense. While Ireland exempts the non-domiciled from Irish taxes, Dubai has no inheritance tax.