In the approach to the 30 October UK budget, a report from an economics think tank says that HNW individuals are hitting the exits amid concerns about rising taxes.

At a time when the UK wealth industry is bracing itself for tax hikes on affluent and high net worth individuals in the 30 October budget, figures from the Adam Smith Institute this week say that millionaires want to get out.

The free market think tank said in a report that the country is set to lose the greatest proportion of millionaires in the world in the next few years. The share of the population who are millionaires will fall by 20 per cent by 2028, the ASI said. 

Today, 4.55 per cent of UK residents are millionaires; the ASI has forecast that this will fall to 3.62 per cent by 2028.

“The fact that the UK is losing proportionately more millionaires than China or Russia is a worrying indicator of our economic health and growth prospects,” the think tank said in a statement. “Many millionaires are wealth creators who set up businesses and employ people across the UK.”

UK Chancellor Rachel Reeves is expected to hike taxes on savings and forms of capital – possibly increasing capital gains tax to match income tax rates – and squeeze exemptions on inheritance tax. 

The government – following the stance of the previous Conservative one – is also planning to end the UK’s resident non-domicile regime, shifting to a residence-based system with a four-year period of no tax on forms of wealth for those who have lived abroad for at least a decade and want to come to the UK. There’s speculation that Reeves might soften the way that the system is changed, such as how inheritance is treated, amid fears that scrapping the non-dom system won’t raise net revenue if there’s an exodus.

The ASI report adds to concerns that the UK has reached the upper limits of how high taxes, as a share of GDP, can go before they reduce, rather than raise, more money. The argument, sometimes known as “supply-side” economics, says that there is an optimum tax level between zero and 100 per cent, and that many major countries’ tax codes are beyond the ideal point. At issue are arguments about fairness versus economic growth and efficiency. 

At a time of greater capital and human mobility, jurisdictions such as the United Arab Emirates, Portugal, Malta, Switzerland, Singapore and Italy are competing to attract affluent people with a variety of schemes, including so-called “golden visas,” and various types of programmes offering residence/citizenship in return for investment. 

The ASI said that millionaires are leaving the UK for a number of reasons, including high levels of current taxation, threats of further increases, and a hostile culture towards wealth-creators. (For a report about hostile attitudes towards the rich, see this WealthBriefing review of a study of attitudes to the rich, by Rainer Zitelmann, a Germany-based sociologist and entrepreneur.)

The ASI has built a “Millionaire Tracker” which calculated the proportion of the population who are millionaires, and how this is forecast to change over time.

Stephen Abletshauser, international private wealth partner at Spencer West, a London-based law firm, said clients are seriously considering quitting the UK.

“If capital gains tax is indeed equalised with income tax, material proportions of wealth generators will without doubt leave the UK for many years,” he said. “This will only further exacerbate the tax gap. There is a feeling that the social contract is broken in that double taxation in the form of Inheritance tax is deemed ‘fair’ whereas successive governments do not address the fact nearly a quarter of households pay no income tax and only 11 per cent of the working age population pays more than basic income tax.”

“We are a far more mobile society culturally and economically than 10 years ago even. The global competition for wealth generators to relocate to their jurisdiction is fierce and the likes of Greece, Spain, Italy, Portugal, Singapore, the UAE, the Caribbean, and the USA will benefit from ill-advised tax grabs,” Abletshauser said.