Inheritance tax driving exodus of wealthy Britons
The rich are already leaving the country because of inheritance tax, experts have warned.
Financial advisers have said thousands of wealthy individuals are departing Britain because of the growing tax burden, which is on track to reach its highest since the Second World War.
Private wealth managers have said the wealthy are making plans to acquire domicile status in tax havens like Monaco, Switzerland and Dubai.
It comes as The Telegraph is campaigning to scrap the divisive 40pc death duty. More than 50 MPs including Liz Truss and Nadhim Zahawi have joined the campaign.
On Friday Lord Frost also gave his support, saying: “There’s no future for this country as a high tax, high spend socialist economy. So we need to cut spending and get the tax burden down.
“Nigel Lawson when chancellor aimed to abolish one tax every year. We should have the same aim, and inheritance tax would be a good place to start.”
Neela Chauhan, a private client partner at accountants UHY Hacker Young, said she had already seen wealthy people moving abroad “because they’re worried about the burden of inheritance tax”.
Wealthy individuals who leave the country to escape tax typically do so in their 40s and 50s, taking lucrative businesses elsewhere, she said.
She said: “Some of them are leaving and still trading through companies, but any new ventures will be in the country they’ve moved to – there will be a huge brain drain as a result.”
Her concerns were echoed by Mark Davies, of Mark Davies & Associates, a tax adviser to high-net-worth individuals.
Mr Davies said wealthy clients were looking to acquire domicile status in the Channel Islands and Cyprus to avoid the heavy tax burden as early as their 40s, emboldened by the ability to work remotely from abroad.
He added: “It’s happening already. People at earlier stages are now looking at moving. A similar thing happened in the 1970s, when high taxation led to a massive brain drain.
“It’s a really big problem for a country if their best and brightest move somewhere else and you’re not collecting tax from those people.
“All those people who moved to California in the 1970s are still there – that’s a lifetime of their tax we’ve not collected.”
The UK is suffering from outflows of millionaires as the tax burden rises, according to research by migration consultancy Henley & Partners and data firm New World Wealth. More than 12,000 rich people have left the UK since 2017, their research found last year.
David Lesperance, international tax and migration adviser to high-net-worth individuals, said his clients were also leaving to avoid dying while resident in Britain for tax purposes.
“Inheritance tax is on UK situs, but it’s also on whether you are domiciled. These are clients who don’t want to have a deemed domicile and don’t want to have HM Revenue & Customs argue that they did.
“Death is a certain event with an uncertain event date. You don’t want to be in the UK when you die, especially if you’re getting older and you’re looking at the great void. You may think that now is the time to just eliminate the possibility that you’re going to get nailed on inheritance tax.”
Geoffrey Todd, of law firm Boodle Hatfield, said foreigners living in the UK were similarly careful not to become domiciled and be subject to British inheritance tax laws, causing the tax burden to fall on “born and bred” Britons.
“I wouldn’t be surprised if more people move abroad,” he said. “The basic threshold of £325,000 hasn’t moved since 2010 and the tax take is increasing every year.”
