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The number of millionaires in the UK has plummeted to its lowest point since the 2008 financial crisis, with a notable 7 per cent decrease recorded in the past year. According to data from the Adam Smith Institute (ASI), the total of high net-worth individuals (HNWIs) has dropped to 442,000, raising alarms about the potential implications for the nation’s economy and tax revenues.
Factors Behind the Decline
Several key factors have contributed to this downturn in millionaire numbers. Falling asset prices, an exodus of wealthy individuals from the UK, and a low household savings rate have all played significant roles. The ASI’s index, which is based on information from the Office for National Statistics, employs “constant prices” to account for inflation and exchange rate fluctuations when calculating millionaire status. This includes assets exceeding £1 million across a range of categories, such as property, investments, pensions, and savings.
The think tank, known for its right-leaning perspectives, argues that urgent policy reforms are necessary to make the UK a more appealing destination for HNWIs. Among their recommendations are the abolition of inheritance tax, a gradual phase-out of capital gains tax, and reforms to the non-domicile tax regime. While these changes could be perceived as beneficial to affluent families, they also raise questions about how the government would compensate for the potential loss in tax revenue.
Rising Concerns Over Tax Revenue
In the 2023-24 fiscal year, the government collected £7.2 billion from inheritance tax, accounting for less than 1 per cent of total revenue. However, this figure is projected to rise, reaching £14.5 billion by the 2030-31 period. The increase is attributed to frozen tax thresholds and the impending inclusion of pension assets in inheritance tax calculations.
The ASI has also dismissed calls for a wealth tax as misguided, pointing to historical failures in countries such as France, Sweden, and the Netherlands, where similar initiatives led to minimal tax gains and increased emigration among the wealthy. This trend poses a significant risk to the UK economy, as millionaires often contribute to job creation and overall economic growth.
The Impact of Wealth Migration
The ASI report highlights a concerning trend: many high net-worth individuals are either leaving the UK or choosing not to relocate there in the first place. Although this pattern has not been substantiated by HMRC data, it raises important questions about the long-term implications for the UK’s economic health. Andrew Griffith, the shadow secretary of state for business and trade, expressed concern over the dwindling number of millionaires, stating, “Everyone should care about Britain having fewer millionaires to contribute to the tax pot and creating jobs and businesses here.”
Mitchell Palmer, an economist at the ASI, emphasised the negative consequences of this decline, suggesting that it signals a weakening entrepreneurial spirit and reduced capital availability for British businesses. He cautioned against new anti-wealth policies, asserting that measures such as wealth taxes or equalising capital gains tax with income tax would exacerbate the issue. Instead, Palmer advocates for making the UK a more attractive environment for individuals looking to build and retain their wealth.
Why it Matters
The decline in the number of millionaires in the UK is more than just a statistic; it reflects broader economic challenges that could have far-reaching implications for the country’s fiscal health and job market. As the government grapples with rising tax revenue needs and the potential loss of capital, the call for policy reforms becomes increasingly urgent. The future of the UK economy may hinge on its ability to retain and attract high net-worth individuals, who play a crucial role in driving growth and innovation.
