02 August 2022
Based on the latest statistics, in the tax year ending 2021 there were 68,300 taxpayers who claimed to be ‘non-dom’. Those taxpayers paid about £7.9bn in tax, which is an average of over £115,000 each. To put this into context, there were about 32.2m income taxpayers in the UK in the tax year ended 2021 and the average income tax liability per taxpayer was just over £6,000, raising £194bn in total for the Treasury.
Individuals who claim non-dom status are only taxed on their UK income/gains, or on foreign income/gains that they bring to the UK. As a rough indication, this means that on average non-doms either received UK income or remitted foreign income of almost £300,000 each in 2021. What the figures cannot tell us is how much foreign income these non-doms received and did not bring to the UK – ie how much the UK did not tax. Claiming non-dom status has a tax cost in itself, as non-doms have to pay a ‘remittance basis charge’ (RBC) of up to £60,000 a year to qualify. To make this worthwhile, an individual will often need to have received more than £150,000 of foreign income in a year.
There is an argument that the UK should do away with the non-dom regime entirely as it is wrong to have a system which benefits a tiny proportion of the population. It could also be argued that the loss of non-dom status would increase tax receipts by removing the option for non-doms to cap their UK tax bill by paying the RBC.
The counterargument is largely pragmatic: it accepts that wealthy non-doms are getting a better deal than the wider population, but recognises that these individuals are internationally mobile and sought-after. There are many countries vying with each other to offer the wealthy tax breaks, and whilst not all non-doms would leave the UK if faced with the prospect of being taxed on their non-UK income, a good proportion would. Put bluntly, the UK is in competition with countries from Italy and Portugal to Singapore and the UAE to attract wealthy immigrants, and the prize in 2021 was a tax yield of £7.9bn.
All tax systems are arbitrary. There is no solution that is fair to everyone, because everyone’s idea of fairness is different. Some believe that a good tax system is one that maximises revenues whilst minimising inequality, and the UK’s non-dom regime does a decent job of this. The latest HMRC figures show the disproportionately large tax contribution that non-doms make to the UK, and some believe we should celebrate and promote this, for all of our benefit.