Henley and partners published their private wealth migration
report once a year. In their latest edition, the UK
ranks dead last for the first time, with a net outflow of
16,500 millionaires. This figure has been quoted in
parliament, picked up by newspapers and used to frame
debates about Britain's global competitiveness.
It's a very worrying number, but it's also quite hard to verify.
Tim Hartford looked into this claim on his BBC podcast More or
Less. He interviewed the head of
research at New World, Weld, who did the research underlying the
migration report, who explained that their estimates rely on
social media profiles, press coverage and company filings.
Hartford argued in his podcast, quite rightly, that their sample
was not representative and that you couldn't draw conclusions
from it. Dan Needle of Tax Policy
Associates went further in a forensic review published on his
website. He pointed out that the report
was riddled with statistical red flags.
The firm had dropped all property wealth from its
analysis between 2023 and 2025, yet it's millionaire counts
barely moved, a result Needle described as impossible if the
published methodology were real. New World Weld later told the FT
that they hadn't actually changed their methodology, just
their description of it. Needle found digit patterns in
the data with a suspiciously high frequency of even numbers
and numbers where trailing digits cluster on zeros and
fives with almost no ones. Statistically, he points out,
the chance of that occurring naturally is about one in
240,000 More evidence, he says that the numbers were either
manually created or manually adjusted.
Needle's analysis used well established techniques to detect
rigged numbers. I'll put a link to his more
detailed analysis in the description, but he concluded
that the figures were likely engineered rather than observed.
Now this doesn't mean that the rich are not leaving the UK, it
just means that it's very difficult to know whether they
are or not, simply because good data doesn't exist.
To highlight the difficulty, the UK Office for Statistics
Regulation recently suspended the official statistics status
of the government's own Wealth and Asset Survey collected by
the Office for National Statistics, following concerns
raised by the ONS that the data is no longer of sufficient
quality to meet users needs. The Financial Times in a
separate analysis, found that a wave of company directors have
left Britain since the government abolished it's
favourable tax treatment for non domiciled residents and raised
other duties on the wealthy. They analyzed Companies House
filings looking for directors of UK firms who updated their
addresses to overseas jurisdictions.
This is not a perfect methodology either, which the FT
highlighted in their column, as plenty of wealthy people don't
run companies and plenty of directors don't update their
filings in a timely manner. But a trend is visible in the
data. In the most recent report, 3790
directors reported leaving the UK, up from 2710 the year
before, and the spike that occurred in April coincides with
the new tax changes. There are other signals being
reported, too. Butler agencies report fewer
placements, wealth managers say that some clients are leaving,
and London's luxury property market has softened.
None of this is conclusive, but it's not nothing either.
EU KS non Dom tax regime is not a recent invention.
It dates back to the very first income tax in 1799, introduced
by William Pitt the Younger to fund the Napoleonic Wars.
At the time, all residents were taxed only on UK income.
In 1915 the rules changed. UK residents were taxed on
worldwide income unless they could claim non domicile status,
and that carve out remained largely intact for over a
century. Non Dom describes Auk residence,
whose permanent home for tax purposes is outside the UK
domicile under British tax law has always been a bit of a funny
thing. It's the place that someone
considers to be their permanent home and where they have the
closest ties, and it refers to their tax status and doesn't
necessarily relate to their citizenship or resident status,
although it can be affected by these factors.
A non Dom only paid UK tax on the money they earned in the UK.
They didn't have to pay tax to the UK government on money made
elsewhere in the world unless they transfer that money back
into the UK. For wealthy individuals, this
presented the opportunity for significant and entirely legal
tax savings, especially if you could claim a lower tax country
as your domicile. One of the best known non doms
was former Prime Minister Rishi Sanak's wife, who, after a
scandal broke a few years ago, announced that she would start
paying UK tax on her worldwide income.
Attempts to reform the non Dom rules over the years were
frequent. Labour nearly abolished it in
1974. Niger Lawson tried again in
1988. During the financial crisis the
regime was tightened where annual charges were introduced
for long term non DOMS. You had to pay £30,000 a year if
you'd been resident in the UK for seven of the past nine years
and £60,000 a year if you'd been resident for 12 of the past 14
years. The remittance basis was
preserved, but access became more expensive and conditional.
