Rachel Reeves is said to be considering reversing her tax crackdown on non-doms after an outcry among the wealthy.
A 40% inheritance tax on the global assets of people with non-domiciled status, which came into force in April, is the new measure that's causing the "most heartburn", one official told the Financial Times. Another confirmed that the chancellor will change the rules if it is "found to be good for Britain's international competitiveness", said the paper.
What did the commentators say? Reeves' initial decision to raise taxes on non-doms was a "calculated gamble" that the wealthy would stay in Britain and pay higher rates, said The Telegraph. With official tax data for last year unavailable until after January 2026, it will be a while before we know whether that gamble has paid off.
Data from Henley & Partners suggested Britain experienced a "record exodus" last year, losing almost 11,000 millionaires, said The Telegraph, but some of these numbers are "based on flimsy metrics". Bloomberg also analysed five million company filings, and found that about 4,400 company directors disclosed "an overseas move in about the last year".
If the FT's report is true, Reeves "may finally have seen sense", said The Spectator's economics editor, Michael Simmons. According to the Centre for Economics and Business Research, the Treasury will make no extra money from the tax increase if 25% of non-doms leave the country. If that rises to a third, it would lose £700 million in the first year. But it's a challenge for Reeves to make these "180" changes without it looking like a "screeching U-turn".
Plus there is a "looming rebellion" over her cuts to benefits, said Stephen Bush in the FT. Taken together, this "double whammy" causes "a lot of political anxiety".
What next? Some believe Reeves will "not give ground on the issue", said the FT. "The politics are dreadful," one Labour adviser told the paper. The Treasury's official line is that the government will "continue to work with stakeholders to ensure the new regime is internationally competitive".
Either way, Reeves was warned before the election that this policy risked costing the Treasury more than it would bring in, said Simmons in The Spectator. "Now it looks like there could be a political cost as well." |