UK finance minister Rachel Reeves is looking to reverse new inheritance tax rules over fears that they have sparked an exodus of wealthy investors, PE executives among them.
Those rules are among a handful of new tax measures that industry insiders say have dulled London’s appeal as a tax destination, prompting professionals to move to friendlier jurisdictions, including Milan, Dubai and Geneva.
Among those reported to be considering relocating executives are Goldman Sachs vice-chair Richard Gnodde and CVC co-founder Rolly van Rappard, raising questions about London’s long-term competitiveness as a hub for global financial talent.
Now, feeling pressure from the City, the UK government says it is listening to feedback on potential revisions of an earlier decision to scrap the current tax regime for non-domiciled individuals and extend inheritance tax liability.
A changing climate
The issue goes beyond just inheritance tax. The UK, and London in particular, is facing questions over its long-term appeal as a financial hub due to a raft of changes to the UK’s tax policy, some of which were initiated during the previous Conservative government and are now being implemented under Labour.
The most significant change is the overhaul of the non-domiciled regime. Previously, non-UK-domiciled individuals could elect to be taxed only on UK income and gains for up to 15 years, allowing them to shelter overseas earnings. Under new reforms, the grace period has been reduced to four years.
A new 10-year inheritance tax tail also means individuals may remain liable for UK IHT on their global estates for a decade after departure.
“The new rules are a huge departure,” said Christine Cairns, private wealth adviser at PwC. “Many of these individuals were happy to pay income and capital gains tax, but the global reach of the new IHT rules seems to be a step too far for them.”
According to some tax advisers, clients are finding it harder to make long-term plans under what they see as an increasingly complex and changing tax environment. The revised treatment of offshore trusts has added to these concerns.
Carried interest has also come under scrutiny. Although recent proposals to tax carry as ordinary income were softened, the suggestion alone unsettled some in the industry.
“It was politically motivated,” said Charlie Sosna, partner at Mishcon de Reya. “The government acted preemptively to take the wind out of Labour’s sails. But even the act of tinkering with carry raised questions about the UK’s long-term commitment to PE.”
Chris Boulet, a partner at Blick Rothenberg, notes that these proposals are already having an effect.
“Many of these non-dom individuals weren’t planning to move. But the proposed reforms nudged them off the fence.”
“It’s also no longer just about taxes. There’s a sense that the UK is becoming anti-business,” said Robert Fidgen, director in the Family Office team at Stonehage Fleming. “Entrepreneurs feel penalized for their success.”
The current movement outbound, however, has been more gradual rather than abrupt, and Cairns noted that the rollback was a positive indication of the government’s stance in wanting these individuals to stay.
Rather than complete relocation, many individuals are said to be limiting their UK presence and dividing their time among other jurisdictions.
Italy, particularly Milan, has emerged as a popular destination, driven by the forfait tax regime, which allows individuals to pay a flat annual tax of between €100,000 and €200,000 on foreign income. Some say there are drawbacks, however.
“It’s great on paper,” explained Fidgen. “But the bureaucracy is real. You need to be ready for layers of paperwork, notaries, and contract formalities that are far more involved than in the UK.”
Other popular destinations include Dubai, Switzerland and Monaco, with each offering distinct tax advantages and lifestyle appeals. Some individuals are reportedly choosing a hybrid lifestyle to avoid tax residency anywhere, spending limited time in multiple jurisdictions.
“They’re not burning bridges. They’re hedging their lifestyle bets,” said Boulet.
The cost of departure
Departures from the UK can carry tangible fiscal consequences.
According to government data, when the non-dom regime came to an end in April 2025, there were around 74,000 non-doms in the UK that paid around £8.9 billion in income tax, capital gains tax and national insurance in the 2023 financial year.
Exits by some of these individuals also affect related financial sectors, including asset management and banking.
Decision-making hubs, including family offices previously based in London’s wealthy Mayfair area, appear to be decentralizing. While UK investments may continue, some anticipate reduced deal origination in London.
According to Sosna, the belief in London as the PE center is being tested. “There’s an arrogance that London will always be the PE center. But you have to keep earning that status,” said the Mishcon de Reya partner.
Offsetting the exodus
However, even as some professionals leave, others are arriving. Cairns noted an increase in US-based professionals relocating to the UK, attracted by a favorable four-year regime and stable institutions.
“For some Americans, the UK now looks like a haven,” said Cairns. “They’re used to paying tax on worldwide income anyway, so the changes here don’t scare them off.”
Those arrivals, however, may be earlier in their careers and not yet in a position to replace the financial contribution of those departing.
Views on the future vary. Some expect the current trend to slow as initial reactions to tax changes settle. “Every big tax change causes a knee-jerk reaction,” said Cairns. “Over time, it settles. The UK still has huge strengths: education, law, talent, time zone.”
Others express caution. “You can’t just flip the switch and make people come back. Once they’ve gone, they’re gone for at least five years,” Boulet noted,
The future of London’s role in global PE may hinge on how it responds. The rollback on carried interest suggests some willingness to adapt.
Featured image by Klaus Vedfelt/Getty Images
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