George Osborne made further changes in 2017, removing
benefits for those who had lived in the UK for 15 of the past 20
years. But each time adjustments were
made, Treasury officials warned of tax flight and ministers
backed down. The fear was that driving the
wealthy abroad would harm the economy more than it would
benefit from taxing them on their foreign earned income.
In March 2024, then Chancellor Jeremy Hunt announced the
abolition of the Non Dom rule. Ahead of the general elections
in October, Labour Chancellor Rachel Reeves confirmed the
policies and extending it to offshore trusts to prevent
inheritance tax avoidance. Now, foreign income and gains
are taxed in the UK as they are earned once an individual has
been resident in the UK for four years.
On top of that, inheritance tax will apply to worldwide assets
after 10 years and continue for 10 years after departure.
The excluded property trust loophole is closed and the
concept of domicile for tax purposes has been retired.
There are transitional rules. Assets held before April 2025
can be rebased. Foreign income and gains can be
brought into the UK at a flat 12% rate for a limited time.
New arrivals get a four year grace period under the
qualifying new resident regime. But the overall direction is
clear. The UK is no longer a tax haven
for the globally mobile. The Office for Budget
Responsibility says that they expect up to 25% of non Doms to
leave the UK. The Treasury forecasts £12.7
billion in revenue over five years.
Research from Warwick University suggests the fears of a mass
departure may be overstated as when Osborne's 2017 change took
effect, only 6% of affected non Doms left the UK.
Those who stayed paid significantly more tax, on
average an extra 100,000 £1000 per year, and the predicted mass
exodus never came. The debate is still not over.
This June, the Financial Times reported the chancellor, Rachel
Reeves, was exploring A partial reversal of the inheritance tax
changes. Following lobbying from the City
of London and a spate of high profile departures.
The government is said to be considering adjustments to the
10 year tale or reintroducing trust protections.
No formal announcement has been made, but the Treasury is
watching the fallout closely. The VAT change on private school
fees has added to this mood. From January 2025, independent
schools are subject to 20% VAT. The government expects a 10%
average fee increase and up to 35,000 pupils to shift to state
schools. For wealthy families already
considering relocation, it's one more nudge.
There have been a number of high profile exits.
Lakshmi Mattal, the Indian born founder of Arsalore Mattal and
Britain's 7th wealthiest man, is reported to be leaving, as is
Nassif Sawaras, Egypt's richest person.
Richard Nodi, the South African born vice chairman of Goldman
Sachs International, has left Britain for Milan and Beaufort.
The Sanofi heiress moved her tax residence to Switzerland.
A study of non doms in 2018 and those who had claimed the state
has since 1997 found that more 93% were born abroad and another
4% had lived abroad for a substantial period.
Most have genuine international ties.
When the UK changes the rules, these people have real ties
abroad and can choose lower tax regimes if it makes sense for
them. A paper from the London School
of Economics on tax flight points out that people who have
already migrated ones tend to be more responsive than natives to
tax changes, and there's often a statistically significant
migration response overall. None of this proves a mass
departure, but it's not just noise either.
HMRC payroll data this August found no evidence to suggest
that more non Doms left Britain than the 25% official
prediction, according to the FT. Countries around the world are
constantly adjusting their tax regimes.
Switzerland offers lump sum taxation to high net worth
individuals where a flat tax rate can be negotiated with
local government authorities. Italy introduced a €100,000 flat
tax on foreign income in 2017, later raising it to €200,000.
This has been popular with footballers, fashion executives
and hedge fund managers. Portugal replaced its non
habitual resident regime in 2024 with a narrower scheme focused
on innovation and research. The UAE has no personal income
tax and a nine percent corporate tax above $1,000,000.
Andura offers a 10% income tax, no well tax and no inheritance
tax. Golden visas are part of the
strategy too. The UAE offers long term
residency to investors. Italy and Greece have property
linked visa schemes. Donald Trump recently proposed a
$5,000,000 Gold Card Visa for the US, a rebranding of the EB5
immigrant investor visa with fewer restrictions.
To highlight how complicated some of this can be, last month,
several senior bankers from Pictay, one of Switzerland's
most prestigious private banks, relocated to Italy where they
could get lower taxes. The move triggered a tax debate
in Geneva. A point of contention is that
some foreigners in Switzerland pay less tax than citizens do.
