Budget ‘highlights the draw of the Gulf’ for UK wealthy

• New ‘mansion tax’
• Investment income tax up 2 pp
• Buy-to-let property taxed too

The UK budget unveiled this week could make wealthier residents reconsider their future in the country and look to jurisdictions with more favourable and predictable tax regimes, such as the UAE, experts have said.

Some of the changes, including a “mansion tax” on properties worth more than £2 million ($2.7 million), might also affect Gulf investors in the UK.  

“The announcements highlight the continued pull of the Gulf,” said Tony Smith, Asia and Middle East head of tax, technical and advice delivery at wealth manager St James’s Place.

“For Dubai especially, this budget is likely to spark more interest from individuals who want stability and certainty in how they manage their cross-border affairs.”

The UAE was named the world’s top “wealth magnet” in migration consultancy Henley & Partners’ latest annual wealth migration report in June. It was projected to attract 9,800 high-net-worth individuals (HNWIs) this year, more than any other nation. 

The report also estimated that 16,500 millionaires would leave the UK in 2025, which would be the largest net outflow of HNWIs of any country in the 10 years since the study began.

The UK’s wealthy have been leaving the country for multiple reasons, including increases in taxes for high earners, changes to the non-domicile tax regime and political and economic uncertainty. 

Indian steel tycoon Lakshmi Mittal, worth £15 billion, according to the Sunday Times, has become the latest HNWI to leave the UK in response to the Labour government’s tax reforms. He had resided in the UK since 1995. 

Chancellor Rachel Reeves’ budget revealed a range of changes to increase the overall tax burden, especially for high earners.

The budget also raises taxes on investment income – property, dividends and savings – by two percentage points from April 2027, and introduces an annual “mansion tax” on properties worth £2 million or more from April 2028.

This will range from £2,500 for properties in the £2 million to £2.5 million band to £7,500 for properties worth £5 million or more. 

“The carry costs of higher-end residential homes for GCC nationals will now be slightly elevated,” said Henry Faun, partner and head of consultancy Knight Frank’s Middle East private office. 

An additional 2 percent tax on buy-to-let property might squeeze rental income for Gulf investors in UK residential assets, but not enough to damage their portfolio benefits, Faun added. 

Further reading:

• Lakshmi Mittal quits the UK to spend more time in Dubai
• Gulf family offices brace for a new era of oversight and accountability
• UAE’s ‘digital dirham’ could benefit low-wage workers

Some of the changes might affect UK expatriates in the Gulf, said Smith. For example, those who maintain ISA arrangements may need to reconsider their repatriation planning given tax increases on savings income. Those paying voluntary National Insurance to qualify for a UK state pension will have to increase their contributions.

“These changes may prompt some internationally mobile families to take another look at their long-term plans.” 

It is unlikely to result in large numbers of the UK’s wealthy leaving the country, he added: “Moving countries is almost never about one policy shift. It’s usually a mix of lifestyle, family, career and financial considerations.”

Peter Ferrigno, director of tax services at Henley & Partners, said the changes “won’t make a huge difference [to people’s income] but will make the maths of leaving the UK even more convincing.

“The economic choice offered between the UK and the UAE remains clear.”

AGBI has contacted the UK government for comment.