With an urgency not always noted in plumbers, Charlie Mullins announced earlier this year that he was leaving the country, before even waiting for the Budget fallout. He put his £12 million penthouse on the market and is busy buying up properties in Spain and Dubai, between which he will now spend his time. Inheritance tax, he said, was his main bugbear. He has already cashed out of his business, Pimlico Plumbers, which he sold for £145 million three years ago.
Wealth managers are enjoying boom times like never before
He didn’t even wait for the budget, but now it has been delivered has the real exodus begun? To judge by the headlines, Mullins is just one in an exodus of multi-millionaires who are evacuating the country in their (now more taxed) private jets. ‘The very fabric of our economy is being ripped apart,’ warns James Dyson. It has been hard to read the business pages of a newspaper in recent weeks without seeing an estimate from Henley & Partners that Britain will suffer a net loss of 9,500 high net worth individuals this year, who will take their wealth, businesses and tax revenues with them.
There are several potential reasons why wealthy individuals might now want to leave. Besides the end of the non-dom regime, the tightening of inheritance tax relief on business assets – now restricted to the first million – has made it much more difficult to pass on businesses to the next generation. Changes to national insurance have made it more expensive to staff those businesses. There is also stamp duty on second homes – already punitive, now even more so. One feared change which wasn’t made was an ‘exit tax’ on the assets of people leaving the country – though the prospect that this might be introduced in future budgets has added to the sense of urgency in those thinking of leaving Britain.
But there is one group of people who are unlikely to be leaving in a hurry. Wealth managers are enjoying boom times like never before, as the well-off hurry to rearrange their financial affairs to cope with a more hostile fiscal environment. You can tell something about an occupation by the number of awards ceremonies dedicated to its practitioners, and in the world of private wealth management they are proliferating. From the Professional Adviser Awards to the Portfolio Adviser Wealth Partnership Awards to the Spear’s Wealth Management Awards, the men and women who make a living by telling others where to put their money have never been so honoured with gongs presented in West End ballrooms.
‘There has been a huge uptick in activity,’ Drew Knutsford of Waverton tells me. He says his clients are typically between 50 and 70 and trust him to manage assets between £600,000 and £700,000 (this is just the loose assets, excluding property). ‘There has never been so much interest in a Budget, never been so much fear.’
If it sounds like a glamorous world, advising multi-millionaires how to arrange their tax affairs, it doesn’t always quite live up to the image. I once interviewed a wealth management adviser, the cream of London’s professional circuit, or so it was spun to me, whose one-man Kensington office turned out to be a dingy space above a branch of William Hill. I found that rather amusing, although he didn’t – he threw me a dirty look and begged me not to mention it. For the most part, advising the wealthy involves boning up on the finer intricacies of tax law, which never get easier to master – Tolley’s Tax Guide, a bible in this field, ironically grew from 800 pages to more than 1,000 during the 13 years in which George Osborne’s Office of Tax Simplification existed.
But are wealth advisers in danger of losing their clients as they all do a Mullins and pack up shop? This is where the tales of an exodus of wealthy individuals seem to go a little cold. ‘There are a lot of people carrying out pre-emptive tax planning,’ Olly Cheng of private bank Rathbones says. ‘There are a lot of people who have had conversations with us about gifting money to the next generation. This Budget has really accelerated that process. Inheritance tax is their biggest worry.’
He says his clients – mostly people with self-made wealth, with an average of £2 million in liquid assets, but with some up to £50 million – have had conversations about leaving Britain, with Singapore a favoured destination. The ‘odd person’ is actually leaving the country for lifestyle reasons, the ones who were going to seek a sunnier retirement regardless of who was in power.
But have any of his clients actually left the country as a result of a Labour government and fear of the fiscal changes announced in the budget? ‘No, not yet. There are grumblings about what might happen, but we’ve not seen anything like the same level of worry we had in 2019 when there was a chance Jeremy Corbyn could become prime minister.’
Fred Hervey, chief investment officer at Lincoln Private Investment Office, has a similar experience to report. There have been lots of conversations with his clients about possibly leaving the country, some thinking of the ‘old favourites’ of Jersey or Switzerland but increasingly the Middle East. Britain is not likely to be attracting non-doms in the near future, yet the wealthy are not quite as mobile as often made out, especially entrepreneurs, as it takes considerable time for people to extricate themselves from a business.
There is the consideration, moreover, of family. If you care enough about your offspring that you are prepared to go to great lengths to avoid inheritance tax, you are unlikely to want to abandon them to go and live in a tax haven thousands of miles away. That tends to limit the number of wealthy people prepared to make good on a threat to leave the country. As for those of Knutsford’s clients who are leaving, the motivation, he says, is often to join children who have already established lives abroad.
That, though, should sound alarm bells. In listening out for the screech of private jets down the runway, we may be looking down the wrong end of the telescope: the people we really need to be worrying about are not so much those with established wealth, but the entrepreneurs of the future.
Britain is struggling to hold on to its wealthy residents partly because there is a lot more choice now, says Simon Allister, head of wealth planning at LGT Wealth Management. Britain used to have an advantage in that the tax situation was stable. These days, Britain is seen as more volatile. What’s more, the wealthy are increasingly mobile – and don’t have to change their lifestyles much to change tax jurisdictions. For the super-wealthy – those who have multiple homes around the world and have never quite been full-time residents of the UK – ‘emigration’ is always a slightly awkward concept. They don’t really need to pack up any boxes; they can change tax jurisdiction by rearranging how much time they spend in each of their various homes.
Even if one in 50 decide to leave the country, it isn’t going to show up all that much on Rachel Reeves’s spreadsheets
‘IHT is the biggest game-changer in the budget,’ says Allister. ‘ But it is not just since Labour took power – there has been a rise in people leaving for a few years now,’ says Allister. Those coming to Britain are not staying so long. ‘I know recent arrivals who were planning to stay in Britain for 10 to 15 years who are now planning to stay four to five years.’ Jeremy Hunt’s change to the non-dom regime set the trend, by limiting to four years the period during which overseas income and assets could be protected from UK tax. The realm of the super-wealthy is no longer characterised by tax exiles so much as fiscal nomads. They don’t necessarily seek out traditional tax havens – for Allister’s clients the most attractive places at the moment are Spain, Italy, and the Middle East. A few have also emigrated to the US.
It is worth putting the Henley & Partners figure into perspective. The definition of a high net worth individual, for the purposes of its prediction of a net loss of 9,500 from Britain this year, is anyone with investable assets of over $1 million (£770,000). That doesn’t make you terribly rich: indeed, there were 609,400 people in this position in Britain in 2021 – 1.1 per cent of the adult population. If we were to lose 9,600 of them that would amount to about 1.6 per cent of the wealthiest 1.1 per cent of the population.
The loss of tax revenues from this group would not be insignificant – the highest-earning 1 per cent of the population pay just over a quarter of income tax, with the top 60 earners alone paying 1.4 per cent of income tax. But even if one in 50 decide to leave the country, it isn’t going to show up all that much on Rachel Reeves’s spreadsheets, given that she has just jacked up the overall tax take by £40 billion.
Rather more significant is the lost opportunities to the economy if entrepreneurs decide to take their businesses elsewhere. If they decide to leave Britain before they set up a business, we will never even know what they could have contributed to the UK economy. That is where the real damage lies: not, perhaps, so much in the loss of the likes of Charlie Mullins, who has already made his money and cashed out to enjoy a retirement in the sun. It is from the people we may never even know about: the lost, younger entrepreneurs who chose to set up shop elsewhere.
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