Financial hubs in Asia and elsewhere are expected to benefit from wealth outflows out of the UK due to the latest decision to tighten tax rules on non-domiciled residents.
On October 30, the UK announced that it would tighten tax rules on non-domiciled wealth in order to raise 12.7 billion British pounds ($16.6 billion) over the next five years. British authorities have signaling the move for months as part of efforts to increase taxes and meet its pledge to voters to spend more on public services.
According to a KPMG estimate, there are an estimated 60,000 so-called ‘non-doms’ in the UK. Henley & Partners forecasts that 9,500 high net worth individuals will leave the country in 2024 alone. Following the latest changes, alternative hubs are expected to benefit.
Asia Impact
In Asia, Hong Kong and Singapore will be the major beneficiaries of UK’s outflows. For those looking for an expedited route to set up family offices, the former hub has been cited as the speedier option.
Many Asia-based clients are already making plans to remain outside of the UK, according to Tony Müdd, director of development & technical consultancy at St. James’s Place.
«Those accelerating plans to become non-UK tax residents and permanently relocate outside of Britain are likely to consider business-friendly jurisdictions with competitive tax regimes, including Hong Kong and Singapore, as they choose their new home,» Müdd said in a recent report. «These jurisdictions could reap the long-term economic benefit as high earners establish their new tax domiciles.»
Other Beneficiaries
Outside of Asia, other financial hubs are also expected to benefit from wealthy individuals seeking a new home. According to a Barclays report, prime locations include Monaco, Switzerland, the UAE and Italy.
Monaco is attractive due to its climate, close proximity to major European cities and high quality of life. Switzerland has a reputation for stability, security and stunning scenery. UAE is a tax-efficient hub based strategically between Asian, European and African markets. Italy is also being considered for relocation by the ultra-rich due to tax incentives.
«At a time when wealth holders are more peripatetic than ever, the option to pack up and move – whether from the UK or another base – is increasingly realistic. Even more so as different jurisdictions compete to incentivize relocations to their own countries,» said Alexandra Hewazy, a director in Barclays’ wealth advisory team.
Opting to Stay
Under the new regime, newcomers to the UK will be given a four-year tax window on offshore assets, compared to the previous 15-year period. For those who have been a resident for at least 10 out of the last 20 years, inheritance tax on non-UK property will also kick in. Despite the tighter rules and heftier tax costs, some may still opt to stay.
«UK remains a popular destination. It continues to attract new residents, and to retain existing ones,» Hewazy added. «Broadly speaking, its appeal lies in the long-held perception of safety and cultural tolerance, as well as a supportive business culture, and world-class educational establishments – both at a school and university level.»
