Labour will come to regret its war on wealth

Non-doms are an easy target. Both Labour and the Tories have pledged to crack down on them – but there will be unintended consequences they will come to regret.

These promises have already hit the top end of London’s property market hard, sending out ripples of uncertainty and creating significant disruption. And it isn’t just homes not selling, but it is the wider economy that will be hit too: the workers that non-doms hire, the restaurants they spend in, the taxis they take.

There are just 68,800 of these non-domiciled residents in the UK, predominantly concentrated in London. This is a tiny amount of people – but the power they hold is significant.

The Tories claimed that their crackdown would bring in £2.7bn a year, while Labour’s more extreme policy – of closing a “loophole” allowing non-doms to move their money into an offshore trust which could shield them from inheritance tax before the ban comes into place in April 2025 – would bring in an extra £450m.

I am an executive partner at an estate agency in central London, selling homes to people from all over the world. Our experience since Chancellor Jeremy Hunt first announced the measures earlier this year has been bleak.

We have a fantastic house on the market for just under £9m, which was on the verge of being sold. But the prospective buyers, like many others, are now seeking clarity on their tax position before proceeding. In our lettings business we are also seeing a shift with high-net-worth tenants, including non-doms, who are now downsizing and moving the main family home abroad and keeping a pied-a-terre in London.

Under the previous rules, non-dom families could settle in the UK and enjoy various benefits, notably the excellent education opportunities – something that is a big draw here. Families could plan their lives with stability, ensuring their children could complete critical stages of their education, from primary to secondary school, and even prepare for university. London’s top-tier schools are held as a benchmark around the world.

The new four-year window, after which non-doms would pay the same tax as everyone else, drastically shortens this time, disrupting children’s education continuity and making it challenging for families to fully integrate and take advantage of the long-term educational benefits the city offers.

The impact of changes to non-doms is not confined to property sales alone; its impact extends to other sectors of London’s economy, notably hospitality, but also services, tradesmen, private transport, cab drivers, nannies, housekeepers and so on.

Non-dom residents play a pivotal role in sustaining the livelihoods of many British families.

According to the Office for Budget Responsibility, 10pc to 20pc of current non-doms will leave the UK because of the tax changes. Any policy changes that dissuade these high-net-worth individuals from settling in London threatens to put unforeseen pressure on an intricate ecosystem, potentially endangering businesses and livelihoods alike.

The timing of these changes exacerbates the uncertainty. As London deals with economic recovery post-pandemic and rising crime levels, imposing additional financial and bureaucratic burdens on non-doms risks deterring potential investors and buyers. This strategic misstep by the Government imperils the city’s reputation as a global hub for commerce, culture, and education.

Despite the turbulence brought about by policy shifts, London’s enduring attractiveness to international property buyers remains steadfast. The city’s appeal lies not only in its robust educational offerings but also in its rich tapestry of culture, healthcare infrastructure, and business. London’s history, coupled with its vibrant lifestyle options, ensures a resilient environment for families seeking stability and long-term investment opportunities.

As we navigate these uncertain times, those in power must carefully consider the broader economic implications of their decisions. Should Labour get into power, London’s golden status could be at further risk with international buyers.

While the city’s enduring appeal remains resilient, whoever is in government must tread carefully to safeguard its status as a global hub for investment and innovation. London’s future prosperity hinges on its ability to attract and retain international residents.

There are so many fantastic places to live beyond London – with lower taxes – so it’s vital we don’t jeopardise losing these buyers, and the contributions they bring here, to other destinations.