Business leaders are urging the Labour government to reverse its abolition of the “non-dom” tax regime, warning of a continuing “exodus” of high-net-worth individuals from the UK. Lobby group BusinessLDN has called for the creation of an “Office for Tax Competitiveness” to assess the impact of UK tax rules on attracting investment and growth, arguing that the current environment is less favourable than that of international competitors.
The call comes as the organisation launched its “growth commission” report, which found that downgraded growth forecasts followed the November Budget. A key recommendation is a review of tax changes impacting investment, including the scrapping of the non-dom regime. The non-dom status previously allowed UK residents with homes outside the country to pay tax only on income generated within the UK.
Chancellor Rachel Reeves, at the 2024 Budget, replaced this with a residence-based system, taxing all long-term residents on their worldwide income. A four-year “grace period” was introduced for the changes. But, concerns are mounting over the economic consequences of these reforms. Reports suggest nearly 2,000 wealthy non-doms left the country in the past year, a figure that follows the loss of nearly 11,000 millionaires in 2024 following initial changes to the regime, according to data from Companies House.
The value of prime London property has also declined, with average house prices in Kensington – a favoured location for wealthy individuals – down approximately 10 per cent since 2024. BusinessLDN’s report states the changes have negatively impacted multiple sectors, including professional and financial services, and the creative industries, resulting in a loss of high-net-worth donors.
Ministers are reportedly engaged in discussions with City leaders regarding proposals to extend the grace period and introduce a “pay-to-play” visa scheme for ultra-high-net-worth individuals. The BusinessLDN report also advocates for a review of other tax policies, including the removal of VAT-free shopping for tourists, the bank levy, and stamp duty.
The proposed “Office for Tax Competitiveness” would be tasked with identifying areas where the UK’s tax system hinders its competitiveness, publishing research and analysis, and providing recommendations to the Chancellor to inform fiscal decisions. The report also highlights concerns about housebuilding, stating that construction in the capital is “close to a standstill.”
The lobby group is urging Labour to accelerate housebuilding by delaying a new safety levy and streamlining regulatory processes. Despite a government pledge to build 1.5 million new homes by the next general election, the Treasury watchdog has forecast only 220,000 new homes will be completed in the next financial year, citing the limited impact of Labour’s planning reforms. London is expected to contribute 88,000 homes annually to this target, but current projections estimate only 4,550 homes will be built in the capital in both 2027 and 2028, according to consultancy firm Molior.
Helen Gordon, chair of the growth commission, stated: “Unlocking the full economic potential of London as an economic engine for the UK is essential to deliver the growth needed to create people across the capital and beyond experience better off. While the capital has inherent strengths from the rule of law to a highly-skilled workforce, success can’t be taken for granted amid intense global competition.” John Dickie, BusinessLDN’s chief executive, acknowledged that the government’s growth initiatives are “starting to bear fruit,” but called for accelerated efforts to boost business confidence and private sector investment in the capital.