Critics argued that Switzerland's rigid enforcement
was pushing talent away, while Italy's flat tax regime was
pulling it in. Tax is only part of the
equation. Wealthy individuals also
consider lifestyle, legal stability and access to global
markets. Jurisdictions that offer the
right mix attract the rich, while others lose them.
Gabrielle Zilkman, the French economist known for his work on
tax havens and inequality, has proposed a 2% annual wealth tax
on billionaires. The idea gained traction in
France's political circles earlier this year, with support
from parts of the left and criticism from business leaders
and economists across the spectrum.
Zupman argues that the ultra wealthy are under taxed relative
to their income and assets. His proposal is designed to be
enforceable through international cooperation and
automatic exchange of financial information.
He's also advising the G20 on global wealth taxation, pushing
for a coordinated approach that would prevent capital flight.
France has a history with wealth taxes.
It repealed its own version in 2017 after years of debate over
its effectiveness. The tax raised modest revenue
and was blamed for driving wealthy residents to Belgium,
Switzerland and the UK. The debate over how taxes should
work has spilled across borders. The former French Prime Minister
recently accused Italy of engaging in fiscal dumping by
luring wealthy French citizens with its flat tax regime.
The Pictay bankers move from Geneva to Milan has sparked
fierce debate in Switzerland. Wealth taxes are politically
popular but economically fragile.
According to Economics Observatory, the number of OECD
countries with annual wealth taxes dropped from 12 in 1990 to
just three today. The reasons for dropping them
are consistent low yield, high avoidance and administrative
complexity. Mobility is no longer limited to
billionaires. Increasingly, professionals in
the upper middle class are making decisions about where to
live based on tax, lifestyle and legal stability.
The barriers to relocation have dropped.
Remote work, international schools and digital
infrastructure have made it easier to live abroad without
severing ties to home. In the United States, internal
migration reflects similar patterns.
States like Florida, Texas and Tennessee, which have no state
income tax, continue to attract high earners from California,
New York and Illinois. The shift isn't just about tax.
It's also about housing costs, crime rates and the quality of
public services. Digital nomad visas have added
another layer. Estonia, Portugal, Barbados and
many other countries offer residency to remote workers
earning above a certain threshold.
These programs target professionals who aren't wealthy
in the traditional sense but have portable incomes and
flexible careers. Citizenship planning has become
a cottage industry. Wealthy families now hold
multiple passports, not for travel convenience but for legal
and financial flexibility. Some jurisdictions offer Plan B
citizenships second passports designed to hedge against
political or fiscal instability. The wealthy have always been
mobile. What's changed is the scale.
Mobility now extends to a broader segment of the
population and governments are adjusting their policies
accordingly. Governments are also just
starting to run out of room. Across Europe, deficits are
widening and the cost of borrowing is no longer trivial.
The post pandemic debt pile hasn't shrunk, it's instead been
layered with new obligations, energy subsidies, inflation,
linked benefits and now military spending.
Ageing populations combined with high retirement benefits aren't
helping either. Governments need to either raise
taxes or cut spending, and there appears to be no desire to cut
spending. Tax revenue has to come from
somewhere, but the traditional targets consumption, corporate
profits and middle income earners are already strained.
This is the tension. Fiscal sustainability demands
revenue while global competitiveness demands
restraint. The balance is hard to strike
and easy to lose. In the 1970s, Britain raised its
top marginal tax rate to 83% and 98% on unearned income, which
means investment income and royalties.
The response was quick. The Beatles, whose music
publishing income would have been classified as unearned
income, shifted their financial operations offshore.
The Rolling Stones left for France.
Film stars, bankers and industrialists followed.
Sotheby's held auctions on heirlooms from shuttered
estates. Stately homes emptied out.
The tax code had become a deterrent.
High earners who could move did. Today, the top rate of income
tax in the UK on most income is 45%, so you would expect that
there must have been a lot more income tax paid in the 1970s
than today. But this chart from Tax Policy
Associates shows that income tax raised about the same in the
1970s as a percentage of GDP as it does today.
It's worth noting that the rich didn't end up paying a higher
percentage of taxes back then either.
When taxes were at their highest in 1978 and 1979, the top 1%
paid 11% of all income tax collected.
