Click here to read the full article: Encouraging wealthy investors to back the UK – FTAdviser
Reproduced below with kind permission.
According to the TaxPayers’ Alliance, the top 1 per cent of income earners continue to pay a disproportionately large share of income tax relative to their share of income. Individuals in this group are expected to earn 12.8 per cent of total income in 2026-27 while paying 26.6 per cent of all income tax.
This underlines the importance of maintaining the UK’s attractiveness to internationally mobile entrepreneurs, investors and business owners.
A relatively small number of high earners contribute a substantial proportion of tax revenues. In addition to income tax, these individuals typically make significant contributions through taxes on consumption, investment and business activity.
As a result, encouraging wealthy investors to live, work and invest in the UK should remain an important policy objective.
High earners are not necessarily reluctant to pay tax. Many are proud to feature on the Sunday Times Tax List, according to which the top 100 taxpayers were responsible for £5.8bn of tax. Fourteen of the entries contributed at least £100mn each, equivalent to almost 13,000 average taxpayers based on HMRC’s projected average income tax contribution per taxpayer.
Sorting out priorities
While tax policy should not be designed solely around the interests of the wealthiest individuals, the concentration of tax receipts among a relatively small group means that retaining internationally mobile high earners is economically important.
The first priority should be stability.
Since July 2024 there have been significant changes affecting wealthy individuals, including the abolition of the non-dom regime, reforms to agricultural property relief and business property relief, and changes affecting the inheritance tax treatment of pensions.
Irrespective of whether these reforms are justified, frequent changes create uncertainty.
Investors making long-term decisions about where to live, invest and build businesses often place a higher value on predictability than on marginal differences in tax rates.
A second priority should be simplification.
The UK tax system has become increasingly complex, making it harder for investors to understand their long-term fiscal position. To attract wealthy investors, the UK needs a stable and predictable tax environment with long-term clarity on IHT, capital taxation and wealth planning.
One way of simplifying taxation for internationally mobile investors would be to consider a lump-sum tax regime.
Switzerland’s forfait system enables qualifying foreign residents to be taxed by reference to their annual living expenses rather than their worldwide income. Italy introduced a similar lump-sum regime in 2017 and it has proved sufficiently popular that the original €100,000 annual charge has been increased twice and is now €300,000.
One of the attractions of such systems is the clarity and certainty they provide to individuals relocating from overseas. By contrast, the UK’s foreign income and gains regime lasts for a maximum of four years.
For further information, please contact Robert Brodrick or Kathryn Bradbury. Alternatively, telephone 020 7465 4300.
