Is the UK’s goose well and truly plucked?

Introduction

Earlier in the year, research was published by the London School of Economics’ (LSE) International Inequalities Institute.

The report’s title is “Britain’s super rich unlikely to move to ‘boring’ and ‘culturally barren’ tax havens”.

Their research suggests that tax increases are unlikely to be a major driver of wealthy people leaving the UK.

Many factors are more important to them than just tax rates, such as cultural life and social standing.

The research

The report attempted to look into the likelihood of high-net-worth individuals emigrating due to potential tax hikes in the UK.

However, its methodology appeared flawed. Researchers interviewed a tiny sample of 35 Britons in the top 1% by income or wealth..

The conclusion of the study was that tax wasn’t the main reason for past emigration among the wealthy, and none were actively considering leaving solely for tax purposes.

The reasons for staying put were the perceived cultural offerings, social connections, and reputational concerns (being seen as abandoning the UK for tax benefits) were more important factors than tax rates for these high earners.

Despite not being the main driver for emigration, some interviewees expressed anxieties that current tax rates were high and might increase further.

Overall, the report suggested that tax increases might not be the mass exodus trigger some fear.

But does the reality reflect the conclusions drawn from this micro-research?

Exit stage left

Sadly, despite what we are being told by those advocating maximum goose-plucking* – that the wealthy will not leave the UK as a result of tax hikes – the figures don’t seem to back this up.

Indeed, although we don’t necessarily know the cause or main drivers, it seems that many are already heading for stage left.

A recent report suggests that the UK is on track to lose a staggering 9,500 millionaires in 2024, second only to China.

This is more than double the 4,200 who left last year and a huge jump from the 1,600 in 2022.

Meanwhile, the UAE continues to be the top destination for the wealthy, expecting a record 6,700 millionaire migrants by year-end, with many coming from the UK and Europe.

Notably, nine out of the top ten countries attracting millionaires have formal investment migration programs, offering residence or citizenship in exchange for investment.

Plenty more fish in the sea!?

Paah! Good riddance. Plenty more fish in the sea.

The same report suggests that there are currently 602,500 millionaires in the UK.  So what’s 9,500 or so millionaires between friends?

However, it says, the country has lost 8% of its millionaire population since 2013.

This is a worrying stat and trend.

Particularly when one bears in mind that, despite the UK having a record tax burden, a significant chunk of the population pay no tax at all, and more than 50% of those of working age receive more in benefits than pay tax.

When one looks further up the fiscal food chain, we see that the top 1% pay more than 30% of income tax.

As such, a reduction in millionaires is likely to represent a disproportionate erosion of the tax base.

Conclusion

The findings from the LSE suggest that tax rates alone may not drive the wealthy to leave the UK.

However, recent data showing a substantial increase in millionaire emigration challenges this narrative.

Despite reassurances from those advocating for higher taxes that the wealthy will not abandon the UK, the exodus of 9,500 millionaires projected for 2024 raises alarms.

This trend, coupled with the loss of 8% of the UK’s millionaire population since 2013, could have serious implications for the country’s tax base.

Given that the tax contributions of these individuals, their departure could lead to a disproportionate erosion of the tax base, straining public finances further.

While some may dismiss the loss of 9,500 millionaires as negligible against the backdrop of 602,500, the broader impact on the economy and fiscal health cannot be ignored.

The challenge lies in balancing tax policies to ensure fairness without driving away the very individuals who contribute significantly to the nation’s revenue.