The number of super-rich people who live in the UK but pay no tax on their offshore income has fallen to a record low, according to figures published by HM Revenue & Customs (HMRC) on Thursday.
UK-based people with non-domicile tax status – so called ‘“non-doms” – in the 2017-18 financial year totalled 78,300, a fall of 13% on the previous year.
Their status led to a £2bn decline in the taxes they paid to the exchequer. The amount of tax they paid fell from £9.5bn in 2016-17 to £7.5bn last year.
Tax experts said the drop in non-doms reflects the growing number of wealthy people leaving the UK because of Brexit uncertainty and fears that a Jeremy Corbyn-led government would introduce a “wealth tax” to tackle growing inequality.
Josie Hills, a senior tax manager at the law firm Pinsent Masons, said: “Brexit uncertainty is driving out many of the wealthiest non-doms who are not prepared to hang around to find out the outcome.
“The prospect of a Labour government is also very unappealing for high net worth individuals – talk of monetary controls and wealth taxes are not well received. Given that there could be a general election in the near future, many will not be willing to take the risk that this becomes a reality.” The vast majority of non-doms are foreign people living in the UK who use the status to be only taxed on income and capital gains arising in the UK, but not on income and gains generated overseas. Most ordinary people living and working in the UK pay tax on income and capital gains arising both here and abroad.
Famous non-doms have included Lakshmi Mittal, the steel magnate, the media baron Viscount Rothermere and Roman Abramovich, owner of Chelsea football club.
HMRC said the number of non-doms had also fallen because some had chosen to change their status to be UK-domiciled after the government introduced an annual “non-dom levy” of between £30,000 and £60,000. The levy, as of April 2017, allows non-doms to continue to pay no tax on offshore income and capital gains, unless they bring the money to the UK. The levy raised just £315m last year.
A Treasury spokesperson said: “We believe those who choose to live in the UK for a long time should pay taxes here like everybody else. That’s why we changed the rules so that individuals who have been resident in the UK for at least 15 out of the last 20 tax years are now deemed to be domiciled in the UK.”
London had the largest number of non-doms, with 58% of all people with the tax classification living in the capital. The London-based non-doms accounted for 76% of income tax, capital gains tax and national insurance contributions paid by non-doms, in a further reflection of the concentration of the country’s rich people in the capital.
The Institute for Fiscal Studies thinktank found this week that the proportion of the top 1% of highest income taxpayers who live in London had increased by a fifth since the early 2000s. The city’s share of the top 1% had risen to 35% in 2014-15, from 29% in 2000-01.