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What's worrying the wealthy ahead of UK election
With under a month to go until U.K. voters head to the polls, some of the country's wealthiest residents are awaiting the results with trepidation.
Every day of the campaign seems to bring a new headline that could be interpreted as an attack on private wealth -- whether it's held in U.K. property or an overseas bank account. Opinion polls are having great difficulty predicting who'll be in power in a few weeks, with one YouGov/The Sun poll suggesting a Conservative Party lead on Thursday, while another Survation/Daily Mirror poll showing a four point lead for the opposition Labour Party.
Here, CNBC takes a look at the main issues that could affect the international super-rich who have flocked to London and the South of England in recent years, tempted by its political stability and lifestyle, as well as its favorable tax regime.
Russian oligarch and Chelsea Football Club owner Roman Abramovich and ArcelorMittal founder Lakshmi Mittal have one thing in common: They are among the roughly 116,000 U.K. residents that are "non-domiciled" for tax purposes. So-called "non-doms" do not need to pay U.K. tax on foreign income.
"Non-doms" have emerged as almost as big a bogeymen as bankers following the 2007 credit crisis, despite paying plenty of tax on their U.K. earnings - nearly £7 billion ($10 billion) in 2011-12, according to law firm Pinsent Masons.
The centuries-old legislation regarding non-doms is under increased attack by the opposition Labour party, even though it was under the previous Labour administration that the number of people receiving the beneficial "non-dom" status doubled.
Non-dom tax status is usually awarded to people who were born or have lived outside the U.K., or in some cases, because of a parent who was born outside the country. Once they have been non-doms for more than seven years, they can pay a levy of between £30,000 and £90,000 each year, then aren't subject to further taxes on their overseas earnings.
Labour sparked a kerfuffle in the City Wednesday when it announced plans to crack down on the controversial tax arrangement. But whether it would really cause the threatened mass departures by wealthy foreigners remains to be seen.
"The Government needs to be mindful of the fact that 'non-doms' and their businesses are internationally mobile by their very nature, and could decide to base themselves elsewhere," Nimesh Shah, partner at accountancy company Blick Rothenberg said in a statement.
It is uncertain what the benefit to UK coffers would be from Labour's move, as the scale of assets that would be in line for higher taxation is unknown.
Jolyon Maugham, a tax barrister whose research was cited by Labour leader Ed Miliband when he announced the new policy, argued that the current law made "no sense".
"There are many people who are benefiting from a rule which should not be there. Everybody knows it needs to be changed, the parties just differ on what that change should look like," he told CNBC.
Labour's plans for a "mansion tax" - an additional tax on properties valued at over £2 million - have caused consternation among some high-end estate agents and buyers. The demand from "prime" buyers for mortgages in the first three months of 2015 was the lowest since the third quarter of 2008, when the financial crisis was in full swing, according to figures released by the Bank of England on Wednesday.
The tax take for London property, where price growth has outstripped the rest of the U.K. in recent years, is increasingly important. London contributed 42 percent of U.K. stamp duty revenues in 2013/14, up from 28 percent in 2007/08, according to figures from lender Halifax.
Yet it's not just the Labour Party that may try to introduce an extra charge for those at the top of the U.K. property ladder.
"Whichever government is in power after the 8th of May will produce some kind of mansion tax. It's too soft a target for them to ignore," Henry Pryor, a London-based property agent, told CNBC.
If the center-right Conservative Party was re-elected, it could opt for subtler ways for getting extra tax income from people living in the valuable home, such as updating council tax bands, for example.
At the moment, if you live in a house in London that was valued at over £320,000 in 1991 (around £1 million today), you're likely to be paying similar council tax irrespective of whether your home is a Holland Park pile or a middle-class family home in Peckham.
Plenty of major international cities - New York and Paris for example - have mansion taxes or extra levies on second homes already. When it comes to pricing, there are plenty of factors at play in the London housing market, not least worries that it has overheated.
Pryor is confident the market would bounce back once the uncertainty around the election is over.
"At the moment, many international investors still see London property in a positive light, as a sterling-based asset, especially compared to whatever dramas are destabilising their own currencies," he told CNBC.
Under Labour Party plans, any discretionary bonus or bonus-like allowances above £25,000 paid to bank employees would face a 50 percent levy, to be paid by the bank. The employees would have to pay income tax on top of this levy.
Labour is also planning to reintroduce the 50 percent top rate of income tax on earnings above £150,000 a year, which the Conservative-led coalition had abolished.
- By CNBC's Catherine Boyle
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