The Great Wealth Exodus: Why HNWIs Are Leaving the UK and Where They’re Going Next

In April 2025, the United Kingdom will abolish its long-standing non-domiciled ("non-dom") tax status, transitioning to a residence-based taxation system. This significant policy shift has prompted many high-net-worth individuals (HNWIs) to reconsider their residency and asset allocation strategies.

Legislative Changes:

The current non-dom regime allows UK residents who are not domiciled in the UK to pay tax only on their UK income and gains, as well as on foreign income and gains remitted to the UK. From 6 April 2025, this system will be replaced by a residence-based tax regime. Under the new rules:

• Foreign Income and Gains Regime: New arrivals to the UK who have not been tax resident in the previous 10 years will receive 100% relief on foreign income and gains for their first four years of tax residence. After this period, they will be taxed on their worldwide income and gains as they arise.
• Inheritance Tax (IHT): The domicile-based IHT system will be replaced with a residence-based system. Individuals who have been UK residents for at least 10 out of the last 20 tax years will be considered long-term residents and will be subject to IHT on their worldwide assets. This liability can continue for up to 10 years after leaving the UK.

Reasons Behind the Trend:

The abolition of the non-dom status means that HNWIs will no longer benefit from the favorable tax treatment on their foreign income and gains. Consequently, many are seeking jurisdictions with more advantageous tax regimes to preserve their wealth. The UK's Office for Budget Responsibility has warned that a significant number of non-doms may depart to avoid higher taxes.

Preferred Relocation Options:

In response to these changes, HNWIs are considering relocation to countries with more favorable tax regimes. Popular destinations include:

• Italy: Offers a flat-tax regime for new residents, making it attractive for HNWIs.
• Switzerland: Known for its political stability and favorable tax policies.
• Portugal: Provides the Non-Habitual Resident (NHR) regime, offering significant tax benefits.
• United Arab Emirates: Notably Dubai, which has no personal income tax and is emerging as a hub for the wealthy.

These jurisdictions offer tax incentives that are appealing to those affected by the UK's tax reforms.

Statistics and Data:

Recent reports indicate a substantial outflow of millionaires from the UK. In 2024, approximately 10,800 millionaires left the country, marking a 157% increase from the previous year. This trend is expected to continue, with projections suggesting that the number of millionaires in the UK could decrease by a fifth by 2028.

Exploring Kazakhstan's Astana International Financial Centre (AIFC):

As HNWIs evaluate their options, Kazakhstan's Astana International Financial Centre (AIFC) emerges as a compelling alternative. Established to attract foreign investment, the AIFC offers:

• Special Tax Regime: There are compelling tax benefits: a fund registered with AIFC, along with its investors, is exempt from Corporate Income Tax, Dividend Tax, and Capital Gains Tax. This structure could offer substantial savings and boost overall profitability.
• Common Law Framework: The AIFC operates under a legal system based on the principles of English common law, providing a familiar and reliable legal environment for international investors.
• Regulatory Sandbox: A mechanism that allows businesses to test innovative financial products and services in a controlled environment, fostering innovation while ensuring regulatory compliance. Kazakhstan ranks as one of the top countries for Bitcoin mining, accounting for 13.22% of the world’s hash rate in 2023 (source: Cambridge Centre for Alternative Finance). The government’s crypto regulations ensure a balance between innovation and compliance, making it a preferred base for blockchain investments.
• For instance, Neomarkets Group Ltd. has recently obtained the Digital Assets License, which we’re very happy about—it’s a big milestone for us. Neomarkets Ltd’s Algo Alliance Fund targets a 25% plus annual return in USD with drawdown levels comparable to classical financial markets. This is achieved through:

A) Diversification: Investing across multiple asset classes, including equities, fixed income, and digital assets. Diversified investments in digital assets like BTC and ETH, complemented by machine learning algorithms for uncorrelated returns.

B) Precision: Algorithms that identify market inefficiencies faster than human traders.

C) Control: Dynamic risk management frameworks.

“Diversification is the only free lunch in finance,” said Nobel laureate Harry Markowitz. Algo trading amplifies this principle, optimizing diversification in real time.

• Tax Clarity: Unlike many jurisdictions, Kazakhstan provides clear taxation guidelines for crypto businesses. Mining firms, for example, are taxed based on energy consumption, creating predictable operating conditions.

• Preferential Visa and Migration Regime: Simplified visa procedures and migration policies facilitate the relocation of investors and their families.

Moody's Ratings recently upgraded Kazakhstan's rating to Baa1 with a stable outlook, reflecting the country's improving economic stability and investment climate.

Strategic Advantages:

The AIFC is strategically located at the crossroads of Europe and Asia, providing access to rapidly growing markets in Central Asia, the Caucasus, the Middle East, and beyond. Its unique position offers investors opportunities to tap into a region rich in natural resources and economic potential.

Conclusion:

The UK's forthcoming tax reforms are driving HNWIs to explore relocation and asset redomiciliation to jurisdictions with more favorable tax regimes. Kazakhstan's AIFC presents a compelling option for the legal entities, offering significant tax incentives, a common law legal framework, and strategic access to emerging markets.

As always, it's crucial for investors to conduct thorough due diligence and consult with financial advisors to navigate the complexities of international relocation and asset management.

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