Why the UK tax regime is driving the rich overseas

An increasingly unfavourable tax regime is prompting an increasing number of high-net-worth individuals to abandon the UK. Gemma Johnson examines the implications

Three years ago, in the wake of scrutiny and a perceived lack of fairness, I wrote about the UK’s tax regime for non-domiciled (non-dom) individuals, and how reform might be inevitable.

At the time, it seemed obvious the UK would want to remain competitive and avoid deterring investment and expertise.

Instead, the abolition of the non-dom regime, increased capital gains tax (CGT) rates and the extended scope of inheritance tax (IHT) on business assets and pensions, have created a perfect storm.

I have had many conversations with lawyers, accountants, bankers and financial advisers in recent months about this evolving tax landscape. A recurring theme is the growing number of people opting to leave the UK.

The storm has gathered such force that record numbers of high-net-worth individuals—both non-doms and UK natives—are reportedly relocating to more financially favourable jurisdictions, such as Portugal, Spain, Italy, Switzerland, the United Arab Emirates, the Isle of Man and the Channel Islands.

Capital gains and offshore strategies

With CGT in the UK now standing at 24 percent for higher earners, those with valuable assets are reconsidering how to maximise their returns.

Many are starting conversations with advisers about moving offshore, at least temporarily, to dispose of assets free from UK CGT.

To ensure gains fall outside the UK tax net, specific conditions must be met, and advice is also required in the destination country.

Experience shows that maintaining a long-term absence from the UK can be challenging, especially when family members remain there.

Contingency plans are also needed for unexpected events, such as illness. Still, for many, the prospect of staying in the UK and paying relatively high taxes makes an offshore move a risk worth taking.

Non-dom changes and expanding IHT scope

Reforms to the non-dom regime took effect in April 2025, introducing new rules for taxing worldwide income and gains.

Replacing the previous remittance basis with a less generous system, UK IHT will now apply to an individual’s global estate after ten years of residence.

Even after leaving, former residents may remain liable for IHT on worldwide assets for up to 10 additional years.

Trusts previously excluded from IHT have also been brought into scope. Their tax status now depends on the residence of the settlor, prompting many trustees to seek guidance to understand their compliance obligations.

For many, these changes have proved a step too far, prompting an exodus of wealthy non-doms prior to the commencement of the new tax year.

Family businesses and future IHT burdens

Proposed changes to the IHT regime for UK business owners are also having an impact. Advisers are seeing more queries from shareholders in UK trading companies who are now considering a move abroad.

From April 2026, relief from IHT on trading businesses will be reduced from 100 percent to 50 percent on any value above £1 million.

This will create a significant liability for many family businesses, whose owners must now plan how they would fund this in the event of a death.

Looking ahead: pensions and broader implications

Further reforms announced for April 2027 will bring pensions into the IHT net. This, combined with other measures, has fuelled demand for professional advice and growing interest in the advantages of relocating overseas (not just for the weather).

There is a lingering sense that the overall cost of these sweeping tax reforms may outweigh the benefits they aim to deliver.

Gemma Johnson is Director of Tax with Grant Thornton Northern Ireland