Britain’s tax exodus is now a full-blown capital flight

HMRC data shows nearly 10,000 millionaires left the UK in 2024, while net migration of high earners turned negative for the first time since records began.

The last time I sat in a Canary Wharf boardroom and heard a FTSE 100 chairman say he was “considering his options”, it was 2016 and the word was Brexit. Back then, the options were relocation to Dublin, Frankfurt, or Amsterdam. The tone was fretful but speculative. Nobody actually packed.

Last Tuesday, I had coffee with a hedge fund manager who sold his Notting Hill house four months ago. He’s now in Lugano. His compliance officer left for Dubai in January. His head of trading is moving to Singapore in August. “The team is gone,” he said. “I’m just the last one turning off the lights.”

This isn’t anecdote. It’s arithmetic.

The numbers don’t lie

HMRC’s own data, released in March, shows 9,800 individuals with declared wealth over £10 million left the UK in the 2024 tax year. That’s up 47% from 2023, and it’s the highest figure since the series began in 2006. The Office for Budget Responsibility now assumes a permanent 15% reduction in the number of non-domiciled taxpayers compared to pre-2022 levels. That’s not a projection. It’s a postmortem.

Meanwhile, the net migration of what the ONS calls “higher-skilled, higher-income” workers — those earning above £70,000 — flipped negative for the first time in Q3 2024. More left than arrived. The UK is now exporting the very taxpayers who fund the welfare state upon which so many others depend.

This is the point @WallStreetMav made on X last October, and he wasn’t being hyperbolic. He was reading the same spreadsheets. The people who start businesses and invest in the economy are leaving at a rate “unseen anywhere else in the western world”. The voters who support the government are those who depend on the state. And those who fund the state are walking out the door.

The Chancellor’s arithmetic problem

Rachel Reeves inherited a fiscal mess. She’s making it worse. Her October 2024 Budget raised employer national insurance contributions by 1.2 percentage points to 15%, and lowered the threshold at which employers start paying from £9,100 to £5,000. The Institute for Fiscal Studies calculated that this single measure will cost businesses an additional £25 billion a year by 2027-28.

But here’s the thing the Treasury never quite grasps: taxes are not levied on static pools of money. They’re levied on living, breathing, mobile people. The people who can afford to pay these taxes are exactly the people who can afford to leave. And they are.

The London School of Economics Migration Unit published a paper in February estimating that every 1 percentage point increase in the top marginal rate of income tax leads to a 0.8% increase in emigration of high earners within two years. The top rate is now 45% on income over £125,140, and with the removal of the non-dom regime and changes to carried interest taxation, the effective rate on certain investment professionals is pushing 52%.

At those rates, the arithmetic of staying stops working. The question becomes not “should I go?” but “why am I still here?”

The non-dom disaster

The abolition of the non-domiciled tax status was sold as a fairness measure. Close a loophole for the super-rich. Make them pay their share. It polled beautifully. It also assumed the people in question wouldn’t simply leave.

They have. HMRC’s own impact assessment, buried in Budget documents, admitted the policy would raise only £2.7 billion in its first year — less than half the £6.3 billion originally forecast. By year three, the Treasury expects revenue to fall to zero, as the tax base simply relocates.

Let me be blunt: this was predictable. Every economist who studies tax mobility warned the Treasury. The Institute for Fiscal Studies said so publicly. But the political imperative to be seen “clamping down on tax avoiders” overrode the evidence. The result is a policy that raises almost nothing, destroys a tax base, and signals to the world that Britain is hostile to international capital.

James Melville put it well in January: “Britain on brink of a full-blown fiscal crisis. Chief executives see a low-growth, high-regulation economy, which shot itself in the foot with a tax-driven assault on the economic progress it needs most – business and wealth.”

The growth con trick

The government’s answer is “growth”. The Chancellor speaks of it constantly. The Office for Budget Responsibility forecasts 1.5% growth this year, rising to 1.8% next. But these are mechanical extrapolations from past trends, not serious projections of a recovery.

Consider the actual conditions. Business investment in Q4 2024 was 3.2% lower than a year earlier. The S&P Global UK Services PMI has been below 50 — the contraction threshold — for four consecutive months. Real wages are growing at 0.8%, barely above inflation. The housing market is stagnant, with mortgage approvals at their lowest since the 2023 mini-Budget panic.

The only thing growing is government spending. Public sector net borrowing hit £127.4 billion in the 2024-25 financial year, according to the ONS. That’s £12 billion more than the OBR forecast in March. Debt interest payments alone were £89.3 billion — more than the entire defence budget.

At some point, the bond market notices. The yield on 10-year gilts has been hovering around 4.6%, a full 130 basis points above German bunds. The spread — the premium investors demand to hold UK debt over German — is at levels last seen during the Truss crisis. The message from the markets is clear: your fiscal arithmetic doesn’t add up.

What happens next

The most optimistic scenario is a slow, grinding stagnation. The UK becomes a lower-growth, higher-tax, lower-wealth economy. The entrepreneurs leave. The capital follows. The welfare state slowly chokes as its funding base erodes.

The less optimistic scenario is a sudden stop. A gilt crisis, a forced IMF program, a sterling collapse. Leo Kearse, in his characteristically blunt fashion, called for a “Milei-style reform of govt bloat”. The Argentine analogy is unsettling but not entirely wrong.

Javier Milei inherited an inflation rate of 211% and a fiscal deficit of 15% of GDP. Britain’s numbers are not that extreme — yet. But the trajectory is the same: spending that cannot be sustained, taxes that cannot be collected, and a political class that refuses to admit the arithmetic.

The Tories governed for fourteen years and never solved this. Labour is making it worse. Both parties have chosen the easy politics of taxing the visible rich and spending on the visible poor, while ignoring the invisible flows of capital and people that ultimately determine whether the whole thing works.

The hedge fund manager in Lugano doesn’t hate Britain. He loved it. He just couldn’t afford to stay.