British polls: Britain’s rich are trying to save their wealth from the election hit

Wealthy people in Britain, from foreign billionaires to bankers in the City of London, are rushing to safeguard their money after Prime Minister Rishi Sunak surprised the country by calling a summer election.

Some are cashing in on investments, paying off bills that could soon rise or leaving Britain entirely, according to interviews with more than 20 wealthy individuals, who did not want to be named, and wealth advisers.

The ruling Conservatives and the opposition Labor Party have both pledged to abolish preferential tax treatment for non-domiciled residents – wealthy foreigners living in Britain, known as non-doms. Labor leader Keir Starmer has additional plans to tax the rich and opinion polls show his party with a lead of more than 20 points.

“I’ve seen hesitant clients panic before,” David Lesperance, a Poland-based tax and immigration adviser to the ultra-rich, said of Sunak calling the July 4 vote. He ‘pulled the pin out of the election grenade’.

Britain was expected to lose a net of 3,200 high net worth individuals last year, the most in Europe and doubling from 2022, estimates citizenship consultancy Henley & Partners. Britain’s reputation for legal and political stability has been rocked by the turmoil of Brexit and the change of five different Tory prime ministers since 2016.

Not only did the country lose ground to popular areas for the wealthy, such as Monaco, Dubai and Switzerland, but it also had to compete with European neighbors such as Italy and Greece, which rolled out schemes to lure wealthy foreigners. Britain scrapped its so-called golden visa program in 2022.

“It will be a serious and entirely avoidable misstep if these changes go ahead as announced,” said Dominic Lawrance, a London-based partner at global law firm Charles Russell Speechlys.

Labor also wants to introduce taxes on private equity professionals and private school fees. As part of the non-dom proposal, it aims to abolish inheritance tax exemptions for foreign assets in trust structures. The idea of ​​this major change has helped to increase the price of insurance to cover potential levies on wealthy estates.

Notable non-Doms

Non-dom status dates back to 1799, when it was introduced to protect colonial investments. Recent notable non-doms include former HSBC Holdings Plc CEO Stuart Gulliver and former Conservative Party deputy leader Michael Ashcroft.

In 2022, it was also revealed that Sunak’s wife, Akshata Murty, benefited from the status. After a media storm, Murty said she would pay British taxes on her global income, some of it from Indian software giant Infosys Ltd.

Labor leaders have previously estimated they could raise around £3 billion ($3.8 billion) by abolishing the regime, following recent academic research that predicted fewer than 100 wealthy foreigners with this status would subsequently leave the country.

The number of non-doms is already declining, falling by almost half to 68,800 in the decade to 2022, partly due to an earlier change in the rules to prevent individuals from permanently using the benefit. Yet those who retain the status pay more than £8 billion in UK taxes a year, according to the latest official data.

One city law firm has received more than three dozen inquiries in recent months regarding nondomestic changes, ranging from multibillionaires to centimillionaires, according to people familiar with the matter. One person has now left for Switzerland, while another is preparing to move to Italy, said the people, who asked not to be identified because the details are private.

A London-based former hedge fund manager originally from outside Britain is moving to another European country, partly due to frustrations with the political direction of both major parties. Another ultra-wealthy British national with property investments is similarly considering ways to switch from living full-time in Britain to just three months a year, with the balance spent in low-tax countries such as Dubai and Monaco.

Simon Goldring, a tax and trust adviser to the ultra-wealthy at global law firm Ogier, said he has a handful of live cases of British residents looking to move abroad, mainly British nationals frustrated by post-war taxes. reached its peak.

“They are fed up,” added Goldring, who himself moved to Dubai from Britain last year. “It’s a sad indictment.”

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Before the 2019 election, the threat from left-wing Labor leader Jeremy Corbyn caused some of Britain’s wealthiest individuals to quit the country. Jim Ratcliffe, billionaire founder of chemical giant Ineos, has said this was a factor in his move around 2018 to Monaco, where residents do not have to pay income or capital gains taxes.

However, Starmer has made more of an effort to appeal to this target group. Iceland Foods founder Malcolm Walker and former director of JPMorgan Chase & Co. Charles Harman was among 120 business leaders who signed a Labor letter of support last week.

“I am very disappointed in the Tory party,” British billionaire John Caudwell said in a Bloomberg TV interview on Thursday. He is a former Conservative donor and has not ruled out supporting Labor next month. “I will support anyone who has the right commercial policy.”

For the ‘mass wealthy’ cohort of Britons, the election has accelerated demand to future-proof their finances, according to wealth advisors.

Although neither party has yet published their manifestos, Starmer has said he would impose a 20% sales tax on private school fees to raise £1.7 billion for the state school system. That’s leaving some deep-pocketed parents considering paying contributions – which can amount to £65,000 annually – for years to avoid those extra costs.

“I have friends in this scenario,” said Ben Yearsley, an investment adviser at Fairview Investing in Bristol. They are “looking at a two-year upfront payment,” he added.

The political fluctuations in Britain also prevent wealthy foreigners from coming to the country.

A wealthy Middle Easterner, who wished to remain anonymous, has drawn up plans to move his family from Monaco to London as his children approach school age. A wealth manager for billionaires said clients are pulling back on British investments for the time being, especially in the property sector often favored by the super-rich.

Lesperance, a former non-dom in Britain in the late 1990s, said a billionaire client’s trust investments would increase his UK inheritance tax by more than 1,000% to around £400 million as a result of Labour’s non-dom reforms .

“We’re refueling the engines,” he said. “And we have our landing permit.”