“Following France and Sweden?” Britain’s Tax Crackdown Fuels Wealth Exodus, Putting Wealth Taxes to the Test Again

Wealthy residents leave Britain as non-dom relief ends and asset taxation tightens
France and Sweden scaled back or abolished wealth taxes after adverse effects emerged
Countries pursuing new wealth taxes face uncertainty over their effectiveness

An exodus of wealthy residents is becoming increasingly evident in Britain. With non-dom tax relief abolished and taxation of high-net-worth individuals tightened, some wealthy residents are relocating overseas or reducing their ties to Britain to minimize their tax liabilities. Market observers say the problem extends well beyond the UK. Wealth taxes have already been scaled back or abolished in numerous countries following controversy, and countries now considering new wealth taxes are seen as likely to face similar policy challenges.

Britain’s Wealth Exodus Accelerates

According to Bloomberg Billionaires Index data on October 4, more than a dozen billionaires have left Britain or substantially reduced their ties to the country over the past two years. Their combined wealth amounts to $160 billion. The figure includes family wealth for some of those who relocated and exceeds the total wealth of UK-based billionaires currently listed on the index. Among the most prominent departures is Indian-born steel magnate Lakshmi Mittal. Bloomberg’s index puts Mittal’s fortune at $40.8 billion, accounting for roughly a quarter of the departing billionaires’ combined wealth. Aston Villa co-owner Nassef Sawiris and telecommunications investor Shravin Bharti Mittal have also reduced their ties to Britain or moved abroad.

Departures among British-born wealthy residents have also emerged recently. Chris Rokos, founder of hedge fund Rokos Capital Management, for example, has relocated to Greece. He paid approximately $438.1 million in UK taxes last year, making him the country’s third-largest individual taxpayer. Such a substantial exodus of wealthy residents is expected to have significant repercussions for the British economy. The immediate concern is the loss of tax revenue. HM Revenue & Customs (HMRC) estimates that the top 1% of earners will pay 26.6% of all income tax in the 2026–27 fiscal year, while accounting for 12.8% of total income. Transactions are also slowing in London’s prime residential property market, which depends heavily on wealthy buyers. According to property firm Savills, 412 homes priced at approximately $6.64 million or more changed hands in London last year, down 11% from the previous year, while the aggregate value of transactions fell 19% to approximately $5.43 billion. Transactions in the approximately $13.28 million–$19.91 million bracket were particularly weak, plunging 31% year on year.

The Fallout From Abolishing Non-Dom Tax Relief

The timing of many of these departures coincides with the abolition of Britain’s non-dom tax relief. Non-doms are individuals who qualify as UK tax residents but whose legal domicile lies overseas. Previously, this status allowed them to benefit from the remittance basis of taxation. They paid tax on UK income and capital gains, while foreign income and capital gains remained outside the UK tax net unless remitted to Britain. According to HMRC, approximately 60,800 non-dom taxpayers lived in Britain in the 2023–24 fiscal year, of whom 42,900 used the remittance basis. They paid a combined approximately $9.43 billion in income tax, capital gains tax and National Insurance contributions.

The situation changed abruptly when this tax treatment was abolished in April last year. Britain began taxing foreign income and capital gains on the basis of the duration of tax residence rather than legal domicile. As a result, long-term UK tax residents are now required to declare and pay UK tax on interest and dividends generated by overseas accounts; rental income from overseas property; and gains from the sale of foreign shares, business stakes and real estate. The burden has increased markedly for wealthy individuals who had enjoyed tax advantages while holding most of their assets in overseas shares, business interests and property.

