Economic and political uncertainty, calls for higher personal tax rates… the list of reasons for wealthy individuals to consider leaving the UK seems to get ever longer. At the same time, other European countries are appealing to wealthy immigrants by offering attractive tax deals to new arrivals. So, is it time to think about moving abroad?
Favourable tax regimes overseas…
Let’s start by considering some of the tax deals on offer. In some countries, new residents have been able to obtain significant tax benefits for many years. The Republic of Ireland (ROI) operates a tax system for non-domiciled individuals (non-doms) similar to the UK’s of ten years ago: non ROI domiciliaries are generally only taxed on non-Irish income/gains on remittance, with no annual charge payable for the privilege. Switzerland offers a forfait system, where a lump sum payment replaces being taxed on non-Swiss wealth. The Spanish ‘Beckham law’ enables individuals moving to Spain under an employment contract to elect to be treated as non-resident for a set period .
Other countries have begun to move in similar directions. Earlier this year Italy introduced a system under which new residents can pay €100k each year instead of being taxed on foreign income. Portugal offers a similar opportunity to non-habitual residents, with no annual fee.
But the UK remains attractive…
The UK’s moves to reduce the tax advantages available to non-doms may seem directly to contradict the direction of travel of mainland Europe, where countries are trying to increase the number of immigrants – or at least wealthy ones. However, it is important not to get too carried away. Although it is easy to list ways in which the UK is becoming less competitive as a destination for wealthy individuals, in many ways it remains extremely attractive both for new arrivals and for long term residents.
Firstly, it is worth remembering that in terms of attractive personal tax codes, most of Europe had some catching up to do with the UK. The non-dom tax system has been hugely successful in bringing wealthy individuals to the UK, and even after these rules are tightened, the UK remains a low tax environment for foreign domiciliaries. For UK domiciliaries too, Britain can be tax-friendly with the right planning – especially for entrepreneurs and investors.
Secondly, tax is not the most important thing in life. International clients value the quality of life and opportunities the UK offers in-comers, and Britain is seen as a great place to settle and bring up children. As advisers, one of the first questions we ask when discussing emigration from the UK with clients is ‘what does your husband/wife/partner think about the idea’. The emotional cost of leaving behind friends, family and lifestyle can easily outweigh the tax cost of staying, especially if you are not expecting to work full time.
So, is it time to think about leaving the UK? Well, possibly: there are certainly some attractive alternatives out there, but it is easy to underestimate the benefits of the UK in terms of tax and lifestyle. The best advice is often to listen to your heart, not your wallet.
For more information please get in touch with Andrew Robins or your usual RSM contact.