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Concerns include tax rises on income, inheritance and capital gains

One evening this summer, in the middle of the British heatwave, a group of thirtysomething professionals gathered together for a barbecue in west London, not far from the river Thames.

As slices of halloumi and slabs of marinated steak sizzled on the grill, the conversation in the garden turned from work to relationships, holidays and, inevitably, to politics. It had been a surreal summer in Westminster following the resignation of several high-profile politicians, including foreign secretary Boris Johnson and Brexit secretary David Davis.

Prime Minister Theresa May’s approach to negotiating the terms of Britain’s imminent departure from the EU had pitted senior Conservatives against one another, fuelling accusations of treachery and betrayal within the party.

Instead of capitalising on the chaos in government, the opposition Labour party had been distracted by its own internal ructions: a heated row over anti-Semitism within its ranks had reached boiling point, triggering widespread criticism of its leader Jeremy Corbyn.

Chatting over beers and Pimm's that August evening, the consensus among the group of lawyers, civil servants and financiers was that the government had been shambolic. “Still,” said one of those present, to murmurings of agreement among his peers, “better than Corbyn being in power.”

This is a sentiment that has steadily gained traction among the UK’s highest earners since Labour surpassed expectations at the 2017 general election, forcing the Conservatives to enter a pact with Northern Ireland’s Democratic Unionist Party in order to function as a minority government.

Corbyn was suddenly seen as a genuine contender should May’s fragile government fall apart. With that realisation has come a growing nervousness among Britain’s professional classes about what a Corbyn-led government might mean for the country’s more affluent households, from middle-class earners right up to the billionaire foreigners invested in property in the capital.

“It is a f**king terrifying possibility,” says a London-based small business owner, speaking on condition of anonymity. “[Corbyn is] all about the demonisation of the rich and is not looking out for businesses — small, medium or large.”

This queasiness is increasingly common, according to Iain Tait, director of private clients at London & Capital, the wealth management firm. “I’ve had some colourful conversations over the past two years about the threat of Corbyn,” he says. “The discussions have gone from not believing it could happen two years ago to becoming a reality.”

Some of the concerns are tied to policies explicitly outlined in Labour’s 2017 manifesto, entitled “For the many, not the few” and which includes a suggested wealth tax and a rise in income tax for those earning more than £80,000. There are also speculative fears about what Corbyn and the shadow chancellor John McDonnell might do if they did win power.

Wealth managers, tax advisers, accountants and estate agents all relay similar feedback: their clients are scared. Corbyn, rightly or wrongly, is regarded as a bigger threat to their finances and the country’s broader economic prospects than Brexit.

Many point to the likelihood of a further drop in the value of the pound, as well as falls in property prices and the value of infrastructure-linked investment funds, should Corbyn lead the next government.

Although many of those interviewed for this article agree that Corbyn has been weakened by the furore over the anti-Semitism problem within Labour, he remains the bookies’ favourite to become Britain’s next prime minister. That means some uber-wealthy voters are moving to Corbyn-proof their finances now. This is in response to widespread paranoia that a Corbyn-led Labour would seek to bolster the public coffers by ramping up inheritance taxes, income taxes, stamp duty and capital gains taxes and cutting back on areas such as pensions tax relief. According to Tait, some wealthy individuals are even preparing for the possibility of capital controls.

He says: “We have had some UK families ask us to set up offshore investment accounts. They want to make sure their investment accounts are Channel Islands-based or Switzerland-based so their money would not be subject to capital controls. It is activity we have seen from real live clients in direct response to the threat of a Corbyn-led government.”

Tait also has dozens of clients who have recently purchased properties for their teenage children, when they would otherwise have waited until they were in their twenties. Their motivation is to put their assets in their children’s name “before a potential 2022 election or an earlier Corbyn government”, he says.

A handful of clients at Grant Thornton, the accounting firm, have similarly sought advice on emigrating or moving their assets offshore, should Corbyn come to power. Monaco, Jersey and Guernsey are some of the locations being considered. “That is rare but it has been raised by a few [clients] in response to the Corbyn threat if inheritance tax, capital gains tax and income tax rates go through the roof,” says Jonathan Riley, head of tax at the firm.

A UK lawyer, speaking privately, says the so-called “Corbyn effect” has become a dominant part of conversations with clients in recent months. Although few are taking action now, many are mulling options, including moving assets offshore, avoiding investing in bricks and mortar and relocating overseas.

“People are extremely nervous for the first time in my career,” says Mark Dampier, research director at Hargreaves Lansdown, the FTSE 100 investment company. “[One client] said he had already sourced Italy as a place to go. I have never known so many of my friends look at the same thing, ever. If they have got the money and don’t mind leaving the country, they are seriously thinking about it. That shows the magnitude of the worry,” he says.

