We can afford to live in the UK but not to die here – non-doms fear IHT raid as Italy says: ‘move here’
- Inheritance tax rise will cheat our children, say entrepreneurs
A flat-rate lump sum levy that falls due each year could be the solution to the mounting challenges facing Chancellor Rachel Reeves in her Autumn Budget plan to squeeze more tax from ‘non-doms’.
These are people whose permanent home is out of the UK for tax purposes and so enjoy certain tax privileges.
A similar scheme in Italy – led by premier Giorgia Meloni – is luring non-doms from the UK and elsewhere who are willing to pay reasonable sums in tax, but unwilling to be penalised.
What is coming? Rachel Reeves will announce the Autumn Budget on 30 October
Ahead of the Budget on October 30, Reeves’s threat to impose inheritance tax on non-doms’ overseas assets has sparked an exodus of these old-money families and entrepreneurs.
Currently, their estates are liable for IHT only on money earned in the UK and on UK properties, including those held through foreign companies.
On hearing of the plan, one non-dom is said to have remarked: ‘I can afford to live in the UK, but I can’t afford to die there any more.’
In an embarrassment to the Government, research from the Oxford Economics consultancy reveals that the Reeves crackdown would not raise the hoped-for £2.6billion but would result in a £900million loss of revenues.
Non-doms are wealth-creators, starting businesses, supporting employment and spending freely on expensive goods and services. But up to a third could quit Britain, according to Oxford Economics.
Policy: Non-doms are now being lured to Giorgia Meloni’s Italy
Dominic Lawrance, a tax specialist at law firm Charles Russell Speechlys, says existing non-doms – and those contemplating a move to the UK – are being deterred by Reeves’s desire to bring overseas assets into the IHT net.
Lawrance said: ‘It’s seen as draconian and hostile – the straw that breaks the camel’s back.’
The rule change would apply to those who have been resident for 10 years – and continue to cover them for 10 years if they decided to quit Britain.
Under the Italian non-dom rules – which are attracting some of those fleeing the Reeves policy – an annual flat fee of €200,000 (£167,000) is levied on overseas income.
The influx of non-doms into Milan is seen as having brought a renaissance to the city, suggesting that a UK scheme could have the same effects.
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