Government plans to scrap the non-dom tax regime could create a £4 billion shortfall in public finances and cost 3,200 private sector jobs, experts warn.
Analysis by the Centre for Economics and Business Research (CEBR), commissioned by Land of Opportunity, which represents entrepreneurs, suggests that if 25% of non-domiciled residents — around 10,000 people — were to leave the UK, tax revenues could fall by £4.6 billion over five years.
Steel billionaire Lakshmi Mittal is among those reportedly considering leaving because of the crackdown on non-doms.
Using a model aligned with the Office for Budget Responsibility (OBR), the CEBR also estimates that such an exodus could result in the loss of 3,163 private sector jobs.
The CEBR suggests that if there is an exodus of non-doms, Chancellor Rachel Reeves’ £9.9 billion spending buffer could be cut in half.
Economists claim this is likely to be wiped out by the Autumn budget as a result of the Government’s U-turn on welfare and winter fuel payments, according to The Times.
Earlier this month, the Government revealed that from April 2025, the tax system for non-domiciled individuals will be eliminated and replaced with a new residence-based system.
The measure will "address unfairness in the tax system and ensure that everyone who is a long-term resident in the UK pays their taxes here" according to a policy document the Treasury released.
But the Chancellor is considering watering down her plans to scrap the non-dom tax rules amid concerns about the number of wealthy individuals deserting the UK.
"The government will continue to work with stakeholders to ensure the new regime is internationally competitive and continues to focus on attracting the best talent and investment to the UK,” the Treasury said.
According to Government estimates, in the tax year ending in 2023, 4,000 people claimed non-domiciled taxpayer status in the UK on their self-assessment tax returns. That was an increase from 68,900 in the tax year ending in 2022.
In the UK, non-doms are individuals who are considered non-domiciles for tax purposes, meaning they are not liable to pay UK tax on their foreign income and gains so long as their funds are not brought into the country.
Andrew Barclay, founder of Land of Opportunity, said the removal of non-dom status is “highly damaging” to the UK’s economy, but said there is still time to slow the rate of departures, The Times reported.
Sam Miley, head of forecasting at the CEBR said its findings suggest that the plans would have a mild negative impact on the economy.
According to Company House records, more than 4,400 directors have left in the past year, including a jump in numbers over the past few months.
Departures in April were 75% higher than in the same month last year.
Labour has said they want to generate an estimated £2.6 billion by closing non-dom loopholes, estimating that implementing its plans would generate an initial £1 billion in the first year. This would pay for extra medical and dental visits — and universal breakfast clubs in schools.
However, Treasury officials have expressed their concern that enough will not be raised due to the impact of the super-rich non-domiciles leaving the UK.