One fear for individuals who consider themselves affluent, but not plain rich, is Corbyn’s proposed rise in income taxes for people earning above £80,000. Precise details are scant, but Labour has said this would affect less than 5 per cent of UK taxpayers.

The policy has troubled individuals who fall squarely into that bracket. “I am a life-long Labour supporter and have always voted with the rest of society in mind,” says a media executive in his forties, speaking privately. “This is the first time a piece of self-interest has entered into my head about whether it would be good for me. I would end up paying up a lot of tax and feeling almost like I wasn’t wanted. It’s kind of an attack on the rich — but not the super-rich.”

When asked how he would vote if a snap election were to be held in January, he pauses and appears momentarily stricken. “Probably I would still vote Labour. But I would have to think about it in a way I have never thought about it before,” he says.

Another concern is the fact that Labour has mooted a potential “wealth tax” as one way to raise an additional £3bn a year to spend on social care. The widespread assumption is that it would come in the form of a “mansion tax” on high-value homes.

There is an acknowledgment, however, that the Conservatives are just as likely to tinker with the tax regime. Inheritance tax and higher-rate relief for pensions are two areas considered most vulnerable to political interference from the current government.

“Don’t assume that if the Tories win the next election that things will be easy,” says Dampier. “The Tories are suggesting they will put taxes up as well. I am far more worried about Labour — but I’m worried about the Conservatives, too.”

Jonathan Reynolds, the shadow City minister, seems half bemused, half fed up of questions around the Corbyn-phobia that seems to have set in across the professional classes. He points out that many former Labour leadership teams, including Tony Blair and Gordon Brown, faced similar concerns about their policies and their approach to macroeconomic discipline. “We’re used to that,” he says with an air of resignation.

The party’s relationship with the City and business has improved significantly over the past 18 months, he adds. He says it is reflected by a 10 per cent rise in membership numbers over the past year at Labour in the City, an independent network of Labour-supporting individuals working in finance and professional services. Total headcount now stands at 650.

Of the Labour Party’s manifesto, which he describes as “completely mainstream centre-left”, he says: “There is absolutely nothing to worry about. People just need to look at that manifesto. There is nothing that would be out of place in Germany or Scandinavia or any other part of the world.”

When asked whether people are right to fear more punitive taxation than has been officially outlined, he says: “People have asked, ‘Do you have secret plans you haven’t [disclosed] yet?’ The answer is no. Everything we would plan to do has been announced publicly and we will announce [anything else] in advance.”

Despite such assurances, concerns have continued to mount about what, given the opportunity, Corbyn and McDonnell might enact.

Charles McDowell, a property agent, says that while the uber-wealthy can simply “hop on a plane and leave” to avoid punitive wealth and property taxes, “people like me are sitting ducks . . . If Corbyn came along and decided that [property] is what he will tax, we would be completely screwed.”

The political risks facing the country, namely Corbyn as well as Brexit, have already caused foreign investors to steer away from UK property. He says these concerns have had a “dramatic effect” on his wealthy overseas clients, some of whom have pulled out of multimillion pound property deals in order to rent or stay in hotels instead.

Jason Hollands, managing director of wealth manager Tilney, says: “For most people there is an overall concern that taxes will go up. There is definitely greater appetite for wealth taxes in the Labour leadership than there has been for a long time. The question is, where will that end?”

Given the choice between a Conservative government hell-bent on leaving the EU with or without a deal from Brussels, or a Labour government with an ambiguous stance on Brexit but a strong possibility of tax increases, many of the country’s high earners feel despondent about their options.

“It’s a mess, whichever way you cut it,” says McDowell. “I don’t know what I’d do — hold my head in despair. I think things will probably get very, very bad before they get better again. They are scary times.”

However, Robert Palmer, executive director of the Tax Justice Network campaign group, says that there is broad support for changes to how the wealthy are taxed.

“I’ve spent six months speaking to a range of tax policy experts across the political spectrum. The idea we should tax wealth better and smarter is something that is agreed on across the board. There is a feeling that the tax system is not set up in a fair or efficient way.”

He adds: “We think that in the UK, we have pretty severe wealth inequality. This is something people are worried about. People in all voting groups think the economy does not work for them and that it does work for the wealthy.

“There is a feeling that multinationals can get away with paying lower taxes and that people at the top get away with not paying on huge stocks of wealth they have. We potentially have economic shocks coming down the line in terms of Brexit — we should be asking the wealthy and corporations to pay their fair share to ensure we have trust in the system.”