The recent drop in capital gains tax revenue will have made the government think hard about its relationship with wealthy foreign investors, according to Knight Franks head of research, Tom Bill.
The estate agency points out that the figure fell to £13bn from £14.5bn in the year to March 2025, with headlines citing the government’s decision to scrap non dom rules as one cause.
“The move to end the non-dom tax regime could reduce the number of wealthy non-doms in the UK and hence reduce future CGT receipts,” Robert Salter, director at tax advisory firm Blick Rothenberg, told the press.
When headroom is already tight to the point of unnerving financial markets, £1.5bn looks like a meaningful sum of money. That is before the obvious question arises of which other taxes could be affected.
The Office for Budget Responsibility (OBR) warned in March that the government’s £9.9bn of headroom was “a very small margin compared to the risks and uncertainty inherent in any fiscal forecast.”
Speculation will inevitably grow this year about which taxes the chancellor may raise at the autumn Budget to rebuild a buffer that is a third of its pre-Covid average.
Despite the predicament, recent turbulence on financial markets means the UK is well-placed to capitalise on its position as a stable place to invest, according to Knight Frank.
And the end of the non dom regime does not signal the end of the conversation about how to attract private overseas investors, the agnecy added.
Bill said: “The reported exodus of wealth from the UK has given rise to the term “Wexit” in the press, which the Treasury won’t want to catch on.”
Bill highlights that tax revenues and OBR forecasts are important considerations for the government, which explains why the likes of the Foreign Investors for Britain (FIFB) are pushing for a so-called tiered tax regime, where foreign investors pay an annual sum depending on their level of wealth, with a figure of £2m per year for those in the upper bracket
Bill continued: “As the financial pressure intensifies on the government, which keeps borrowing costs higher for everyone, could it introduce a new measure with a politically-palatable name like a ‘UK investor visa’?
Donald Trump recently unveiled plans for a “gold card” visa in the US, which will cost US$5 million. Elsewhere, the global landscape is a mix of countries winding schemes down as others ramp them up.”
Bill believes that any form of wealth tax in the autumn Budget would surely be a tougher sell against the background of falling tax revenues and a so-called “Wexit”.
He added: “Whatever decisions are taken, the uncertainty has affected the prime central London (PCL) property market in recent months. While average prices in PCL fell 1.6% in the year to April, they rose 1.2% in prime outer London.
“It follows a tough five years since Covid in PCL, where demand was also curbed by the so-called race for space and travel restrictions.
“Average prices in PCL in April fell 3% in the five years since the pandemic began, while prices in POL rose by 8%.
“For some overseas buyers, that will look like a buying opportunity, with or without an investor visa.”
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