Today in the UK the top 1% pay about 29% of all income tax
collected. There were a few reasons for
this change. Firstly, the top 1% today earn a
lot more than the top 1% did in the late 70's.
The nature of how money is made today, where technology can be
leveraged to build scalable income, means that income is
less tied to hours worked than it was in the past.
Secondly, in the wake of the financial crisis, tax rates went
up a lot for higher earners. Thirdly, and possibly most
importantly, higher earners are often in a position where they
can control the size of their incomes and the timing of
payments. While The Beatles and The
Rolling Stones couldn't slow down their royalty payments, a
business owner or a senior executive could defer payments
waiting for a better tax rate. Why would you pay yourself a
high dividend or a bonus if the government would take 98% of it?
You'd just leave it in the company.
In the 1970s, benefits in kind were under taxed or completely
untaxed so an executive could eat out, have a company car,
take holidays and enjoy club memberships, all without being
taxed. As Dan Needle explains in his
blog, the UK tax policies of the 1970s were a failure.
They failed to tax the rich effectively, they failed to fix
the government's fiscal problems, and they drove many
wealthy Brits abroad who never came back.
The 1970s are remembered for strikes and stagflation, but
they also marked a turning point in how Britain treated globally
mobile wealth. When the cost of staying rises,
those with options start looking elsewhere.
Those calling for a return to those types of policies are
often doing so out of a desire to punish high earners.
According to Dan Needle, the lessons that can be drawn from
that era are that the best way to tax the wealthy is to expand
the base and close loopholes. Well, that makes a less snappy
sound bite than sending rates sky high.
The evidence and the history show that it's a fairer and much
more effective method. The debate around wealth
inequality often starts with a statistic and ends with a
slogan. Oxfam's claim that the richest
1% own more than the rest of the world combined gets repeated
frequently, but the methodology behind it is rarely examined.
The figure includes negative net worth, which means a recent
medical school graduate with student debt is counted as
poorer than a homeless person with no debt but with no
employment. Prospect sex.
That's not a meaningful comparison.
Another example, Jerome Kerviel, the rogue trader who lost
billions for society. Generale is technically one of
the poorest people in the world by net worth.
His debts are so large that they skew the data, but he's not
representative of global poverty.
In the UK, the top 1% pay around 29% of all income tax.
That share has risen over time and not fallen.
The idea that the wealthy aren't contributing is popular, but
it's not supported by the numbers.
Inequality exists, but the shape of it is more complex than the
headlines suggest. Many of those counted as wealthy
are business owners with volatile income or professionals
with high earnings but limited assets.
Where you live matters too. You can probably live more
comfortably on $50,000 a year in Texas than on $100,000 a year in
California, where everything costs a lot more.
Many of those counted in broad based statistics as being poor
are young, educated and on upward trajectories.
According to research from the Institute for Fiscal Studies,
high earners in the UK are not a stable group. 1/4 of those in
the top 1% in one year will not be there the next.
After five years, only half will still be in the top 1%.
Research from Cornell University shows that about 11% of American
workers will move into the top 1% of income earners for at
least one year between the ages of 25 and 60.
Hopefully you can see that the data is a bit more complicated
than it first appears to be, and you need to look past the
headlines and slogans to see what's actually going on.
Whether the rich are leaving the UK or not in meaningful numbers
is hard to pin down based on the available data, and it will take
some time to work that out. The bigger issue is whether
people, especially those with options, feel that they're
getting value for money with their taxes.
Tax isn't just about rates, it's about trust.
In Sweden, high taxes are tolerated because the system is
transparent, the institutions are trusted and the public
services work. Civil servants disclose their
financial interests and one phone call will get you, your
lawmakers tax statements. That kind of openness builds
legitimacy and with it, compliance.
In the UK and the US, trust in government is lower, tax systems
are more complex, and when people feel their money is
wasted or mismanaged, they start looking for the exit.
There's no perfect formula, but history offers clues and the
international landscape offers comparisons.
The challenge is to tax fairly, fund public services, and remain
globally competitive all at the same time.
Thanks for tuning into this week's podcast, with special
thanks to my supporters on Patreon whose funding makes this
happen. Have a great week and talk to
you again soon. Bye.