Under mounting pressure from the City, the Government is mulling over making changes to Inheritance Tax rules for non-doms whose exodus from the UK has had a big impact on London’s property market, it is reported.

When Labour came into power last year, they made a number of major changes to the tax rules for non-doms, but it is the 40% inheritance tax on their global assets that is said to be one of the main drivers of the current rush to leave.

The changes were meant to generate an extra £430m per year for the Government. However, with 25,0000 non-doms already having quit the UK, the Office for Budget Responsibility (OBR) estimates it will only bring in half that.

Non-doms are key drivers of the property market in prime central London. Knight Frank’s data reveals sales in those areas fell by 7% in just six months, with buyer numbers down 13%. At the same time, average property prices in prime central London declined by 2.2% on an annual basis.

Market impact

The damage caused by the exodus, though, extends beyond London’s central postcodes. The average prices in prime outer London rose just 1.1% annually compared to national growth of around 3%, as the usual displaced demand from central areas failed to materialise.

I have always said this move against non-doms was a step too far.”

Dominic Agace, Chief Executive of estate agents Winkworth, says any policy reversal would be “incredibly positive” for London’s struggling market.

He adds: “I have always said this move against non-doms was a step too far. It is one of the factors leading to a very difficult sales market in central London, with international high net worth buyers staying away.

“A change in policy towards non-doms would be positive for central London and the London economy as a whole. The non-doms are wealth generators being actively welcomed by other countries.”

However, he warns reversing damage may prove challenging: “We’ll see if this adjustment on its own is enough now people have already made their decisions.”