The pressure on Keir Starmer’s government to reverse its abolition of the non-domicile tax regime has been building for months, but it reached a new level of formality this week when lobby group BusinessLDN published its growth commission report and put the case squarely on the table.
The organisation, which represents London’s major employers and business associations, is calling on ministers to reconsider the tax changes that critics argue have undermined the capital’s competitiveness and triggered a measurable outflow of high-net-worth individuals since the new rules came into force.
The non-dom regime, as it existed before the 2024 Budget, allowed UK residents whose permanent home for tax purposes was outside the country to pay tax only on money earned within the UK. Chancellor Rachel Reeves replaced that system with a residence-based structure taxing all long-term residents on their worldwide income, with a four-year grace period running through 2028.
The policy was presented as a fairness measure, and it was popular with voters during the election campaign. The practical consequences for London’s economic ecosystem have since proved considerably more complicated.
BusinessLDN’s report argues that the change has been felt across multiple sectors simultaneously, not only in financial services. “This change has been damaging to multiple sectors, from loss of talent in the professional and financial services sectors, to the creative industries, where the reforms have resulted in the loss of high-net-worth donors,” the report states, pointing to the ripple effect of wealth departure on arts philanthropy alongside the more widely covered investment and business formation implications.
The property market has provided some of the most visible evidence of what’s happening at the top end. Average house prices in Kensington, the postcode most associated with wealthy international residents, have fallen around 10% since 2024, a correction that reflects reduced demand from exactly the demographic most affected by the non-dom changes.
That kind of price movement in a market that has been structurally undersupplied for years speaks to the scale of the behavioural shift taking place among internationally mobile households.
The numbers being cited around wealth departure require careful handling, because the methodology underpinning headline figures has been contested. The Tax Justice Network published findings last year arguing that the widely circulated projection of 16,500 millionaires leaving the UK in 2025, drawn from Henley & Partners research, was based primarily on LinkedIn data tracking where wealthy individuals say they work rather than where they actually live, a methodological gap significant enough to call the absolute figures into question. That said, advisers working directly with affected clients describe a genuine shift in intention and behaviour that goes well beyond what any aggregate dataset captures.
David Lesperance, a wealth adviser who works with internationally mobile clients, described the conversation that has become routine in his practice. One of his clients, a business owner planning to sell a company worth approximately £70 million, moved to Dublin specifically to avoid the capital gains consequences of a sale under the new UK regime.
“As one of my clients said, ‘London’s nice, but it’s not that nice,'” Lesperance told reporters, a line that has since become something of a shorthand for the sentiment driving a meaningful subset of departures.
The fiscal irony running through the entire debate is that the non-dom abolition was projected to generate £12.7 billion for the Treasury over five years, yet independent analysis now suggests that figure may not materialise if the departures are large enough to offset the additional tax take from those who remain.
The top 10% of income taxpayers contribute over 60% of all income tax receipts, which means even a modest reduction in that cohort’s participation rate can produce an outsized fiscal impact relative to the numbers involved. The Treasury has not published updated projections, and that silence is itself a source of frustration for business groups pushing for a policy review.
BusinessLDN’s proposed remedy goes beyond simply reversing the non-dom changes, though that is their headline ask. The group is also calling for the creation of an “Office for Tax Competitiveness,” a standing body charged with identifying areas where UK tax rules place British firms and wealthy residents at a disadvantage relative to peer jurisdictions. The concept is modelled loosely on similar bodies operating in Ireland and the Netherlands, countries that have spent the past decade systematically optimising their fiscal positioning relative to larger neighbours. Ministers are reportedly in talks with City leaders about extending the grace period and potentially introducing a “preferential lump-sum” arrangement for new arrivals, similar to Italy’s flat tax scheme.
Italy’s offer is worth understanding because it is increasingly the benchmark that London is being measured against. Under the Italian model, wealthy foreign residents pay a flat annual charge of €200,000 to keep foreign assets and income entirely outside Italy’s tax net.
The simplicity and certainty of that structure has attracted a meaningful number of London’s departing non-doms, with Milan and Rome absorbing arrivals who would, under a different regime, have remained in Mayfair or Kensington. Ireland, meanwhile, has been rated the top relocation destination by more than a quarter of wealthy UK residents considering leaving, reflecting both its residual non-dom status and its cultural proximity to Britain.
The London hospitality and entertainment sectors add another layer of concern on top of the wealth departure question. Planned Tube strikes scheduled across 12 days between March and May are expected to cost the capital’s restaurants, bars, and entertainment venues millions in lost footfall, a problem that arrives on top of an already fragile consumer environment. London’s unemployment rate has climbed to 7.3%, unusually high for the UK’s economic engine, and business investment plans across the capital are tracking at their weakest in five years according to CBI data.
The combination of a thinning high-net-worth resident base, rising youth unemployment, and impending transport disruption paints a picture of a city under genuine economic pressure at the precise moment its cultural calendar, packed with major West End openings and landmark exhibitions, is trying to reassert its status as the world’s most compelling destination.
