The Labour Government has been forced to borrow a whopping £14.6billion more than expected as high net worth individuals flee Britain – hammering tax receipts and leaving Labour’s Rachel Reeves with a massive fiscal headache.
According to fresh figures from the Office for National Statistics, capital gains tax receipts plunged to £11.2bn in the first three months of 2025 – down from more than £13bn over the same period last year. And self-assessed income tax revenues also came in below forecasts from the Office for Budget Responsibility (OBR), adding to Treasury woes.
The slump in tax take comes as wealthy non-doms leave the country following Labour’s sweeping tax reforms, with experts warning the exodus is costing the UK billions.
Andrew Griffith, the shadow business secretary, tore into Chancellor Reeves’s tax policies, blaming her £40bn of tax hikes from last October’s Budget.
“If you set out with a vengeance to destroy incentives to work and chase wealth creators overseas, it should be no surprise when tax revenues fall short and borrowing surges,” he said.
“A sensible Chancellor would change course urgently. But I am not sure we have one of those.”
The shortfall in taxes – along with weaker-than-expected growth in City bonuses, which dragged down PAYE income tax and national insurance receipts – meant Government revenues last year were £7.8bn below forecast.
With surging spending on benefits, public sector wages and sky-high interest payments on debt, total Government borrowing for the 2024/25 financial year hit a staggering £151.9bn – £20.7bn more than the previous year and £14.6bn more than the OBR had predicted just a month ago.
Speaking in the Telegraph, Maxwell Marlow of the Adam Smith Institute warned that Britain’s tax crackdown is driving the wealthy out of the country – and dragging the economy down with them.
“The OBR’s correction that Capital Gains and Self-Assessed Income Tax receipts are £1bn below estimates is highly concerning, and could be linked to the departure of thousands of high net worth non-doms,” he said.
“By killing the golden goose with these tax reforms, the Government has chased away wealth creators, and thus brought in less tax revenue than they anticipated. ASI modelling shows that, by 2035, the British economy could be £14bn worse off every year, than if the government did not abolish the status.”
He added: “It is imperative that the Treasury rapidly amend its offering to high net worth individuals, and attract more private investment to the UK.”
The figures are a blow to Reeves, who has insisted her economic strategy is “pro-business and pro-worker”. But with tax revenues plummeting and borrowing ballooning, critics are sharpening their knives – and demanding a major policy rethink.
