Lobby group urges Rachel Reeves to rethink non-dom tax hike to prevent exodus of wealthy residents

Chancellor Rachel Reeves is facing pressure from lobbyists representing 74,000 non-UK residents to scale back planned tax changes, ahead of her next Budget.

The newly formed group, called Foreign Investors for Britain, is due to meet government officials this week to urge a reconsideration of Reeves’ proposed overhaul of the non-resident tax system, which could include an inheritance tax on foreign assets.

Non-residents, who are resident in the UK but are considered to be resident overseas for tax purposes, are currently exempt from paying UK tax on their overseas income. However, the changes proposed by Reeves have raised concerns that wealthy non-residents will leave the UK, potentially causing a net loss in tax revenue rather than boosting the exchequer. In 2022-23, non-residents contributed £8.9 billion to UK tax revenue.

The lobby group, which was formed in June and has already met with Treasury officials, proposes an alternative tiered tax system. This would pay non-residents a fixed annual sum, proportional to their wealth, for 15 years. Under the scheme, a person with up to £100 million of personal wealth would pay an annual fee of £200,000, with those with more than £500 million contributing £2 million a year. Currently, non-residents pay up to £60,000 a year.

Lesley MacLeod-Miller, spokeswoman for foreign investors in Britain, said: “We are pleased that the government is listening because this is a real issue. Britain is turning into a departure lounge, and without changes, we risk losing valuable investment and tax revenue.”

The government has so far defended the proposed changes. A Treasury spokesperson said: “We are tackling injustices in the tax system to raise revenue to rebuild public services. The old non-resident tax system will be replaced by a new residency-based system focused on attracting the best talent and investment to the UK.

The debate over non-residents comes amid wider concerns about Reeves’ first budget, which is expected to include major tax reforms as Labor seeks to rebuild the country’s public finances.