As Chancellor Rachel Reeves attempts to stabilize public finances, her policy targeting non-domiciled residents (non-doms) may be having the opposite effect.
Magda Wierzycka/Screenshot from Sky News Instagram video
Despite promises of billions in extra tax revenue, there are growing signs this crackdown could cost the UK in investment, jobs, and existing tax income, as reported by Sky News.
The non-dom regime, in place for over 200 years, allowed some of the country’s wealthiest residents to declare permanent domicile abroad for tax purposes—meaning they paid no UK tax on foreign income. But that changed dramatically.
At the dispatch box last October, Reeves declared: “I have always said that if you make Britain your home, you should pay your tax here. So today, I can confirm we will abolish the non-dom tax regime and remove the outdated concept of domicile from the tax system from April 2025.”
The government estimated this reform would raise £3.8 billion over five years. Yet evidence is mounting that many non-doms are leaving the UK in response, threatening to erode the very tax base the policy aimed to protect.
If these departures accelerate, the policy risks backfiring—harming investment and costing jobs as well as the tax paid on UK earnings by non-doms who remain.
With public finances already under pressure, a miscalculation could prove costly. Alternatively, a policy reversal risks damaging confidence in Reeves, who has faced a turbulent start.
So, how serious is the threat?
Data on non-dom numbers come with a significant lag, meaning the full impact will only become clear over time. The Office for Budget Responsibility (OBR) predicted the policy could yield £3.8 billion but admitted uncertainty, estimating between 12% and 25% of non-doms might leave.
Meanwhile, early indicators—especially in London—suggest the exodus could be greater.
Property sales in decline
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Research by property firm LonRes found transactions in London’s most exclusive postcodes dropped 35.8% in May compared to the previous year and 33.5% below pre-pandemic levels. Estate agents attribute this slump to declining demand from non-dom buyers.
South African billionaire Magda Wierzycka, who runs an investment fund in London, is among those threatening to leave unless the government softens its stance.
“Non-doms are leaving, as we speak, and the problem with numbers is that the consequences will only become known in the next 12 to 18 months,” she said.
“But I have absolutely no doubt, based on people I know who have already left, that the consequences would be quite significant.
“It’s not just about the people who are leaving that everyone is focusing on. It’s also about the people who are not coming, people who would have come, set up businesses, created jobs, they’re not coming. They take one look at what has happened here, and they’re not coming.”
Where will they go?
Britain’s non-dom regime was unusual. Most countries, except for a few like Italy, operate residency-based tax systems—taxing individuals on worldwide income only if they live in that country.
This allowed many non-doms to avoid paying tax on foreign income altogether by living outside those countries where the income was generated.
Double taxation treaties generally prevent people from being taxed twice, though they may have to pay the difference between rates.
In this context, Wierzycka’s warning rings true: it could take months or even years before the full impact of the policy becomes clear.
With limited hard data yet available, history may offer some lessons, but the uncertainty remains high.
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