Tax Hikes on Professionals Could Trigger a Brain Drain, Warns Mishcon de Reya Boss
While few Britons might shed tears over a tax increase targeting accountants and lawyers in Rachel Reeves’s upcoming budget, the implications could extend far beyond the affluent neighborhoods of London and the southeast. But here’s where it gets controversial: James Libson, managing partner of the renowned law firm Mishcon de Reya, argues that these tax hikes could drive middle-class professionals—not just the ultra-wealthy—to seek opportunities abroad. And this is the part most people miss: it’s not just about the tax itself, but the cumulative effect of rising costs, from private school fees to living expenses, that make the UK less appealing.
Libson has been vocal in his criticism of plans to raise taxes on limited liability partnerships (LLPs), a structure used by over 50,000 businesses in the UK. Introduced in 2001, LLPs offer tax benefits by treating partners as self-employed, exempting them from employer National Insurance Contributions (NICs). However, critics argue that this system disproportionately benefits high earners. According to a London School of Economics report, the top 0.1% of taxpayers received 46% of all partnership income in 2020, and Reeves could raise £1.9 billion by aligning LLP taxes with those of regular employers.
But is this a fair comparison? Libson insists that equating LLP partners with employees is misleading. “These are people investing in their businesses, taking risks, and putting in capital,” he explains. “To treat them like salaried workers ignores the entrepreneurial spirit that drives these structures.”
The City is abuzz with speculation about how severe the budget will be. Initial reports suggested Reeves was planning a tax raid that could cost some partners thousands of pounds annually. While the Treasury has since hinted that LLPs may not face as harsh a crackdown as initially feared, Libson warns that even modest increases could have “dangerous and potentially destructive” consequences. “It’s not just about millionaires or billionaires,” he says. “Normal, middle-class professionals will start looking elsewhere if the UK becomes less attractive.”
This sentiment is echoed by Mishcon de Reya’s own expansion into the United Arab Emirates (UAE), with new offices in Dubai and Abu Dhabi. Led by managing partner Chris Skipper, this move reflects a broader trend among Western law firms seeking growth in regions with favorable business climates and regulatory reforms. Rival firms like Addleshaw Goddard and Simmons & Simmons have also set up shop in the UAE, while others, such as Kirkland & Ellis, are expanding in Saudi Arabia.
But here’s the bigger question: Is the UK losing its global edge? Libson believes London’s “magnetism” has diminished due to political and economic instability, as well as competition from emerging global hubs. “London is still the greatest city in the world,” he says, “but we need to address execution, productivity, and the barriers that hold us back.”
It’s not just businesses eyeing opportunities abroad. Wealthy individuals are also reportedly relocating to tax-friendly destinations like the Gulf, though exact figures remain disputed. Libson notes that Mishcon de Reya’s immigration practice has seen a significant increase in clients moving to the region, a trend he believes is undeniable despite data controversies.
Amid these challenges, Mishcon de Reya continues to innovate, recently appointing former NatWest CEO Dame Alison Rose as an adviser to focus on diversity and inclusion. Promoted to non-executive chair in September, Rose brings a wealth of experience, despite her controversial departure from NatWest over the Nigel Farage Coutts account scandal. Libson praises her as “one of the most impressive people I’ve ever worked with,” emphasizing that Mishcon’s diversity efforts are rooted in business value, not tokenism.
So, what do you think? Are tax hikes on professionals a necessary measure to balance the books, or a risky move that could drive talent away? And is the UK doing enough to maintain its competitive edge in a rapidly changing global landscape? Let us know in the comments—this is a debate worth having.
