 "London is no longer among the five richest cities in the world. Reuters")
Millionaires are leaving London in droves.
So much so that the capital of the UK is no longer among the five richest cities in the world.
According to a new report, London has lost more millionaires in the past year than any other city in the world barring Moscow.
The development comes as changes to Britain’s “non-dom” tax regime take effect.
It also occurs in the backdrop of a debate in the UK over the implementation of a wealth tax.
But what do we know? Why are the super-rich fleeing?
Let’s take a closer look:
What do we know?
As per IBC.co.uk, the study was put out by New World Wealth for advisory firm Henley and Partners.
The study showed that 11,300 dollar millionaires have left London over the past 12 months.
This includes 18 centimillionaires – those who have over $100 million – as well as two billionaires .
The study classifies wealth as assets that are “liquid investable” – cash, bonds and shares.
Property is not counted as wealth for the purposes of the study.
London currently has 215,700 dollar millionaires.
The study found that London is one of just two cities, alongside Moscow, to have fewer millionaires than it did a decade ago.
Since 2014, London has witnessed 12 per cent of its wealthiest residents leave.
The study was conducted before US President Donald Trump announced his trade tariffs.
New York and San Francisco remain the two richest cities in the world, as per The Standard.
Why are the super-rich fleeing?
As per The Independent, the report blames Brexit, tax increases and a reduction in the value of the pound for the super-rich leaving.
Lisa Nandy, Secretary of State for Culture, Media and Sport of the United Kingdom, told Sky News, “The report points to a variety of factors that have led to that, most specifically Brexit, and one of the things that we’re committed to doing as a government is making sure that we get a far better deal with the European Union that make sure that we can continue to support British business.
So in my area, for example, we’ve got significant problems, as has the EU, because music artists aren’t able to tour from the UK and the EU and vice versa. Now that’s not good for anybody, so closer cooperation is in people’s interests.”
She added: “But the tax regime in Britain is still highly competitive. We’ve got the lowest main rate of corporation tax in the G7 and, look, when I come on programs like this, I get asked a lot, ‘why aren’t you taxing wealthy people more?’
“The fact that you’re challenging me today to say is the tax rate too high, I think broadly, shows that we’re taking the right approach and we’re striking the right balance.”
The Standard quoted Andrew Amoils, Head of Research at New World Wealth, as laying the blame at capital gains tax and estate duty for the super-rich choosing to relocate to destinations such as Paris and Dubai .
“Capital gains tax and estate duty rates [IHT] in the UK are amongst the highest in the world, which deters wealthy business owners and retirees from living there,” Amolis said.
“It’s worth noting that most of the companies on the FTSE 100 were started by centimillionaires, so the loss of these individuals has a massive impact on an economy.”
“The growing dominance of America and Asia in the global hi-tech space has caused wealthy tech entrepreneurs in the UK to reconsider their base location.”
Others point the finger at the government’s overhaul of the ‘non-dom’ tax regime led by Chancellor Rachel Reeves – referring to the tax status of a UK resident whose permanent home is overseas.
In March, it was reported that tycoon Lakshmi Mittal was considering leaving the UK over the change in the tax regime by the Labour government.
The system has been around for 226 years.
The government has said the new system will be a “residence-based” regime – with foreign earnings coming under the UK inheritance tax system, as per BBC.
As per Self-employed.com, under the new system, new UK non-doms will pay no tax on foreign income till 2029.
They will only pay tax on gains.
Those who have non-dom status will be given a two-year grace period to transition.
After that lapses, they will be taxed on all income from abroad.
The UK in 2022-2023 had around 74,000 people with non-dom status, as per BBC.
Matthew Braithwaite, client partner at law firm Wedlake Bell, told The Telegraph “The non-dom reforms have led to a spike in millionaires leaving the UK, but the tax environment has become more hostile to foreign investors over the last 10 years.”
“There were tweaks to the non-dom regime in 2017 which made it harder, as well as Brexit. The way people can migrate to the UK has become complicated.
“The curtailment of business property relief under Labour is also off-putting. The threat of inheritance tax on your business is significant. These individuals will either leave or make sure not stay for more than 10 years so that they don’t come into the scope [of inheritance tax].”
Braithwaite said Dubai, Jersey and Italy – which have “borrowed heavily” from the UK’s non-dom regime – have become locations of choice for many of his clients.
But the Labour government has rebuffed claims that the tax system is burdensome and onerous.
The Telegraph quoted a treasury spokesman as saying, “Our tax system is fair and progressive, and keeps the UK an attractive place to live while ensuring everyone who is a long-term resident in the UK pays their taxes here.”
“The UK’s main capital gains tax rate is lower than any other G7 European country – including Italy, France and Germany – and our new residence-based regime is simpler and more attractive to new arrivals than the non-dom regime it replaces.”
With inputs from agencies