The growth in the number of resident non-domiciled people living in the UK is being hampered by the UK’s special tax levy imposed two years ago, which ironically will reduce, rather than raise, the amount of tax revenue, according to a survey by Stonehage, the multi-family office.

To highlight the damage it says is being caused by regulations and taxes on non-doms, the report said that unimpaired growth in the population of this group would have resulted in the current tax contribution nearly doubling to £14 billion (around $21.3 billion) by 2018. However, the report found that 2 per cent of RNDs have already left the nation or switched residency, while annual RND population growth is set to slow.

The UK should simplify the rules about RNDs, even if it leaves the new annual levy on non-doms, the report said. At present, the UK government imposes a £30,000 annual levy on non-doms who wish not to pay tax on their worldwide income.

The measure, coupled with the new top-rate income tax band of 50 per cent due to take effect in April, has been criticised for encouraging people to quit the UK and deterring wealthy people from coming into the country.

Stonehage’s report was produced with input from London’s Cass Business School and 25 RND advisors.

It said the new RND rules, which were forecast at the time by the UK government to raise £650 million of additional revenue, comprised an annual £30,000 charge for RNDs, and changes to personal allowances and taxation of offshore trusts.

Resident non-doms contribute £8.3 billion in income tax, stamp duty and VAT each year, based on the 2008/2009 tax year, the report said. It added that RNDs spend £19 billion in the UK each year on property, goods and services.