A Change in South Africa's Indpendent Billionaire's Plans
A Reversal of Non-Dom Status Would Maintain South African Billionaire's UK Residency
The wealthiest self-made woman in South Africa could keep her British residency, if proposed changes to non-domestic (non-dom) inheritance tax rules occur as rumored. Rachel Reeves, a rising politician, is said to be mulling over these alterations, which could impact Magda Wierzycka's intentions of returning to her native country.
"I'd rather stick around," Wierzycka shared with City AM. The billionaire behind UK venture capital fund Braavos felt apprehensive about South Africa's foreign exchange controls, causing her to worry about her estate's ability to pay the potential inheritance tax (IHT) bill under the current rules.
Speculation suggests that the Treasury is examining multiple strategies to curb the growing exodus of wealthy foreigners migrating away from Britain due to the government's recent crackdown on non-doms, as announced in the last Autumn Budget.
One drastic option under debate is a reversal of the Chancellor's decision to make the IHT applicable to non-doms worldwide assets, including those kept within foreign trusts.
Experts estimate that this initial measure, launched April 2022 alongside the abolition of the non-dom regime, would add only £200m annually to the Exchequer. However, tax advisors have pointed fingers at this change as the driving force behind the non-doms exit from the UK.
Anthony Whatling, managing director at City auditor Alvarez and Marsal commented, "The inheritance tax change is the most controversial aspect of the non-dom reforms. If the government wants to maintain wealth and the businesses that follow in the UK, this is the lever they need to pull."
In the wake of the government's tax adjustments, a notable wave of high-profile wealthy foreigners have left the country, such as billionaire steel magnate Lakshmi Mittal and top Goldman Sachs banker Richard Gnodde.
Such departures have sparked debate among experts, questioning whether the tax hike—originally projected to bring in £33 billion over five years—will ultimately prove costly to the Exchequer, as some former Treasury economists have suggested.
Responding to the speculations, Chris Walker, a former Treasury economist, remarked to City AM, "The IHT seems to be the final straw that's causing non-doms to depart. I don't believe the current stance maximizes tax revenues from non-doms, which would have been the objective of the reform."
Leslie Macleod-Miller, CEO of the pro-immigrant lobby group Foreign Investors for Britain, declared, "Perhaps the government has finally started to grasp that UK taxes levied on overseas assets will only lead to capital flight, business closures, philanthropy ending, and intellectual capital departing the UK permanently."
Should the proposed change be implemented, Wierzycka's venture capital firm, Braavos, would be more likely to raise a fourth funding round, as she would maintain relationships with her investors.
Reacting to these developments, a Treasury spokesperson stated, "The government remains committed to working with stakeholders to ensure the new regime remains internationally competitive and focuses on attracting the best talent and investment to the UK."
Perspective on Potential Trends
Reversing the IHT on global assets for non-doms could lead to a myriad of financial and economic outcomes:
Public Finances Effects
- Lower IHT revenues: The decision to tax global assets at a 40% IHT, effective April 2025, represented a new significant revenue stream. Reversing this could lead to a decrease in expected taxes collected from wealthy individuals, as non-doms would no longer be subject to inheritance tax on their global wealth but only on assets based in the UK.
- Retaining Wealthy Individuals: The prospect of a reversal could encourage high-net-worth individuals to stay in the UK, preserving revenues from various tax sources like income tax, capital gains tax, and corporation tax associated with their activities and investments in the nation.
- Fairness and Wider Tax Base Perspectives: Critics argue that wealthy non-doms evading IHT on global assets intensifies inequality and undermines tax fairness. However, the government appears willing to make trade-offs for economic competitiveness over fairness concerns.
Business Climate and International Competitiveness Impacts
- Improved Appeal for Wealthy Individuals: The original IHT on global assets drew criticism and prompted a mass exodus of affluent non-doms, causing concerns about the UK's status as a global financial hub. A reversal could signal a more welcoming and competitive tax regime, potentially attracting high-end talent and capital.
- Restoring the UK's Preferred Investor Destination: The abolition of non-dom status and global taxation from April 2025 marked a significant departure from earlier incentives that attracted wealthy individuals to dwell and invest in the UK. Reversing inheritance tax changes would help restore some of the previous advantages that attracted wealth and business to the nation.
- Ongoing Tax Planning and Advice Requirements: Despite the regulatory changes, non-doms and long-term residents must strategically manage worldwide income, gains, and remittances under the new residency-based system, emphasizing the importance of sophisticated tax planning to optimize outcomes.
In conclusion, reversing the global assets IHT for non-doms is likely to:
- Prevent an exodus of wealthy individuals, thus preserving UK financial services and associated economic activity.
- Reduce direct inheritance tax revenues but potentially protect overall tax revenues by retaining high-net-worth taxpayers.
- Enhance the UK's international business climate by projecting a more competitive image for attracting global capital and talent.
- Demonstrate a delicate balance between fiscal needs and maintaining a conducive atmosphere for international investors and the affluent, reflecting the UK government's delicate juggling act.
- The reversal of the inheritance tax on global assets for non-domiciled individuals could lead to an increase in the number of wealthy foreigners staying in the UK, thus potentially preserving revenues from various tax sources like income tax, capital gains tax, and corporation tax.
- In the context of business climate and international competitiveness, reversing the inheritance tax on global assets for non-domiciled individuals could help restore the UK's status as a preferred destination for global capital and talent, attracting high-end investors and business.
- If the proposed change is not implemented, Magda Wierzycka, South Africa's wealthiest self-made woman, might be less likely to invest in her venture capital fund, Braavos, in the UK due to the potential inheritance tax burden on her estate.
