Business Leaders Urge Labour to Revisit Non-Dom Tax Regime to Revive London Economy
Business leaders are urgently calling on the Labour government to reconsider its abolition of the non-dom tax regime, warning that the policy has triggered a significant exodus of high-net-worth individuals from London. Lobby group BusinessLDN has released a comprehensive growth commission report, commissioned after the November Budget revealed downgraded economic growth projections, which highlights the need to reconfirm London's status as a global economic leader.
Tax Changes and Economic Impact
The report's flagship recommendation is for the government to establish an "Office for Tax Competitiveness." This department would identify areas where the UK loses investment and growth due to stricter tax rules compared to international peers. One key policy under scrutiny is the scrapping of the non-dom regime, which previously allowed UK residents with a primary home abroad to pay tax only on income earned within the UK.
In the 2024 Budget, Chancellor Rachel Reeves replaced this system with a residence-based regime that taxes all long-term residents on their worldwide income, introducing a four-year grace period for the transition. Economists have warned that the Treasury is underestimating the impact, with reports suggesting nearly 2,000 wealthy non-doms left the country last year, leading to talent losses in professional, financial, and creative sectors.
The value of London's prime properties has declined sharply, with average house prices in affluent areas like Kensington falling by approximately 10% since 2024. BusinessLDN's report states, "This change has been damaging to multiple sectors, from loss of talent in the professional and financial services sectors, to the creative industries, where the reforms have resulted in the loss of high-net-worth donors."
Proposals for Reform
Ministers are reportedly in discussions with City leaders on proposals to extend the grace period and introduce a "pay-to-play" visa for ultra-wealthy individuals. The report also suggests revisiting other tax policies, including:
- The scrapping of VAT-free shopping
- The bank levy
- Stamp duty reforms
The proposed Office for Tax Competitiveness would "identify where the UK is hurting itself by being out of kilter with – or falling behind – other international jurisdictions, publish research and analysis, and put forward recommendations to the Chancellor to inform fiscal decisions."
Housebuilding at a Standstill
In addition to tax reforms, BusinessLDN is urging Labour to accelerate housebuilding by delaying a new safety levy and streamlining regulatory red tape. The government has pledged to build 1.5 million new homes by the next general election, but housebuilders and manufacturers warn that tax and cost pressures make this target infeasible.
The Treasury watchdog predicts only 220,000 new homes will be built in the next financial year, noting that Labour's planning reforms have yet to "meaningfully" affect housing supply. Progress is particularly slow in London, which is expected to contribute 88,000 new homes annually to the national target. However, consultancy firm Molior estimates that only 4,550 homes will be built in London in each of the years 2027 and 2028.
The growth commission report describes housebuilding in the capital as "close to a standstill" and calls for a new help-to-buy scheme and improved efficiency in the building safety regulator to provide clarity for developers.
Leadership Perspectives
Helen Gordon, chair of the growth commission, emphasized, "Unlocking the full economic potential of London as an economic engine for the UK is essential to deliver the growth needed to make people across the capital and beyond feel better off. While the capital has inherent strengths from the rule of law to a highly-skilled workforce, success can’t be taken for granted amid intense global competition."
John Dickie, BusinessLDN’s chief executive, acknowledged that the government's growth initiatives are "starting to bear fruit" but urged Labour to accelerate efforts to boost business confidence and private sector investment in London. The combined focus on tax competitiveness and housing development is seen as critical to reviving the city's economic vitality and addressing the challenges posed by recent policy changes.
