Ed Miliband's proposed change in the rules on 'non-doms' would cost Britain billions, experts warned last night. The Labour leader announced plans to overhaul Britain's non-domicile regime, which allows 116,000 foreigners and people with foreign links to pay tax only on money that they bring into Britain. Mr Miliband initially suggested he would 'abolish' non-dom status – but it later emerged that Labour is effectively proposing a time limit on it of between two and five years. Scroll down for video . Crowd-pleaser? Ed Miliband joins crowds in Warwick yesterday, where he announced his non-dom plans . The Tories pointed out that a five-year grace period would exempt up to six in every ten non-doms from the crackdown anyway, because many non-doms do not stay longer than five years. Announcing the policy, Labour aides suggested the change in the rules, which date back to the 18th century, would raise as much as £1billion. But tax advisers immediately disputed this, saying driving non-doms away would in fact cost the Treasury significant sums. With non-doms paying around £8billion in tax and national insurance a year, it is claimed that Labour's proposal could in fact create a huge hole in Treasury coffers. Within hours of announcing the policy, Shadow Chancellor Ed Balls was forced to admit he did not actually know how much extra cash the measure would raise. In a further embarrassment, it later emerged that just three months ago he himself had said such a move would be counter-productive – saying it would result in the country losing money. In a video that emerged yesterday, Mr Balls can be seen telling a local BBC radio station that abolishing the status altogether 'will probably end up costing Britain money because some people will leave the country'. Despite this, the surprise move by Labour wrongfooted the Conservatives, who took several hours to craft a coherent response. The issue of non-doms is a sensitive one for the Tories, because Mr Miliband has claimed David Cameron is close to 'dodgy donors', including non-doms, who support the party. Labour has repeatedly attempted to characterise the Tories as friends of the rich – despite official figures showing the best-off are paying more tax than they did under the last Labour government. Last night, sources close to Chancellor George Osborne indicated he would consider scrapping the right to pass on non-dom status to heirs. Last year, Mr Osborne announced a new £90,000 annual charge for people who are non-domiciled in the UK for tax purposes but have lived here for 17 of the past 20 years. Tory officials said it was more effective to hit non-doms with an annual levy than to 'tinker' with the status. The Chancellor said: 'Labour's policy is a total shambles. You have Ed Balls admitting it will cost Britain money and then when you look at the small print it turns out the majority of non-doms won't be affected.' In a speech at the University of Warwick, Mr Miliband insisted non-dom status was an 'arcane' rule dating back to the time of William Pitt the Younger, allowing a 'few people at the top' to 'operate under different rules'. 'There are people who live here in Britain like you and me, work here in Britain like you and me, are permanently settled here in Britain, like you and me, were brought up here, but just aren't required to pay taxes like you and me,' he said. Graham Aaronson QC, who chaired an independent committee which drew up new rules against tax avoidance, said the non-dom regime did need reform. He said he had advised the Treasury two years ago the right to pass it on to heirs should be scrapped, and suggested he also favoured removing the right for British citizens to claim it. But he was scathing about Labour's proposals, which he said would cost the country dear. 'It's either unbelievable deception or the man is completely pig ignorant,' he told the Daily Mail. 'I couldn't believe what I was listening to. This is why politicians have such a bad name. Mr Miliband was describing non-doms born here, brought up here, who go to school here, use our hospitals. The audience would have thought that's what a non-dom is. But it's a very small number. There are those that live abroad, their main family life, home and base but they choose to live in the UK for a month and a half a year. They pay taxes when they're here, they may employ people. It's ridiculous to treat them the same way.' Jolyon Maugham, the QC who advised Labour on its plans for reform, conceded the policy could lead to a flight of wealthy taxpayers from Britain. Yet the Labour supporter was cited by both Mr Miliband and Mr Balls as an independent expert who supports the policy. The QC, who admitted the Tories have a 'terrific record' on squeezing tax dodging, said his own calculations suggested the measure was likely to raise about £1billion, but there was a risk of a 'negative tax yield'. Lib Dem leader Nick Clegg defended the non-dom rule, saying it allowed people to come to Britain, some of whom were not 'massively rich'. Simon Walker, of the Institute of Directors, said: 'It's very unclear what additional revenue would be raised, but the UK's international reputation would be put at risk.' Nicholas Leeming, of estate agents Jackson-Stops, said: 'The Labour Party is out to target the wealth creators in this country and will effectively close down London to international businesses and investors.'
Experts warn Ed Miliband's changes for non-doms would cost millions.
The Labour leader initially suggested he would abolish non-dom status.
But it later emerged he is effectively only proposing a time limit on it.
It allows those with foreign links to be taxed only on money entering Britain.