More than one in 10 residents of some of London’s wealthiest neighbourhoods have claimed “non-dom” status at some point, meaning they paid no tax on their offshore income.
UK-based people who have benefited from this special tax status by claiming another country as their legal “domicile” made up more than 12% of residents in two parliamentary constituencies in 2018 – Kensington, and the Cities of London and Westminster – according to an analysis of HM Revenue and Customs data. In five of the most affluent council wards they accounted for more than a quarter of residents.
The study by the London School of Economics and the University of Warwick found that the number of people who had ever claimed non-dom status in the UK rose from 162,000 in 2001 to 238,000 in 2018.
It found that these people were most commonly working in finance, management consultancy and accountancy, with 22% of top earning bankers having claimed non-dom status.
Most ‘non-doms’ live in London and the south of England
It emerged on Wednesday that Akshata Murty, the wife of Rishi Sunak, claims non-dom status, which would allow her to save millions of pounds in tax on dividends collected from her family’s IT business empire.
The highest earning non-doms work in the film industry and sport, likely to be famous actors, directors, producers and Premier League football players, according to the researchers. Their average earnings in 2018 were £2m, almost four times more than the income of non-dom bankers.
Outside London, some of the highest numbers of non-doms were found in Oxford and Cambridge, where they made up more than 1% of the population in two parliamentary constituencies. These included 310 people working in higher education, who the researchers said were likely to be foreign senior managers and professors employed by the two elite universities.
Non-doms pay no tax on income or capital gains accrued outside the UK, unless they bring the money into the country. This has allowed the super-rich, such as Roman Abramovich, owner of Chelsea football club, Lakshmi Mittal, the steel tycoon, and the media baron Viscount Rothermere, to avoid paying significant sums to HMRC.
The study, The UK’s ‘non-doms’: Who are they, what do they do, and where do they live?, analysed the anonymised personal tax returns of everyone who claimed non-dom status at some point between 1997 and 2018.
It found that non-doms made up two-fifths of top earners – those whose annual income was more than £125,000 – in the oil industry, a quarter of those in the car industry and a sixth of those in film and sports.
The very wealthy were most likely to claim non-dom status, according to the researchers. More than two-fifths of those who earned £5m or more in 2018 have claimed non-dom status at some point since 1997, compared with less than three in 1,000 among those whose income was under £100,000.
This trend was even greater among migrants, with 84% for those earning above £5m having claimed non-dom status at some point.
More than 10% of residents in some affluent London neighbourhoods are non-doms
One of the report’s authors, Mike Savage, professor of sociology at LSE, said the report showed that non-dom status has contributed to inequality in the UK by attracting the global super-rich to work here.
He said: “What this study is really showing is that inequality in the UK isn’t just a British problem, it’s to do with the way in which rich people, who can command a high income, are working in the UK. We assume [they’re coming here] because the non-dom clause is an attractive part of the package they get here. So it’s facilitating the rise of the super rich.”
Wealth and non-dom status graph.
More than 93% of non-doms were born abroad, coming mainly from the US, India and western Europe, especially France, Germany and Italy, the study found. The number of Indian non-doms has risen most rapidly, from about 4% of the total in 2001 (3,200) to almost 14% in 2018 (22,700).
The study also found that migrant non-doms cluster in national enclaves in London. Western European non-doms are predominantly found in Westminster and Kensington and Chelsea. American non-doms are most prevalent in Islington, Camden and Hackney.
Those from other English-speaking countries, including Australia, Canada and South Africa, are clustered around Wandsworth, Merton and Richmond, as well as in Surrey. Meanwhile, Indian non-doms reside in more suburban areas such as Harrow, Hillingdon and Bromley.