Almost a third of non-doms plan UK flight following tax changes

Nearly a third of non-doms and a quarter of high net worth individuals (HNWIs) are planning to pack their bags and leave the UK following tax changes, according to new research.

Furthermore, 7% of non-doms and 2% of HNWIs have already relocated after Budget announcements threatened to hit them hard in the pockets, according to a Market Insight Survey from international estate agents, Knight Frank.

Although the 2008 Budget confirmed the special remittance basis of tax would continue for non-dom expats, resident non-doms living in the UK for longer than seven out of ten tax years would incur a tax charge of £30,000 a year.

The 2009 Budget added to non-doms' woes, announcing an additional rate of income tax of 50% applying to income over £150,000, to come into force from April 2010. Furthermore, income tax personal allowance will be restricted for those with income over £100,000.

The planned mass exodus follows the sale of up to 1,000 houses in London since October 2007 by HNWIs or non-doms as the government sought to reel in more tax, according to the survey.

It also found Switzerland is the most popular alternative to the UK with just over a quarter of HNWIs and non-doms favouring the move, with 23% opting for Monaco.

The survey also found the impact on the UK and central London property portfolios is mixed, with 17% and 3% respectively of non-doms and HNWIs that made the move to the UK, selling their entire UK property estate.

However, remaining recently relocated non-doms and HNWIs are either making no change or planning to retain part of their property portfolio, with up to one third of London-based HNVIs looking to expand their UK property portfolios over the next few years.

Liam Bailey, head of residential research at Knight Frank, says: "Our belief is that demand for London property from wealthy UK and international buyers has been, and will continue to be, negatively affected by the new taxes."

"Other locations, especially Switzerland, will attract buyers who would otherwise have come to the London," he says.

However, Bailey believes the impact on the residential market in central London will be "limited", as he expects a large proportion of the non-doms and HNWIs plotting a move from the UK will not carry out their escape plans.

In fact, there has been "dramatic" growing demand from international buyers for prime London properties over the past six months, with over half of property sales costing £3m plus expected to go to foreign buyers. This percentage has risen to 70% since March, says Bailey.

"Current buying trends indicate that demand from different groups of UK based and international buyers will be sufficient to soak up supply of properties from wealthy residents who decide to relocate overseas," he adds.

The survey is available at: http://resources.knightfrank.com/GetNewsResource.ashx?Id=e95d435d-365f-435b-a497-343b55dc1a1c&type=1