Tales from the Front Line

Tax Exiles?

by Richard Sharples
on April 1, 2010 in London Property

Much has been made of the new 50% top tax rate being introduced on 6 April. There have been a number of surveys indicating that city-based high earners are seriously looking at their options as London is no longer competitive in terms of income tax rates. The two interesting questions for us are: What is the likely impact on the top end of the London residential property market and where is the likely beneficiary of their departure?

Dealing with the former initially, by way of background it is certainly true that city salaries and bonuses in the good years have been one of the main driving forces behind the rises we have seen in our property market. Traditionally, a good proportion of bonuses paid would get spent on prime London property – both smart flats for the younger ‘guns’ and bigger houses through the prime geographical swathe from St Johns Wood through the Royal Borough and out to Wimbledon. However, it is important to note that there are other macro-economic factors affecting the prices of these properties meaning that any effect may be less pronounced than envisaged by some.

In terms of where these high-earners are likely to go, inevitably some will go both to the established far-eastern financial centres but also to some of the powerhouse emerging market economies too. However, it is for Switzerland that we have had by far the largest number of enquiries from old, current and potential clients asking whether Property Vision offer a similar service there. Both Zurich and Geneva differ in their attractions and tax rates vary across Switzerland on a Canton by Canton basis. For example, Geneva has one of the highest rates of tax, but neighbouring Vaud is significantly lower and easily commutable via the excellent road and rail links. The German-speaking Cantons of Zug and Schwyz offer lower tax rates still – as low as 20% income tax.

The final, and perhaps most pressing question is how many of these individuals will actually up-sticks and go. There was a lot of foot-stamping when the changes in non-Dom rules came into force in 2007 but certainly less went than was feared. The issues that need to be considered when leaving are lifestyle, schooling, availability of suitable housing stock as well as tax. For many, I suspect, will be cautious of the metaphorical tax ‘tail’ wagging the dog…