HNW clients seek advice as non-dom status is scrapped
The financial services industry is reporting increased business from high net worth clients ahead of the government’s scrapping of the tax efficient non-dom status this month.
Labour is abolishing the status – which describes a UK resident whose permanent home or domicile for tax purposes is outside of the UK. Significant numbers of wealthy people are understood to be making a move out of Britain in what’s been dubbed ‘a millionaire exodus’.
Some 10,800 millionaires left the country last year, reports Garrington Asset Management, with some property owners choosing to rent out, rather than part with their assets. Rental values of flats in London’s most expensive postcodes have soared 7.9% in just three months, it says, in what it describes as a ‘rapid recalibration’ of London’s prime property market. The capital has also seen property prices stagnate amid a glut of luxury homes for sale.
Mortgage broker Thomas Boughton (pictured left), founder of London-based Artillium Finance Partners, reports a boost to his business. “We’ve seen a significant uptick in refinancing,” Boughton told Mortgage Introducer. “A large number of clients who own unencumbered prime assets are now actively seeking to release equity and looking to deploy that capital into jurisdictions or ventures perceived as more fiscally stable or efficient. There’s also been a notable rise in clients transferring ownership of properties from personal names into SPVs (special purpose vehicles), a move increasingly seen as a way to insulate against future tax burdens.
“These aren’t distressed sellers, they’re highly strategic and many still see the long-term value in holding London real estate. But the effect of this shift is already being felt with rental stock being absorbed quickly, and sales stock is increasingly concentrated in the hands of owners who are no longer rushing to sell. That supply squeeze will almost inevitably feed back into higher prices over time, making London less accessible still.”
Broker Luther Yeates (pictured centre), head of mortgages at Orton Financial, commented: “The clients I have who are looking to sell are struggling - the clients I have who are buying have a more powerful position in the transaction. We are weathering the market well. The clients who are struggling to sell often have a finance requirement to release equity - they have finance moving to a high rate, or are selling to purchase another asset - so we can step in here with short to mid-term solutions.” He added: “The private banks we predominantly work with were turning away clients based overseas 12-24 months ago, opting to focus their efforts on domestic clients only. They have since transitioned towards publicly offering a range of products for overseas clients. We also have an active presence in the expat market, allowing us to attract and arrange finance for these clients.”
Read more: Londoners move to Scotland for cheaper property and lifestyle
Middle Eastern investors acquire prime property below market value
Jack Goguelin (pictured right), founder of Convici Capital, works with high net worth investors in lucrative locations such as London and the more tax-efficient Dubai and the Channel Islands. He is busy, giving mortgage advice to those seeking to relocate, and reports that he’s still seeing many of those leaving deciding to sell. “Some of the transactions we are working on currently are for Middle Eastern investors acquiring prime property at below market value - the vendors are people leaving the UK,” Goguelin said. “If you leave the UK, but retain property that is available to you, it can be deemed a tie for taxation in the UK. Couple that with the fact that IHT is payable on UK situs property, whether or not you are resident in the UK, and you can understand why the wealthy who are choosing to vacate are also, in many cases, choosing to dispose of their assets in the UK.”
Meanwhile, Chris Ball, (pictured above) CEO & founder at Hoxton Wealth, notes that a lot of business owners are exiting their businesses and seriously considering leaving the UK. “We have seen a rise in interest of places like Dubai and Florida, which are lower tax jurisdictions, have sunnier climates, but are less restrictive for these high net worth individuals,” Ball said. “Quality of life is also important for these people. Obviously, they have had a really good quality of life in the UK and they want to keep that too. It’s good for our business because we deal with these people in the UK, and we also deal with them internationally, so it works really well for us and the changes are a good thing for us because complexity means that people need quality advice.”
Islay Robinson (pictured above), CEO of Enness Global, which advises high and ultra-high-net-worth individuals, observes that the changes to the UK’s non-dom regime have triggered concerns, and, in some cases, early exits. “We’re seeing a recalibration,” Robinson commented. “Many are reassessing their long-term UK exposure and considering how best to structure their global portfolios moving forward. That said, London remains a world city. It still holds strong appeal for international buyers, even if they choose not to be UK tax residents. The legal framework, access to education, healthcare, and global connectivity mean London won’t be easily replaced, but clients are more conscious of tax efficiency and mobility than ever.” He added: “For us as a business, this is driving increased demand for international mortgage solutions and advisory support across multiple regions, not just in the UK.”
