advisers to the rich react to UK Budget’s non-dom tax cap

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Advisers to the wealthy have rejected a budget measure to reduce taxes owed by former non-residents, calling it “too little, too late.”

In her Budget this week, Chancellor Rachel Reeves included a measure to cap the unlimited inheritance tax (IHT) charge she introduced last year. This was one of the reasons given by wealthy people for leaving the UK.

IHT charges are currently 6 per cent every 10 years on certain assets in global trusts, but the new measure will cap them at £5 million for trusts set up before last year’s budget.

A government official said the increased revenue from anti-evasion measures on the rich meant it could spend “a little bit on reducing IHT charges on trusts, which is important”. [former non-doms] Most have been complained about.”

Robert Broderick, a partner at law firm Payne Hicks Beech, said the move was “an attempt to appeal to former foreigners who have left the UK due to concerns about inheritance tax”, adding: “Unfortunately, this may be too little, too late.”

He estimated that this would only benefit those whose bonds were valued at more than £85 million.

“The damage is done,” said one former non-resident, who left partly because of the new trust charge.

Giuseppe Ciucci, CEO of Stonehage Fleming, which advises the wealthy, said the measure was welcome but “may not be enough” for some people. He added: “The inheritance tax aspect… is something that for many is a red line in terms of their tax residency in the United Kingdom.”

Damien Bloom, a partner at law firm Taylor Wessing, said it would be “too little, too late”.

In her first Budget, Reeves confirmed the abolition of the non-residency regime, which allowed British residents who declared their permanent home abroad to avoid paying UK tax on foreign income and gains.

Taken together, the new measures “leave estimated revenues” from non-domestic repairs “broadly unchanged”, the Office for Budget Responsibility said. She added that revenue forecasts are “highly uncertain and dependent on the behavior of a small number of wealthy individuals.”

The number of non-residents who left the UK during the autumn 2024 budget proceedings is disputed.

The Financial Times reported in August that HMRC payroll data found no evidence to suggest that more non-residents with trusts had left the country than the official forecast of 25 per cent.

However, advisors to the wealthiest non-resident individuals have reported significant departures. HMRC’s figures were based on pay-as-you-earn (PAYE) payroll data, which does not include the richest individuals.

Current and previous tax contributions by non-UK residents rose by 1.8 per cent to £12.5 billion in 2023-24.

A Treasury spokesperson said: “The target cap will help ensure revenues are raised to lower costs of living, reduce waiting lists and reduce debt and borrowing, while balancing to ensure the UK remains a competitive destination for global mobile talent.”