lmost 69,000 taxpayers told HM Revenue & Customs they were leaving Britain permanently last year, a 32 per cent increase that highlights growing scrutiny of the UK’s tax regime among people considering an overseas move.
Some 69,000 P85 forms were submitted to HMRC, up from about 52,000 the previous year, according to analysis by national accountancy group UHY Hacker Young.
The form is used by taxpayers leaving the UK permanently to notify HMRC of their departure and settle their tax affairs.
The increase comes after a series of tax changes introduced since the last general election, including higher Capital Gains Tax, Inheritance Tax and employers’ National Insurance contributions.
Higher Stamp Duty on rental properties and VAT on private school fees have added to the financial pressures facing households, while changes to the UK’s non-dom regime have altered the incentives for internationally mobile taxpayers.
Under the revised regime, the period of favourable tax treatment available to eligible new arrivals has been reduced from as much as 15 years to four years for income tax and Capital Gains Tax. The relevant period for Inheritance Tax has also been reduced from 15 years to 10.
UHY Hacker Young said the changes were prompting more taxpayers to reassess the financial advantages of remaining in Britain, particularly against the prospect of further tax increases.
“More and more people are looking at the ‘tax deal’ they get in the UK and deciding they can do better overseas,” said Neela Chauhan, private client tax partner at UHY Hacker Young.
“That’s as true for working people who do not consider themselves wealthy as it is for business owners.”
The trend is not confined to high-net-worth individuals, according to the accountancy group. Ordinary families are also considering whether moving overseas could provide a more favourable long-term tax position.
Inheritance Tax has become a particular focus, with substantial differences between countries potentially influencing where families choose to live and establish their financial affairs.
Chauhan cited Sweden, which does not levy Inheritance Tax, as one destination attracting interest from people considering leaving Britain.
“One major draw for people is a less-harsh inheritance tax regime than we have in the UK,” she said. “We’ve seen more people choose to move to Sweden, for example, where there is no inheritance tax at all.”
The number of taxpayers leaving Britain is likely to be higher than the P85 figures suggest because not everyone who departs permanently submits the form.
Nevertheless, UHY Hacker Young said the submissions provide a useful indication of the scale and direction of taxpayer departures.
“We generally advise anyone leaving the UK permanently to file a P85 form to avoid confusion at HMRC,” Chauhan said.
“It also prompts HMRC to do a tax calculation. That can result in a tax refund in some circumstances.”
The figures also raise questions about the potential long-term effects of tax policy on the UK’s mobile workforce, entrepreneurs and family wealth.
Chauhan warned that further increases in the tax burden could encourage more households to consider relocating.
“The Government must remember that increasing taxes will push more people to leave the country,” she said. “Inheritance tax in particular is a very unpopular tax.
“Continuing to allow more ordinary families to fall into the IHT net incentivises them to look elsewhere for a tax regime that gives them more for their money.”
The P85 figures do not establish that tax increases were the cause of the rise in departures, and the reasons people leave Britain can range from employment and family circumstances to retirement and lifestyle.
But the sharp increase in notifications comes as the UK continues to debate how far its tax system can be changed without affecting the behaviour of the people and businesses it is designed to tax.
Leave a Comment