In an increasingly complex environment, individuals face new considerations regarding wealth planning. This includes tax changes in the UK, which could trigger outflows to the benefit of other hubs worldwide, according to law firm Stephenson Harwood’s Suzanne Johnston.
The world is facing seismic shifts that have an impact on wealth and succession planning. Considerations now span across the environmental, social, technological as well as political.
In the UK, for example, wealthy individuals face a major change in tax rules that could potentially trigger outflows to other hubs. On 6 April 2025, the UK is expected to change its current tax regime which allows non-UK domiciled individuals to keep their offshore income and gains sheltered from UK tax for 15 years.
Under the new regime, the concept of domicile will no longer be relevant for UK tax purposes. Anyone who has been a non-UK tax resident for 10 years will only be sheltered from tax exposure for four years if they choose to move to the country. Resident individuals who are currently taxed as non-domiciles but have been in the UK for more than 4 years will move to worldwide exposure to income tax and capital gains tax.
Stay or Leave
According to Stephenson Harwood partner Suzanne Johnston, the tax changes are now a critical factor for many wealthy individuals who have traditionally considered the UK as a second home.
«As you can appreciate, [four years] is a very short period as compared with the existing 15-year period. We do not know what, if any, transitional provisions will be available to those individuals who will, overnight, become subject to UK tax on a worldwide basis,» Johnston said in a conversation with finews.asia.
«Moreover, non-UK domiciled individuals who have been in the UK for more than 10 years will also become subject to UK inheritance tax [of 40 percent] on a worldwide basis. For clients already in the UK and who will be impacted by the changes they have a decision to make: stay and pay the additional tax or leave.»
Alternative Hubs
The tightened rules could benefit other financial hubs that have been actively maintaining attractive conditions, including tax rates, to attract global wealth.
«Of those leaving, there are alternatives, with favorable tax regimes being considered, including Singapore, Hong Kong, Switzerland or Italy,» Johnston observed. «The Middle East is also rising in its appeal to the wealthy and Dubai may also be a beneficiary of the proposed UK tax changes.»
NextGen Factors
Aside from taxes, Johnston is also seeing a lot of new factors being considered by clients planning their wealth, especially among the next generation. For example, it is now commonplace for illegitimate children to be included in the group of beneficiaries under a trust or will. Focus on sustainability is increasing with investments in renewable energy and environmentally focused companies.
«Even the types of assets involved are different and evolving. In almost every case with next-gen clients, there is at least a small exposure to crypto investments,» she added. «As a result, we are finding that we need to rethink how estate planning documents are drafted.»
