Top earners and entrepreneurs fleeing Britain over tax raids

Chancellor risks ruining hopes of growth amid looming exodus of wealthy, experts warn

Wealthy individuals and entrepreneurs are already fleeing Britain as fears grow over a raft of tax rises in Rachel Reeves’s first Budget.
An exodus is being reported by bankers, financial advisers and business chiefs with experts warning that the Chancellor risks ruining hopes of faster economic growth with a widely expected increase in capital gains tax (CGT).
It comes after Sir Keir Starmer warned last week that those with the “broadest shoulders” would carry the burden of fixing Britain’s ailing public finances.
Ceri Vokes, a partner at law firm Withers Worldwide, who works with entrepreneurs and private equity executives, said a number of her wealthy clients had already moved overseas this year, with the election “the main driver”.
She added: “People with hundreds of millions of pounds [are leaving] because changes can be more impactful for them.”
Those packing their bags and moving overseas are typically entrepreneurs and private equity executives in the top income bracket, she said. Italy, the United Arab Emirates (UAE) and Switzerland are among the most popular destinations.
David Lesperance, of Lesperance and Associates, an advisory firm, said Britain’s wealthiest were “getting out while the going is good”.
He said: “Ever since Rachel Reeves started talking about a ‘fiscal black hole’, my wealthy UK non-dom and domiciled clients have been looking for the other shoe to drop.
“Sir Keir’s warning about a ‘painful budget’ just reaffirms their concerns that major inheritance tax and capital gains hits will be coming soon. As a result, they are actively preparing their exit from the UK.”
Brent Hoberman, the founder of Lastminute.com and Founders Forum, said: “Entrepreneurs are very mobile. Many of them will leave or, maybe even worse, not come to the UK if they aren’t creating entrepreneur-friendly policies.
“The combination of a potential move on non-doms, inheritance tax, CGT and VAT on private schools as a lesser issue, all those things when not married with any figurehead supporting entrepreneurship, valuing entrepreneurship, so far from this Labour Government I don’t think we have had anything backing the country’s entrepreneurs.”
City figures said there has also been an increase in tactics to swerve Reeves’s tax raid.
One investment chief said: “Even businesses that are pro-Labour are p—-d off with the rhetoric [around cuts].”
Tim Stovold, partner and head of tax at accountancy firm Moore Kingston Smith, said people were “so terrified” of a capital gains tax rate increase that their decisions were becoming “entirely tax-driven”.
He said: “There is definitely a cash flow advantage to the Government in allowing all these transactions to go ahead over the next couple of months because they get their tax sooner rather than later.
“The uncertainty now is just creating this insane period where people are triggering gains that they wouldn’t otherwise trigger for maybe many years.”
Mr Stovold said he had heard from entrepreneurs who expect to sell their business in the future and were now considering jumping ship because of the looming capital gains tax raid.
He said: “Even though the sale of their business may be a few years away, they are already exploring what other territories they could live in to avoid or reduce their capital gains tax liability.”
These more attractive territories include Spain, where under “Beckham’s Law”, named after the famous footballer, gains on non-Spanish assets are not taxed. Ireland also has its own non-dom regime allowing foreign gains and income to grow tax-free.
Sir Martin Sorrell, the chairman of S4 Capital and founder of advertising giant WPP, warned that with “increased mobility in the digital age” there could be “a considerable exodus and avoidance” in the event of a capital gains crackdown.
Small business owners are scrambling to sell their companies owing to mounting fears that Ms Reeves will increase CGT in the Budget on Oct 30, wealth advisers said.
Industry leaders warned that it will be hard to win back wealth creators who abandon Britain, adding that the country would risk missing out on thousands of new jobs as a result.
Charlie Mullins, the founder of Pimlico Plumbers who has recently relocated to Spain, said: “I don’t like the idea of the capital gains [changes], I don’t like the idea of inheritance tax.
“Any property I have in the UK under my name I will be selling. I still have a place there now in Westminster, but that will be getting sold.
“I know quite a few millionaires and billionaires who have left the UK, set up in Monaco or Dubai. Italy are offering a good deal now.
“I know a lot of people have moved their money from the UK. Not just because of tax, but because of Labour’s policies on workers’ rights, and on most things.”
The billionaire Tory donor Lord Spencer, a City tycoon who gave £250,000 to Rishi Sunak’s election campaign this year, said that Labour was hoping to “turn lead into gold” as there is “no example of a high tax, high spend and high growth economy” anywhere else.
Fears of a tax raid among Britons who own businesses, property and other assets have intensified over the summer after the Chancellor announced a £22bn hole in the public finances.
Gains made from selling a business are currently taxed at 20pc but many investors are concerned that Labour will seek to equalise these rates with income tax, which is 45pc for additional rate payers.
This means many business owners who sell up  after the tax changes would lose a significant amount to the Treasury.
Entrepreneurs have started to draw up emergency plans to quickly take money off the table before any tax increase hits.
One City banker said there had been a “rush for exits” from business owners hoping to finalise takeovers before Oct 30 or start a sales process before the end of the tax year to avoid the capital gains threat.
They said: “Lots of entrepreneurs are trying to get their deals done and I can see the same thing happening as Brexit where there was so much dealmaking going on before it came in.”
According to Alasdair McPherson from Rangewell, which brokers deals between lenders and entrepreneurs, there has been a big rise in the number of businesses opting to change ownership.
Dominic Lawrance, of law firm Charles Russell Speechlys, said: “Non-doms are a tiny sector of the population, but they are economically significant. They bring investment into the UK and there are a large number of businesses which are reliant on these people, or which will be seriously harmed if we lose them.
“Since the Labour Party announced plans to abolish the non-dom regime, there has been a noticeable increase in relocations among wealthy individuals. We are seeing them relocating to Italy, Switzerland or Dubai in numbers that are unusually high for a typical year.”
Investors are also using a so-called “bed and breakfast” tactic to try and escape the tax burden, according to one City investment chief.
This involves selling shares before re-buying them 30 days later to avoid a higher liability further down the line.
Converting to employment ownership trusts, where founders sell their stakes to employees and are exempt from capital gains tax, are also increasing in popularity.
Funds are also facing a potential hit from changes to how “carried interest” is taxed, which would eat into the profits of technology investment firms.
City accountants said that Labour was benefiting from allowing speculation about a capital gains tax raid to build up as it drives a spike in asset sales.
A Treasury spokesman said: “Following the spending audit, the Chancellor has been clear that difficult decisions lie ahead on spending, welfare and tax to fix the foundations of our economy and address the £22bn hole in the public finances left by the last government.
“Decisions on how to do that will be taken at the Budget in the round.”