Tax rates matter to wealthy taxpayers but tax certainty matters even more
Tax rates matter to wealthy taxpayers but tax certainty matters even more, say leading audit, tax and business advisory firm, Blick Rothenberg.
Elisa Sofocli, a partner at the firm, said: “The issue the UK faces isn’t necessarily the change from the old non-dom to the new Foreign Income and Gains (FIG) regime; tax systems have to evolve, but that taxpayers don’t know where the rules are going next. Taxpayers can plan around a tax rate; it is much harder to plan around a tax system that may not still exist in five years’ time. If people are making ten- or twenty-year decisions about where to live, invest and build their businesses, certainty matters enormously.”
She added: “Countries aren’t just competing on tax rates anymore; they’re competing on the overall tax proposition they offer. The UK’s new FIG regime has some real advantages, particularly in terms of simplicity, but it is a very different proposition once those first four years have passed. Those with the broadest shoulders have the longest legs, and for someone who genuinely has a choice about where to live, work and build their future, it’s entirely rational that the longer-term tax position will form part of that decision.”
Elisa said: “The debate should not simply be ‘are wealthy people paying enough tax?’ or ‘are taxes too high?’ The more useful question is: ‘what makes someone choose the UK when they have the financial freedom to choose somewhere else?’ Tax is part of that answer, but so is certainty, stability, access to talent and markets, education and quality of life. If the Government wants growth, they need to think not just about how much tax they can collect from people who are in the UK, but why people would choose to be here in the first place.”
She added: “It may be tempting to reduce the issue to ‘other countries have lower taxes than the UK’, but that misses the point. Those other countries are deliberately designing regimes to attract internationally mobile wealthy individuals.”
Elisa said: “The headlines around wealthy taxpayers changing their tax residence understandably attract attention, but caution should be taken in turning individual departures into evidence of a mass exodus. But the real risk isn’t just the people leaving – it is the people who never arrive.”
She added: “The 2024/25 tax statistics did not show a dramatic exodus of wealthy taxpayers, but behavioural change takes time to appear in tax data. There is a much bigger blind spot, the statistics can show who has left the UK, but not how many people looked at the UK and decided not to come here in the first place.”
Elisa said: “Very large individual tax contributions can be difficult to replace. At a very high level, replacing hundreds of millions of pounds of tax would require the equivalent tax contribution of tens of thousands of people earning around the National Living Wage. That isn’t an argument that one taxpayer matters more than thousands of others. It is a reminder that broadening the tax base is about more than simply increasing the number of taxpayers, it is also about retaining those who make exceptionally large contributions.”
She added: “The UK needs more people in work and a broader tax base, but that should be done to drive growth, not to replace taxpayers who have left. The goal should be to grow the tax base, not continually refill the hole in it.”