Reform UK has announced it would give non-doms the chance to avoid some UK taxes by paying a £250,000 fee, with the proceeds going to people on the lowest incomes.
Non-domiciles (or non-doms) live in the UK but have a permanent home overseas for tax purposes.
Under Reform’s plan, non-doms would pay the fee for a new Britannia Card and in return not be taxed on wealth, income or capital gains earned abroad. They would also avoid the need to pay inheritance tax.
Labour Chancellor Rachel Reeves said the measure amounted to a “tax cut for foreign billionaires” and Reform would have to either raise taxes or cut public services such as the NHS to compensate for the loss in revenue.
Reform UK says income from the measure would be transferred annually tax-free to the bank accounts of the lowest paid 10% of full-time workers.
The party estimates its policy would raise between £1.5bn to £2.5bn annually, equating to £600 – £1,000 per low-paid worker.
Speaking in central London, Reform UK leader Nigel Farage said “tens of thousands” of people would be tempted to the UK by the offer of the card, which could be renewed every 10 years, with no additional cost.
“Many talented people are leaving and we want as many entrepreneurs, as many risk-takers, as many job creators, as many people paying lots of tax, as many people investing huge sums of money.”
Asked if the policy was an example of “fantasy economics”, he said the initial £250,000 payment would be “just the tip of the iceberg of what these people will pay if they come back” in stamp duty and VAT in the UK.
Questioned on whether an influx of wealthy people would push up property prices in London, he said it was a “good point” but argued there would not be an impact on the cost of affordable housing.
The Institute for Fiscal Studies (IFS) said it was “far from clear” that the measure would make money for the Treasury.
Stuart Adam, senior economist at the think tank, said: “For those who would have been in the UK (and paid tax on their UK income) anyway, the exchequer would lose the tax they would otherwise have paid on their foreign income and gains – which must be at least enough for them to prefer to pay £250,000 to avoid it, and would often be far more than that.”
He also warned that there was a risk the lowest-income households, which do not generally have someone in full time work, would not benefit from the redistribution; while many of the beneficiaries would have working partners and thus a higher household income than their individual earnings might suggest.
Speaking to the BBC’s World at One, Dan Neidle, who is founder of Tax Policy Associates and a Labour member, estimated the policy would cost £34bn in lost revenue over five years, pointing to figures from the government’s OBR spending watchdog.
He also warned that foreign, highly-skilled professionals unable to afford the £250,000 fee could, under Reform’s plans, have to pay full tax in the UK and their home country, meaning they would be discouraged from moving to the UK.
He added that the “very wealthy” were unlikely to believe the policy would be in place for the long term and could therefore be unwilling to pay the fee.
Last year, the Labour government announced it would be abolishing the tax status, which allows non-doms to only pay UK tax on money they earn in the country.
The so-called loophole meant wealthy individuals were able to legally save money by choosing a lower-tax country as their permanent home.
Earlier this year, Chancellor Rachel Reeves said that, having listened to “concerns that have been raised by the non-dom community”, she would introduce a more generous transition phase to the policy.
There are reports she is considering watering down the policy further after claims it has triggered an exodus of wealthy people from the UK.
The government says its package of measures would raise £12.7bn over the next five years.
Under previous rules, non-doms paid an annual fee of £30,000 or £60,000 depending on how much time they had spent in the UK.
According to HMRC figures, 74,000 people claimed non-dom status in 2022-23.
Responding to the Reform UK policy, a Labour spokesperson said: “Nigel Farage can brand this whatever he wants – the reality is his first proper policy is a golden ticket for foreign billionaires to avoid the tax they owe in this country.
“As ever with Reform, the devil is in the detail. This giveaway would reduce revenues raised from the rich that would have to be made up elsewhere – through tax hikes on working families or through Farage’s promise to charge them to use the NHS.”
Conservative shadow chancellor Mel Stride said: “The British public need a real plan for putting more money in their pockets – but what Reform are peddling is fantasy economics. Their promises are ruinously irresponsible.
“Only Kemi Badenoch and the Conservatives believe in the fiscal responsibility our country needs.”