Ease of global mobility and higher UK taxes driving wealth overseas

Accountants, tax advisers and other professionals often have an early insight into fiscal trends. Over the past 12 months, one seemingly growing trend has been the steady increase in the number of high net worth and ultra-high net worth individuals considering emigrating from the UK. 

Whilst emigration enquiries have not been uncommon in the past – the UK has always seen a substantial number of inbound and outbound individuals – what is noteworthy is the growing number of UK domiciled individuals seeking to relocate overseas, alongside their non-UK domiciled counterparts. 

As may be expected, one of the primary motivators behind this is tax efficiencies. Individuals are either looking to leave the UK to ensure that they are not liable to UK taxes when they reach a significant liquidation event such as the sale of their business, or the 'digital nomad' population is realising that there are more advantageous income and/or corporate tax regimes elsewhere. 

The perception is that the number of individuals falling solely in the ‘tax-motivated’ camp is larger than usual, likely as a direct result of a less competitive UK tax regime. Recent changes that may have contributed to the UK tax regime being less attractive include the reduction in the business asset disposal relief (formerly entrepreneurs’ relief) capital gains tax lifetime limit from £10m to £1m, the lowering of the additional rate income tax threshold and the increased main rate of corporation tax. 

However, there are also those citing the uncertain political landscape and working-lifestyle as reasons to move elsewhere. Historically this may always have been a motivating factor, but perhaps was not something that was acted upon frequently. However, in a time when global mobility has never been easier, the number of those taking action seems to be on the rise. Jurisdictions offering a combination of low tax rates, political and economic stability and good infrastructure (and a perhaps a warmer climate) are an attractive proposition to taxpayers of all ages. 

Popular destinations tend to include:

• Dubai – low to no taxes, politically stable and world leading infrastructure. 
• Italy and Portugal – attractive low tax regimes which benefit high earners and those realising liquidation events, geographically close to the UK and favoured semi or full retirement destinations.
• Croatia – beneficial short-term tax regime for digital nomads, which is proving attractive to younger generations.

The age profile of individuals emigrating is varied and spans generations. Historically, it might be expected that those emigrating for tax reasons would be slightly older and looking to maximise their retirement pots. However, the digital nomad and first-time entrepreneur generations tend to be younger in age, and whilst they are motivated by lower taxes, they are also assessing where their long-term futures may play out best.

It is possible that the increased ease of global mobility has not been factored into recent tax policy decisions. However, the circumstantial evidence is that the current high tax burden is driving more wealth and wealth creators away from the UK. As we get closer to a general election, more thought may need to be given as to how to reverse this trend.