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News that Chancellor Jeremy Hunt may scrap the UK’s tax rules for non-domiciled people has rattled London estate agents.
Hunt is reportedly considering the move, which would be announced in next week’s Spring Budget.
Under current rules, non-domiciled people — also called non-doms — can live in the UK and pay taxes on any earnings made here, but have another country as their main residence for tax purposes.
Chief executive of estate agents Winkworth Dominic Agace warned that such a move would have a serious impact on London’s property market, which sees a lot of international investment.”The government should be careful about steps that will discourage successful wealth generators, who by their very definition are not tied to the UK,” said Agace.
“It’s highly likely it would cause many to just choose another country to base themselves and we will lose the benefit of their wealth generation and not raise the monies required,” he added.
“Undoubtedly, this would be a negative for London’s international allure and, in turn, London’s property market.”
London’s prime property market has already been buffeted by Brexit, interest rates, political uncertainty, money laundering crackdowns, and sanctions on wealthy Russians as a result of the war with Ukraine. Many wealthy London homeowners have been selling their mansions at a serious discount.
According to Knight Frank’s latest wealth report, London’s international status hangs in the balance with the upcoming general election and the potential for a Labour government. Labour leader Keir Starmer has already pledged to abolish non-dom tax status in his party’s manifesto.
“People are concerned about the government and in particular about any changes that might make big overseas investors feel unwelcome,” said Paddy Dring, global head of sales at Knight Frank.
“Feeling welcome is important,” he added.
“Clients use these words and I think it’s important that a new government conveys that Britain still values international investment.
Knight Frank ranked London’s 89 out of 100 in its Prime International Residential Index, with price growth on prime property down 2.1 per cent in 2023.
The report also highlighted that London’s banking elite are being poached by Paris post-Brexit. Some 2,8000 financial service jobs have been lured from London to the French capital as of 2022, reports EY.
London’s status as a global financial hub remains for now, however.
“There are enough workarounds to be able to have staff in London and operations in the EU,” said Jérôme Legras, managing partner at Paris-based Axiom Alternative Investments.
“We’ve seen more people going to Frankfurt and Paris but it’s not massive.”
All eyes are on the 2024 Spring Budget in an election year, with speculation over stamp duty, 99 per cent mortgages and now non-dom tax status impacting the property market one way or another.
