Rachel Reeves is to water down her clampdown on the non-dom tax status after analysis showed it had prompted an exodus of high-net-worth-individuals.

The chancellor said she would be tabling an amendment to the plans to allow a more generous phase out of tax benefits.

“And in the finance bill, we will be tabling an amendment which makes more generous the temporary repatriation facility, which enables non-doms to bring money into the UK without paying significant taxes.”

Reeves extended the two-year transition window that the Conservative government had planned to three years in her budget back in October.

The new extension comes after analysts found over 10,000 millionaires left the UK in 2024, a 157% increase on 2023 – meaning the UK lost more wealthy residents than any other country except China.

The research, conducted by global analytics firm New World Health and investment migration advisers Henley & Partners, shows the UK became a net outflow country of millionaires after the Brexit vote in 2016, but the big haemorrhage happened last year.

Dominic Agace, chief executive of Winkworth, said: “It is good to see Rachel Reeves now focusing on growth and looking to prove the government is business friendly. We need to see an injection of optimism into the government’s messaging to demonstrate the UK is pushing for growth and is welcoming to international business people and entrepreneurs.

“The non-dom measure has definitely had an impact on wealthy high net worth individuals wanting to buy houses in central London and a row back on measures is to be welcomed, although on the face of it these don’t seem enough.

“The biggest concern of many is where there are no double tax treaties – and to have to have inheritance tax on global assets earned prior to UK residency in unrelated overseas territories. While this remains, it is hard to see reform moving the dial significantly.”

Up until 2016, the UK had always been a net inflow country when it came to high-net-worth individuals.

Leslie MacLeod-Miller, chief executive of FIFB, commented: “They need to give a clear signal that Britain supports growth and investment before it is too late. This is now the final call, and the flight is about to leave taking investments – and tax revenue, spending into the economy, job creation and philanthropy – with them.”

Under the old scheme, non doms didn’t pay tax on their non-UK income for up to 15 years under a set of rules that date back more than 200 years. Around 74,000 non doms contributed £8.9 billion in UK taxes in 2022/23.

The new residence-based scheme from April introduces a four-year cap, which means the scheme is less attractive than other countries including Italy, where foreign investors pay an annual flat tax for a maximum of 15 years.

“Our Oxford Economics commissioned data found that 83% of foreign investors said that UK inheritance tax on overseas assets was the redline,” said MacLeod-Miller. “As part of the Tiered Tax Regime, foreign investors would pay between £200,000 and £2 million a year – with protection from draconian UK taxes being levied upon assets which have never had a connection to the UK. In this way foreign investors win, the government wins and the public win as funds will flow into to vital frontline public services.”

A Treasury spokesperson said: “While we do not expect these changes to impact the £33.8bn of tax revenue that the OBR forecast to raise over five years, they reflect our continued engagement with stakeholders to make sure the reforms announced at budget operate as intended.

“The temporary repatriation facility is designed to encourage non-doms to bring their funds to the UK, encouraging them to spend and invest this money here.”