Table 1. Britain’s Increasing Tax Burden on High-Net-Worth Individuals

Labour’s Policy Agenda Adds to the Pressure

Concerns over the Labour government’s policy direction have further encouraged wealthy residents to leave. Since taking office, the government has progressively tightened taxation of high-net-worth individuals and income from assets. Its first budget, presented in October 2024, abolished non-dom tax relief and raised the top rate of standard capital gains tax (CGT) from 20% to 24%. It also increased the tax rate on carried interest, the performance-based compensation received by private equity managers and others, to 32%. The stamp duty surcharge on purchases of additional homes rose from 3% to 5%. Last year’s budget included plans to increase certain income tax rates on property rental income, savings income and dividends by two percentage points.

Further tax increases remain possible. UK Chancellor of the Exchequer John Healey is scheduled to present his first budget since taking office on October 28, while the government continues to uphold Labour’s existing pledge not to raise the rates of income tax, value-added tax (VAT), corporation tax or National Insurance contributions. Capital gains tax and taxes on property and assets are therefore being discussed as the principal means of securing additional revenue. A further increase in capital gains tax has drawn particular market attention, and some within Labour have called for capital gains tax rates to be aligned with income tax rates. Britain’s capital gains tax rates stand at 18% for basic-rate taxpayers and 24% for higher-rate taxpayers, below the corresponding income tax rates of 20% and 40%.

Past Wealth Tax Failures Offer a Warning

Other countries’ experiences have repeatedly highlighted the risks associated with such taxation of the wealthy. France, for example, previously imposed a solidarity tax on wealth (ISF) on net assets encompassing financial holdings and real estate. As of 2017, the tax applied to households with net assets of at least approximately $1.46 million, with a top rate of 1.5%. The problem was that substantial numbers of wealthy taxpayers left to escape the burden. According to figures compiled by the French Senate, the net annual outflow of ISF taxpayers—departures minus returning taxpayers—averaged 597 between 2012 and 2016, when the tax was tightened, approximately 1.9 times the average of 315 recorded between 2007 and 2011. The French government ultimately abolished the ISF in 2018 and replaced it with a real estate wealth tax (IFI), limiting the tax base to property.

Sweden introduced a net wealth tax in 1911 and retained it until 2007, but struggled with its limited revenue yield. In the postwar period, wealth tax receipts never exceeded 0.4% of gross domestic product (GDP), and amounted to just 0.16% of GDP in 2006, immediately before its abolition. Tax rates at the time were around 0.5%–1.0%. Concerns over tax equity also accumulated. To ease the wealth tax burden, Sweden expanded asset-specific relief and exemptions, excluding the net business assets of unlisted companies from the tax base from 1991. As a result, individuals with the same total wealth faced different effective tax burdens depending on the composition of their assets, and dissatisfaction continued to grow. Amid these controversies, the Swedish government ultimately abolished the wealth tax entirely in 2007.

New Wealth Tax Proposals Face Mounting Challenges

As evidence accumulates of wealth taxes triggering wealthy residents’ departures and tax avoidance, or failing to generate the expected revenue, countries seeking to introduce new wealth taxes are also expected to face greater challenges. Hungary’s government, for example, unveiled a bill on October 6 that would impose an annual wealth tax on individuals with net assets exceeding approximately $3.09 million. Under the proposed progressive structure, the portion of net wealth above approximately $3.09 million and up to approximately $308.8 million would be taxed at 1% annually, while the portion exceeding approximately $308.8 million would be taxed at 1.5%. Taxable assets would include real estate, financial investments, business stakes and assets held overseas, with liabilities deducted from the tax base. The government plans to submit the bill to parliament following public consultation and, if it passes, bring it into force in January 2027.

In the United States, discussions over a separate tax on billionaires’ assets are taking place in California rather than at the federal level. Proposition 40, scheduled to be put to a public vote on November 3, would impose a one-time 5% wealth tax on billionaires with net assets exceeding $1 billion. According to Reuters, California is home to approximately 250 billionaires whose combined wealth exceeds $2 trillion. However, Governor Gavin Newsom opposes the measure, citing the risk that wealthy residents could relocate to other states and that the investment climate could deteriorate, leaving its eventual adoption uncertain.