UK tax regime pushes super-rich to Dubai: What Indian HNIs should know

UK's overhaul of non-dom rules, capital gains, inheritance tax and property charges is unsettling wealthy families and serves as a warning for Indian HNIs

Indian-origin billionaire steel tycoon Lakshmi N Mittal is reportedly preparing to leave the United Kingdom after decades of living there, according to media reports. And some of the UK’s super-rich are doing the same. The reason? Taxes.

 

The mood within private wealth circles has shifted sharply over the past year, as the Labour government’s reforms reshape the UK’s appeal for globally mobile high-net-worth individuals, including wealthy Indians.

 

Tax changes under Labour have altered incentives that once made the UK a preferred base for global capital. The biggest change is the end of the non-domiciled regime. From April 6, 2025, the system moves to residence-based taxation, meaning foreign income and gains are taxed once a person becomes a UK resident, regardless of domicile. For many families who built plans around sheltering offshore income, the shift has been jarring.

 

 

Capital gains tax has also become costlier. From October 30, 2024, the main rates increased from 10 per cent to 18 per cent for the basic band and from 20 per cent to 24 per cent for higher-rate taxpayers. Business asset disposal relief, previously known as entrepreneur’s relief, is being phased out as well.

 

On the inheritance side, more changes are coming. From April 2027, inherited pensions will fall under inheritance tax treatment. Relief for business and agricultural property is being capped too, with only the first £1 million receiving full relief. Anything above that is taxed at 20 per cent. At the same time, the inheritance tax threshold remains frozen at £325,000.

 

Together, these reforms increase the long-term tax load on capital and remove many of the structural advantages that once drew wealthy non-doms to the UK.

 

Under the new set of rules, more high-net-worth individuals are looking elsewhere. Wealth advisers say the shift is already evident in behaviour. Lower capital gains tax receipts — reportedly down by around £1 billion — have been cited by some analysts as early signs of wealthy exits.

 

This shift also serves as a warning for wealthy Indians considering making the UK their home.

 

Tax heads to watch

 

Dinesh Jotwani, co-managing partner at Jotwani Associates, listed the main tax categories that wealthy individuals should consider:

 

Income tax: The top rate is 45 per cent for non-savings, non-dividend income above £125,140. Dividend income can go up to 39.35 per cent.

Capital gains tax: Now 18 per cent (lower rate) and 24 per cent (higher rate) for most assets. Gains on carried interest will rise to 32 per cent in 2025–26. Business asset disposal relief is being phased to 14 per cent in 2025 and 18 per cent in 2026.

Inheritance tax: 40 per cent on estates above the threshold, with freezes pulling more estates into the net. Pensions inherited from April 2027 fall under IHT. Long-term UK residents (10 out of the previous 20 years) face IHT on worldwide assets.

Property-related charges: Stamp duty is higher for second homes, with a 5 per cent surcharge. Non-UK residents disposing of UK property face CGT and must report transactions.

Residency-linked obligations: Global income and gains are taxed once residency conditions are met. The old remittance basis is ending. Transition rules include a temporary facility to repatriate foreign income and gains at reduced tax for some non-residents returning after April 2025.

 

UK versus India: The tax burden

 

“In the UK, income is taxed at progressively high rates, with the top band reaching 45 per cent for certain earnings. India, too, follows a progressive system with surcharges at higher income levels, but the effective burden varies more widely depending on the nature of income, available exemptions, and underlying investment structures,” said Jotwani.

 

He added that the difference becomes sharper when looking at capital gains. “In the UK, once an individual becomes sufficiently established as a resident, capital gains on worldwide assets are generally taxed at 18–24 per cent, depending on the tax band and asset type. India’s capital gains regime, by contrast, distinguishes between asset classes: Long-term gains on listed securities benefit from preferential rates, while gains on real estate or unlisted assets follow a different schedule.

 

“For an investor with a diversified portfolio, this can result in a more flexible and, in many cases, more favourable tax outcome in India,” Jotwani said.

 

Inheritance tax remains the clearest dividing line. “The UK imposes a 40 per cent inheritance tax on large estates, and for long-term UK residents, this tax can extend to global assets. This single levy can substantially erode multi-generational wealth. India, on the other hand, abolished estate duty in 1985 and currently has no inheritance tax, allowing wealth to pass to future generations without a direct tax charge on the value of the estate,” he said.

 

Property rules also differ in ways that matter. While both countries tax property disposals, India’s long-term capital gains structure allows reinvestment benefits in some situations. In the UK, stamp duty on additional homes and CGT on disposals can sharply increase overall costs for wealthy property owners.

 

“From a planning perspective, the UK demands far more active structuring to manage exposure to capital gains tax, inheritance tax, and property-related charges. India’s system, while it has its own compliance and structuring complexities, presents a comparatively lower risk of wealth erosion through estate taxation,” he said.

 

In practical terms, someone with assets worth around ₹200 crore may face a far heavier lifetime and succession-related tax burden in the UK. Without highly complex planning, the combined effect of higher income and capital gains taxes and a strong inheritance tax regime makes long-term wealth preservation more difficult in the UK than in India.

 

How important is inheritance tax in wealthy Indians’ decisions to move to the UK?

 

Inheritance tax is now central to how wealthy Indians assess the UK. Jotwani explained the pressures shaping their thinking:

 

Legacy risk: Preservation of wealth across generations is a top priority, and a 40 per cent tax on estates directly cuts into family capital.

Global exposure: With IHT applying to worldwide assets after long-term residence, offshore wealth, including assets in India, enters the UK tax net.

Planning complexity: Reductions in business property relief make long-standing planning strategies less effective.

Pension exposure: From 2027, inherited pensions fall under IHT, reducing a tool often used for efficient value transfer.

Behavioural impact: Changes are already encouraging wealthy individuals to reconsider long-term residence, with early evidence suggesting movement of capital and people.