According to a report by Oxford Economics, Labour's plan to overhaul the non-dom tax regime in the UK could have significant financial consequences, potentially resulting in a loss of up to £1 billion for the government as wealthy individuals may choose to leave the country. The proposed reforms, scheduled to come into effect in April 2025, are designed to replace the existing system that allows non-doms to avoid taxation on overseas income for up to 15 years with a new regime offering the benefit for just four years.
The Office for Budget Responsibility (OBR) initially estimated that the reforms would generate £3 billion annually. However, the OBR has acknowledged the inherent uncertainty in these projections due to the unpredictable responses from non-doms, making the financial impact of the changes uncertain. An Oxford Economics survey indicated that the non-dom population could decrease by 32% as a result of the reforms, potentially leading to a loss of tax revenue amounting to £0.9 billion by the fiscal year 2029-30. The survey, which included responses from 73 non-doms and 42 tax advisers representing 952 non-dom clients, revealed that 63% of non-doms are either planning to leave or actively considering leaving the UK within the next two years.
Critics of the proposed reforms, such as Chris Etherington of RSM, have raised concerns about the lack of in-depth research supporting the changes, pointing out that financial forecasts could be jeopardized if a significant number of non-doms decide to leave the UK. Etherington suggested that the reforms appear to be driven more by political considerations rather than economic reasoning. Additionally, the study highlighted that non-doms have substantial investments in the UK, with respondents collectively holding £8.4 billion in the British economy. If these individuals depart, 96% of them indicated that they would reduce their investments in the UK, potentially impacting the economy negatively.