Labour’s plan to plug revenue gap via non-doms likely to fall short, says RSM UK

09 July 2024

With the new Labour government relying on raising significant additional amounts of tax from non-doms, today’s non-dom statistics show what a dangerous assumption this is, says RSM UK.

Rachel de Souza, partner at RSM UK, comments: 'Post pandemic, the number of non-doms had been falling and in 2023, this trend was reversed with a small rise in non-doms to 60,700. However, assuming Labour goes ahead with the proposed abolition of non-dom status then we are likely to see a significant decrease in non-doms in the coming year. 

'HMRC estimates that the UK currently has at least 83,800 non-domiciled and deemed domiciled individuals, paying a total of £12.3bn of tax. Interestingly, although the number of taxpayers has risen by 6%, the tax being paid has actually fallen slightly, which suggests that there is a small amount of turnover between wealthier non-doms leaving the UK and being replaced by less affluent arrivals.

'In total, only 2,400 individuals chose to pay the remittance basis charge in 2022 and it is from these people that the government is expecting to raise £3.2bn. On average that implies an additional tax yield of over £1.34m per non-dom.

'The number of non-doms paying the higher remittance basis charge of £60,000 has held steady at 500 in the five years to 2022. This suggests that relying on such a small number of taxpayers to plug the revenue gap may be wishful thinking.

'The statistics show that deemed domiciled taxpayers had UK tax liabilities of at least £3.4bn in 2023. We suspect this will fall dramatically by 2025 as a direct result of the changes to the non-dom rules as many of these individuals are internationally mobile. However, it’s unlikely we will be able to confirm the position as it will no longer be possible to collect the data once the non-dom status has been abolished.

'Whilst there has been an increase of about 5,000 non-domiciled taxpayers in 2023, the trend in the statistics show that very few of these would go on to pay the remittance basis charge. The point being that only a very small minority of new arrivals have sufficient overseas wealth to make using the non-dom regime attractive.

'The political uncertainty in the UK over the last couple of years seems to have had very little impact on non-dom numbers. So far, the possibility of a Labour government that was reflected in opinion polls going back several months has not translated into a mass exodus. But our guess is that the picture for 2024 and 2025 will be very different.'