X

X

Wealthy Brits fleeing UK to escape tax hikes, experts warn

tax

Forbes Dawson, which manages tax affairs for some of the UK’s most successful business owners, claimed recent tax changes are forcing Britain’s entrepreneurs to consider moving abroad.

The Manchester-based firm, which is celebrating a decade in business this year, said the number of enquiries from people looking to escape the UK because of the rises in taxes has skyrocketed “fourfold” since the start of the Covid-19 pandemic in 2019.

Forbes Dawson tax director Angela Carey said that countries such as Portugal and Dubai were becoming increasingly popular destinations for UK sun-seeking tax-savers.

“Whereas four or five years ago clients were coming to us asking how best to structure their affairs while remaining as a UK resident, we are now seeing an increasing appetite for advice on how to leave the UK altogether,” she said.

“The 1.25% increase in dividend rates on 6 April 2022 could be the straw that broke the camel’s back”.

She added: “In the case of Portugal, expats can qualify for favourable tax exemption which, if correctly followed, can allow dividends to be extracted from their UK company free of tax.

“The fact that resorts like the Algarve are also nice places to live is the icing on the cake.”

In April, the government applied a 1.25% increase to National Insurance (NI) and dividend tax. Employers were also ordered to pay an additional 1.25% employer’s NI.

Soaring fuel, energy and rent costs – combined with a swathe of tax hikes – have also led to a surge in inflation. This month, The Bank of England also increased interest rates from 1.25% to 1.75% – the largest rate hike in 27 years.

Meanwhile, economic challenges such as Brexit and the Covid pandemic two years ago have further added to the UK’s financial woes.

Mrs Carey said: “We have been approached by several high net worth clients who are curious to explore their options around breaking UK tax residence and moving abroad.”

“While this remains a complex area to advise upon, the tax rules have become notably easier to navigate since the introduction of a statutory residence test in 2013”.

“Under the new rules, an individual can be assured that so long as they do not exceed a maximum number of permitted days in the UK, they will not be UK resident”.

In a further warning to policymakers, Forbes Dawson said that the increase in the UK’s corporation tax rate from 19% to 25% from April 2023 could be the “tipping point” for company owners in deciding whether to take the plunge and move overseas.

“From April 2023, many business owners will effectively suffer tax of over 50% on their profits due to a combination of corporation tax and dividend tax. Given that Covid has taught them how easy it is to work remotely, moving abroad is now seen as a much less drastic step than it was before,” Mrs Carey said.

“With information published by HMRC pointing towards the fact that the top 1% of UK earners pay nearly a third of all the income tax, a mass exodus of entrepreneurs, or ‘brain drain’, could have a very damaging effect.”

This Week’s Most Read

Latest IFA Magazine Podcast Episodes

Keep updated on the most important financial events 

Make sure you are an informed

wealth professional..

Adblock Blocker

We have detected that you are using

adblocking plugin in your browser. 

IFA Magazine