Last weekend, a noteworthy article appeared under the headline “Capital gains tax receipts fall as wealthy exit the UK.” It highlighted two key facts that spurred considerable discussion among readers. Notably, former Prime Minister Liz Truss took to X to express her views, suggesting it validated her previous stance, a common theme in her online commentary.

The first fact is that capital gains tax (CGT) revenue for the tax year ending 2024-25 decreased by 10 percent to £13.05 billion, down from £14.49 billion in the previous year. In the 2022-23 tax year, CGT receipts were as high as £16.93 billion.

Secondly, there is evidence that some affluent individuals are indeed departing the UK due to the government’s tax policies. A recent example is Richard Gnodde, the South African vice-chairman of Goldman Sachs, who is relocating to Milan, reportedly due to changes in non-domicile regulations.

In her budget presentation last October, Rachel Reeves confirmed the shift from the prior non-domicile framework to a new residence-based tax system. The government has claimed that this new system aims to be “internationally competitive” and designed to attract top talent and investment to the UK.

However, many individuals impacted by these changes disagree, fueling reports of an exodus of non-doms and entrepreneurs seeking lower tax environments, which could significantly affect The Sunday Times Rich List. Lakshmi Mittal, a prominent steel magnate who has frequently topped that list, is reportedly among those contemplating a move.

It is rarely advisable to lose billionaires, millionaires, and entrepreneurs. The adage often cited is that chancellors should “pluck the goose with the minimum amount of hissing,” but there seems to have been considerable discontent, risking harm to the very wealth that supports economic growth.

The top 1 percent of income taxpayers contributed 28.2 percent of all income tax in the 2024-25 tax year, totaling £85 billion; the top 5 percent accounted for 48.8 percent, or £147 billion.

However, it remains unclear how significant the potential outflow is. CGT revenues for 2024-25 primarily reflect sales made in the previous year, 2023-24, prior to any election campaigning. The full impact of the “Reeves effect” on these numbers will not be clear until next year, and may show an initial spike.

The Office for Budget Responsibility (OBR) indicated that the decline in 2024-25 results from a normalization of the exceptionally high levels of disposals and CGT liabilities that occurred during and after the pandemic. In the 2022-23 tax year, CGT receipts peaked at over £16.9 billion, compared to a typical pre-pandemic annual figure of around £9 billion.

Looking ahead to the 2025-26 tax year, the OBR forecasts an increase in CGT receipts to £19.7 billion, reflecting a rise of over 50 percent from 2024-25, as “tax is paid on gains forestalled ahead of the autumn 2024 budget.” This refers to strategies undertaken to avoid potential tax liabilities that might arise from upcoming budget adjustments. Prior to the October budget, speculation abounded that CGT rates might rise substantially, prompting a flurry of asset sales to minimize tax impacts.

Following this year’s projected revenue increase, the OBR anticipates that CGT receipts will stabilize over the next few years, with a potential recovery to £25.5 billion by 2029-30. However, these projections are subject to fluctuations in asset prices and other economic variables. Notably, the latest projection for 2029-30 is £5.5 billion lower than previous forecasts made during the October budget discussions.

The decline in CGT receipts has significantly contributed to the pressure on fiscal policies, influencing the chancellor’s search for additional savings in the recent budget.

The true impact of possible wealth migration remains uncertain and will likely take time to manifest, particularly given the recent trends of some affluent Americans relocating to the UK, though their numbers may not be sufficient to counterbalance those leaving the UK.

A report from the Adam Smith Institute, which may have vested interests in this issue, warns that phasing out the non-domicile regime may accelerate the departure of high-net-worth individuals. Some could find themselves facing effective tax rates as high as 67 percent under the new regulations, which could result in the UK losing a higher percentage of its millionaires than any other developed nation during this parliamentary term.

The OBR’s analyses suggest that around 12 percent of former non-dom taxpayers without trusts and 25 percent of those with trusts might leave the UK. However, the OBR also believes that the new tax regime could still yield modest net revenue for the government, despite admitting substantial uncertainty regarding tax base size and the behavioral responses of wealthy individuals.

This scenario exemplifies the complex relationship with wealth. While the affluent are often viewed unfavorably, their presence within the UK’s tax framework is more beneficial than their absence. The long-term consequences of tax policy changes that drive them away may take years to fully emerge, impacting income tax projections, CGT, inheritance tax, and other revenue streams. Moreover, cultural contributions such as philanthropy and arts sponsorship could also suffer. If the current trend continues, the decline of the golden goose could be a gradual process of economic deterioration.