Labour’s non-dom gamble backfired – now it wants them back

“I have always said that if you make Britain your home, you should pay your tax here,” Rachel Reeves told the Commons in October 2024.

The Chancellor’s comments came as she scrapped the non-dom regime, which ended some wealthy individuals’ right to avoid full UK tax on their overseas earnings. The reforms were intended to make sure those with the “broadest shoulders” paid their “fair share” of taxes, Reeves said at the time.

But rather than put their hands in their pockets, many high-net-worth individuals are packing their bags and jetting off to Milan or Dubai in search of a more favourable tax regime.

“The people with the broadest shoulders have the longest legs and they are using them,” says Leslie MacLeod-Miller, the chairman of Foreign Investors for Britain.

The exodus has obviously alarmed the Government amid warnings that the tax raid could backfire and end up losing money for the Exchequer.

Andrew Griffith, the shadow business and trade secretary, claims: “Labour have presided over the biggest exodus of investors and wealth creators since the 1970s and it is ordinary British taxpayers who will end up having to pay more.”

Last month Reeves ordered officials to carry out a review into the impact of the abolition of non-dom status.

Officials are now listening to ideas such as the introduction of an investor visa or extension of the tax exemption on earnings from abroad in an attempt to stem the flow of rich people moving abroad and win back the wealthy.

Foreign Investors for Britain has met with officials from the Department for Business and Trade and sent briefing documents to MPs calling on Labour to introduce a “global investor visa”.

If introduced, it would require individuals to pay £200,000 annually and invest £2.5m in the UK over a five-year period in exchange for residency and a 15-year tax exemption on earnings from abroad.

The proposal has been backed by a group of more than 10 members of the House of Lords, including Conservative peers Baroness Mobarik and Lord Risby, a former Merrill Lynch banker.

MacLeod-Miller says “it’s a critical time” for Reeves to encourage wealthy individuals to move to the UK.

Peter Kyle, the Business Secretary, is putting together a range of measures as part of his “global talent taskforce” aimed at attracting entrepreneurs to the UK.

Yet it seems Kyle and Reeves may be short on time.

Several high-profile business people have left the UK for tax purposes since Labour came to power – including billionaire Revolut founder Nik Storonsky, the Goldman Sachs banker Richard Gnodde and John Reece, the finance chief of chemicals giant Ineos.

“It’s economically pragmatic for the Government to try to find a way to keep people in the country and stop the wealth drain, whether that’s done through an investor visa, or something similar to it,” says Julia Willemyns, the co-founder of the think tank Centre for British Progress.

But an investor visa “would be a good way to compromise on the non-dom scrap without having to do a U-turn on the policy”, she adds.

The pledge to abolish non-dom status was a key part of Labour’s manifesto before the 2024 general election and the Government is already under heavy fire for its succession of about-turns, which are now in double digits.

Other politicians are also advocating similar policies to encourage entrepreneurs to make the UK their home.

The Conservative Party says it would allow wealthy individuals to gain the right to reside in the UK in exchange for investing in the country.

Griffith says: “These are people who have a choice where to locate and, until Rachel Reeves came along, had chosen the UK and unlike many migrants, were contributing positively to our economy.

“The next Conservative government will re-introduce an investor visa and tax policies to encourage those who have left to return.”

Last year, Nigel Farage, the leader of Reform UK, unveiled the Britannia Card, a measure that would reinstate non-dom status for wealthy entrepreneurs if they paid a £250,000 fee. The policy would also allow high-net-worth individuals to be exempt from inheritance tax.

Several other countries already have investor or “golden” visa schemes in place. New Zealand’s Active Investor Plus visa, for example, requires foreigners to invest a minimum of $5m (£3.7m).

Last month, the US launched the “Trump Gold Card”, which requires wealthy foreigners to pay a $1m fee in exchange for fast-tracked residency.

The US president has also said he plans to introduce a $5m visa that will offer tax breaks for high-net-worth individuals.

“The people that can pay $5m, they’re going to create jobs,” Trump said last year. “It’s going to sell like crazy. It’s a bargain.”

A visa aimed at attracting very wealthy people to the UK has been done before.

The Tier 1 investor visa, introduced by Labour in 2008, required applicants to be able to demonstrate they had access to £1m of available funds to invest in UK government bonds and shares or loan to UK companies.

However, it was scrapped in 2022 following concerns that it was being abused and was leading to national security risks.

MacLeod-Miller says the previous visa was also “too passive” and “wasn’t necessarily driving business”.

To avoid this, a new visa should require wealthy individuals to invest £2.5m in the UK within a five-year time frame, he says.

MacLeod-Miller also argues that the Government should mandate that investments are made in growth sectors with rigorous anti-money laundering checks to protect against fraud and corruption, which became a widespread issue with the abolished Tier 1 visa.

If introduced, the new visa would require individuals to pay £200,000 annually and invest £2.5m in the UK over a five-year period in exchange for residency and a 15-year tax exemption on earnings from abroad.

MacLeod-Miller, along with other campaigners, is hopeful that introducing an investor visa or extension to the current four-year tax exemption on earnings from abroad will help to encourage entrepreneurs to move to the UK.

John Barnett, the vice-president of the Chartered Institute of Taxation, points out there are many wealthy Americans clamouring to gain the right to reside in the UK following the election of Trump.

US citizens still have to file tax returns even if living abroad, but a potential investor visa remains a tempting prospect for those frustrated by the current president.

“Britain is a natural place for them to come. Tax is less important to them than their immigration status … Changing the visa rules is probably the single biggest thing,” Barnett says.

Yet after repeated changes to the UK’s non-dom rules over the last 15 years, he warns that many high net worth individuals are sceptical about any further changes to tax rules.

“That ability to get certainty, particularly for wealthy individuals, is probably the single most important thing I think the Government could do, because actually, in a lot of cases, it’s not about paying less tax. It’s just about knowing how much tax you’ve got to pay.”

A government spokesman said: “The UK remains a highly attractive place to live and invest. Our main capital gains tax rate is lower than any other G7 European country and our new residence-based regime is now simpler and more attractive, while also addressing tax system unfairness so every long-term resident pays their taxes here.”

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