Non Dom Exodus Claims Questioned as HMRC Data Matches Official Predictions

Fresh claims of a mass departure by wealthy non-domiciled residents in response to recent tax changes may be exaggerated, as new reports suggest their numbers align closely with government forecasts. The chancellor, Rachel Reeves, ended the longstanding non-domiciled tax status in April, a policy that once allowed affluent individuals with international ties to shield overseas income from full UK taxation. This significant overhaul sparked speculation about a wave of high net worth individuals fleeing Britain.

Despite speculation of an exodus, early monthly payroll data from HM Revenue and Customs appears to show the situation is far less dramatic. According to sources cited by the Financial Times, the number of non-doms leaving the UK matches projections made by the Office for Budget Responsibility. The OBR estimated in January that 25 per cent of non-doms with trusts and 10 per cent without trusts would depart following the abolition of the controversial tax status. Those briefed on the early figures noted that departures seem to be on course with, or even below, these forecasts.

Jeremy Hunt, the chancellor’s Conservative predecessor, had already initiated plans to phase out the 225-year-old non-dom status, which protected overseas earnings in exchange for a flat annual fee. The current Labour government took these reforms further, introducing rules that will see overseas assets subjected to the UK’s 40 per cent inheritance tax rate.

Payroll data is emerging as a key indicator of these non-dom shifts, since many non-doms receive income from employment or pensions within the UK, thus appearing in PAYE figures. After more than 120 days since the beginning of the tax year on 6 April, it is reasonable to assume that those seeking to avoid UK tax residency have already left. However, this data set may not capture the movements of those non-doms who do not work in the UK, a group that includes some of the wealthiest residents.

HMRC has previously indicated that comprehensive data on non-doms who earn UK income will not be available until January 2027, following the submission of self-assessment tax returns for 2025-26. While debate continues over whether Labour’s policy could backfire, current payroll data provides some comfort to the Treasury, suggesting departures are in line with expectations and not higher than anticipated.

The government maintains that its tax reforms strike a balance between fairness and competitiveness. A spokesperson noted that if you make your home in Britain, you should contribute to UK taxes, highlighting that the UK still boasts a lower main capital gains tax rate than any other G7 European nation. The new residence-based regime is described as both simpler and more attractive than the old system, aiming to attract investment while ensuring all long-term residents pay their share.