Labour’s ‘painful’ budget: signalled tax hikes are driving the wealthy out of the UK

As the UK braces for the upcoming Autumn budget, anticipation is building throughout the country as to whether Labour will stick to their election taxation pledges or not. So, buckle in, because if you have a business, investments, properties, or hope to leave your children a hefty sum of money, the overall picture is not looking promising.

After initially coming into power with promises of no sweeping tax increases, the Labour government has started backtracking. We could have all guessed they were hiding something behind these promises, and now Kier Starmer has started to hint at significant fiscal tightening that will likely hit the wealthiest the hardest, stating ‘those with the broadest shoulders should bear the heaviest burdens’. As a result of this, there is growing discontent among the UK’s financial elite, with many beginning to explore overseas and offshore options to escape the impending tax burden, with a projected 9,500⁽¹⁾ millionaires due to leave the UK this year, and around 500,000⁽¹⁾ set to depart by 2028. This is in addition to the mass numbers that have relocated in the last 12 months.

What is becoming increasingly apparent is that Labour are eyeing tax reforms that will directly affect the HNWI’s and non-doms who have historically enjoyed reasonable tax advantages under previous regimes. One change is the abolition of the non-domiciled tax status. Currently, non-doms benefit from special tax treatment, paying UK tax only on income they bring into the country, but the suggestion that this will be removed is a direct assault on international wealth. All it will do is drive away the wealth creators and successful entrepreneurs. By driving these people away it will cripple key investment and cause a dip in innovation and job creation.

Another change is the potential increase to capital gains. Wealthy individuals could face rates as high as 45%⁽²⁾, which is a huge increase on the current 20%. This would more than double the tax burden on investments, severely punishing those who have accumulated wealth. It also reduces the attraction of the UK to these wealth creators, pushing them to relocate to countries with more favourable tax regimes.

It is clear that the Labour party seems to believe that the wealth belongs to the state, not any individual. As Starmer and Reeves prepare to unveil the full budget in October, the tension between the government’s economic plans and the wealthiest of the UK is only continuing to grow. What is very clear, however, is that a significant portion of the country’s most successful individuals feel they are being unfairly targeted, and for many the only solution is to take their wealth elsewhere – before the rumoured exit tax⁽³⁾ comes into force.

Faced with the prospect of paying more tax than ever before, many HNWI’s and non-doms are unsurprisingly taking action. Industry professionals across the UK are reporting a noticeable uplift in clients seeking advice on moving themselves overseas. For others, the solution lies in moving businesses, if not themselves. Some of the UK’s most successful entrepreneurs and company owners are contemplating transferring their business operations to more tax-friendly jurisdictions. By shifting the core of their business abroad, many are hoping to shield the operations from the government’s reach. Offshore havens and countries with lower taxes have never looked more attractive to UK businesses and HNWI’s.

A mass flight of capital would further exacerbate the challenges the government faces, forcing them to reassess their fiscal strategy – but possibly too late. This is especially concerning considering the top 1% of taxpayers (with an income exceeding £214,000) actually provide 29% of all income tax revenue⁽⁴⁾.

These policies discourage success and are nothing short of economic sabotage should the suggested changes go ahead. All they do is target and punish the wealth creators of the UK, the very people who invest, create jobs and drive innovation forward. The long-term damage that could be caused is even more terrifying, with the potential for the UK economy to begin stagnating. Prioritising short-term gain over long-term prosperity is not the correct focus.

We have already seen the Labour government target pensioners by cutting the winter fuel payment for many, whilst still claiming the funds to heat their second homes may we add. There is nothing stopping them from targeting the wealth creators of the UK with eyewatering tax hikes next, and we are here to help if you are wanting to move your wealth out of the county and to sunnier shores.

Here at Turner Little, we have decades of experience in developing bespoke strategies for businesses and entrepreneurs. Understanding the most appropriate business structure for your venture is essential to minimise your tax liability and create the right organisational structure for growth. To provide you with the widest variety of options, we incorporate companies in many overseas jurisdictions. Please get in touch to discuss your options.

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Labour’s ‘painful’ budget: signalled tax hikes are driving the wealthy out of the UK

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