A bigger carrot, not a smaller stick, is needed to lure back the wealthy
Those who left the UK for wealth retention purposes are not currently thinking about returning. If Healey wants the wealthy back, he needs to offer a proper incentive, writes Jamie Mathieson in today’s Notebook
Wealthy need incentives
During the last week there has been much discussion about the relief that Chancellor John Healey seemingly does not plan to align income tax with capital gains tax (CGT). It has been rumoured that this alignment had been planned, but Mr Healey has allegedly been persuaded that it would not be in the national interest to put more taxation on the investment community. I’ve certainly noticed clients responding to legislative change by relocating away from the UK, an unsurprising phenomenon given how easy it is for wealthy individuals to move to a different jurisdiction.
I do however bring a word or two of caution. In my recent experience, those who have decided to depart the UK for wealth retention purposes are not currently thinking about returning, and certainly a reassurance about maintaining current CGT rates is not going to be a big enough carrot for them. In my view, incentives will be required to get people back. Liberalising the number of days one can visit without incurring tax on worldwide income would be a good start and is unlikely to adversely affect Treasury coffers.
Aside from the significant financial considerations, it’s always seemed astonishing to me that thousands of successful people who have lived in the UK for the majority of their lives will spend their later years away from children and grandchildren due to concerns about punitive tax treatment.
Some will say the UK can prosper without the departed, and maybe we will. But the wealthy tend to spend while they’re here, which can act as a significant boost to areas of the economy that have faced many challenges in recent years, for example hospitality and retail. Let’s introduce a programme showing Brits now domiciled abroad that they’re welcome and won’t be financially penalised for visiting or returning home.
Simplifying tax would be effective and popular
If the Chancellor were to ask me for one piece of advice I’d say: we should not continue with having the largest tax code. It’s one thing when productivity and growth is positive, but when things are challenging the tax system should ideally help stimulate growth, not penalise UK-based entrepreneurship. Simplifying the tax system by introducing flat rates would be popular and would likely encourage more work as people would better know where they stand. Also, tax avoidance and evasion would likely decrease in a world of fewer grey areas.
Financial education should start younger
It seems children are provided with little education about managing finances in adulthood. I hope that one day we’ll see more awareness spread to young people about protecting themselves and their families. Younger people often find it difficult to think far into the future let alone contemplate death and what might happen when they die. However, putting well thought through instructions in place helps ensure that assets will pass to the correct people. This should be on any government’s radar given the backlog at the Court and Tribunal Service Centre.
Quote of the week
Don’t overthink things. Take a step forward, and that step will lead to another step. Believe in yourself
Nvidia CEO Jensen Huang
Well played, Mr Koumas!
Despite growing up (and still living) in Essex, I am unashamedly a Liverpool FC fan. I particularly enjoyed seeing 21-year-old Lewis Koumas score his first Champions League goal for Liverpool last week. It was third time lucky for Koumas following two previous goals being disallowed, but each time he carried on with a smile seemingly determined to make his mark while senior teammates are unavailable. An example for all young people starting out in their careers – take every opportunity you can with enthusiasm and drive.
What I’m watching
I don’t watch much television nowadays, so my recommendations tend to be dated. I think a very underrated (in the UK anyway) television drama/comedy series is Boston Legal, which came into my mind recently when I watched a podcast featuring William Shatner, the Canadian actor best known for Star Trek who is still going very strong at 95 years old.
Shatner’s character in the show is called Denny Crane, an outrageous caricature of a senior lawyer from a bygone era, but his relationship with co-star James Spader (Alan Shore in the show) stands out for me. It reminds me of the importance of building strong relationships within your company. In an era where working from home is so prevalent, we should all make time every day for our colleagues.
Jamie Mathieson is a private wealth partner at JMW