Higher Taxes and Increasing Insecurity Causing Exodus
Wealthy residents are rethinking their status in the UK. Both UK citizens and wealthy foreign residents are leaving for greener pastures.
Rising tax rates in the UK are causing an exodus of residents to leave. In recent years the UK has become a less welcoming place for entrepreneurs. Tax relief for those selling businesses has been cut substantially. Entrepreneurs previously enjoyed a low tax rate when they sold a company for up to £10m. This has been cut to just £1m. Corporation tax has also risen, making many countries more competitive.
Other factors, such as poor public services and rising crime, are also responsible.
While it was always a popular option for people to relocate to pure tax havens such as Monaco or The Cayman Islands, people are becoming more aware of less costly alternatives. For example, it’s possible to live in countries like Portugal and Italy and pay very little tax. Living costs are lower too. UK residents will also find the climate in southern Europe more appealing than the dreary British weather.
Non-Domiciled Status Watered Down
It’s not just the British who are leaving. Many long-term foreign residents are leaving the UK too. This is because successive governments have watered down the Non-domiciled tax status that had allowed foreign residents to live in the UK tax-free. As a result, foreign residents who have been in the UK for more than seven years can find it beneficial to relocate to sunnier and lower-tax countries.
In the past, emigration from the UK mainly comprised the older generations. People would leave after selling a business and making a substantial gain. Nowadays, however, younger people are waking up o the fact that they can run their businesses overseas. They can set up tax-efficient structures and live in a more desirable location while paying little tax compared to the UK.
Croatia has been a popular option amongst younger entrepreneurs. This is because it has short-term tax benefits for digital nomads. On the other hand, Dubai is ever more popular as it has a zero per cent personal tax rate. In addition, many people who would have chosen Monaco in the past are now opting for Dubai as it has much better options for accommodation.
Some Wealth Residents are Heading to Latin America
The more adventurous are heading far from Europe. Latin America is gaining traction as people realise they can take advantage of that region’s many territorial tax countries. Almost every country in Central America has a territorial tax system. Panama, Costa Rica and Nicaragua are becoming more popular.
This increased mobility amongst the working-age population may cause a change in tax policy. Countries like the UK will inevitably do something to protect their tax bases. As it stands, anyone can leave and become an ex-taxpayer. It’s almost surprising that any high-rate taxpayer with mobility chooses to stay!
The rules can be confusing, but you won’t be taxed there if you spend less than 90 days in the UK every year.
More countries may end up going in the direction of the US, which has long had citizenship-based taxation. US citizens must file a tax return yearly, even if they don’t live there. Exchange controls that restrict how much currency can be taken out of the country are another possibility.
Any British taxpayer with a mobile occupation can leave and never look back. They may wonder what took them so long.