UK Residents, Especially High-Income Individuals, Contemplate Leaving Due to Impending Tax Increases
Rewritten Article:
It's been a hot topic lately as wealthy residents flee the UK following a crackdown on tax exemptions for non-doms. And now, a lawyer has issued a stark warning - this trend is spreading among high-income individuals considering a move.
The political spotlight has been on non-doms for the past six months ever since Chancellor Rachel Reeves followed through on her promise to abolish tax breaks for ultra-rich non-domiciled individuals.
Recently, City AM discovered that the head honcho at Goldman Sachs International was among those jumping ship and setting up camp in Milan.
But it's not just non-doms who are feeling the heat, according to Michael Anderson, partner at Joseph Hage Aaronson & Bremen (JHAB). He told City AM that he's been fielding inquiries from high-earning individuals considering a potential exit.
"I represent clients who aren't even non-doms, and they're thinking about bailing on the UK," he said.
Anderson added that he'd be surprised if a decent chunk of high-earning bankers haven't at least considered a temporary sojourn abroad to save on taxes.
It's been over a month since the new tax year began, but Anderson says he's still getting requests from people asking if they can still jet off and set up shop offshore this year.
"The stream of folks asking about residence tests and their options has been nothing short of unprecedented," Anderson noted.
Brace Yourselves, HMRC Is Coming
This exodus of individuals aiming to become non-residents has not gone unnoticed. And Anderson warns that HM Revenue & Customs (HMRC) will be sniffing around, making sure everyone is following the rules.
One area where he predicts HMRC will come down hard is the scrutiny of the statutory residence test - whether people have genuinely followed the rules or not.
He explained that some of the rules include the number of days you can spend in the UK and the number of hours you could theoretically work abroad, both of which can be tricky to keep track of, especially for certain jobs.
Anderson warned that when HMRC eventually knocks on their door, folks will need to be prepared to produce detailed records, such as work hours and flight schedules, to show they've been living and working abroad.
"I have a feeling that [record-keeping] is what HMRC will zero in on for people claiming to be working full-time abroad," he explained.
This comes hot on the heels of news that the UK government's decision to axe tax exemptions for non-doms could cost the Treasury a whopping £12.2bn if half the number of non-doms leave by 2030.
Enrichment Data:
The impending tax year changes fundamentally alter how UK tax residency is determined and how offshore income is treated. After April 6, 2025, the UK will abandon its traditional non-domicile (non-dom) status system, which was based on domicile status, and replace it with a purely residence-based tax regime.
The revamped system requires objective criteria based on presence and years of residence, eliminating subjective domicile status and necessitating precise tracking of time spent in and out of the UK. Newcomers can claim a "tax holiday" on foreign income and gains for their initial four UK tax years, allowing for remittance of overseas income without UK tax. However, after the four years, they become fully taxable on their worldwide income like other residents.
Record-keeping becomes critical under the new rules, with individuals required to maintain detailed travel and presence records, remittance documentation, and accurate tax filings reflecting residence status and worldwide income reporting. HMRC's increased scrutiny and enforcement can lead to back taxes, penalties, and interest charges in case of misrepresentation of residence status or remittance rules.
- Michael Anderson, a partner at Joseph Hage Aaronson & Bremen (JHAB), has stated that he's been receiving inquiries from high-income individuals, not just non-doms, considering a potential exit from the UK due to the new tax changes.
- Anderson anticipates that HM Revenue & Customs (HMRC) will intensify their scrutiny over the statutory residence test, ensuring individuals are abiding by the rules regarding days spent in the UK and hours worked abroad.
- Starting in April 2025, the UK will transition to a purely residence-based tax regime, fundamentally altering the determination of UK tax residency and the treatment of offshore income.
- Under the new tax system, individuals will be obligated to maintain detailed travel records, remittance documentation, and accurate tax filings to prevent misrepresentation of residence status or remittance rules, as increased HMRC scrutiny could lead to back taxes, penalties, and interest charges.
