UK exit tax: could one be introduced in the Autumn Budget?

As the Autumn Budget approaches, one proposal that could be under consideration is a new tax on individuals who leave the UK while owning assets that have increased in value but haven’t yet been sold– referred to as an ‘exit tax’.

Why might an exit tax be introduced?

The Chancellor, Rachel Reeves, is under pressure to raise revenue. At the same time, there’s concern about the erosion of the UK tax base as individuals relocate overseas, particularly following changes to the non-dom regime.

Currently, individuals who become non-resident can often avoid UK capital gains tax (CGT) on gains made while they were UK resident, provided they dispose of assets after leaving. Although there are rules to catch individuals who are only temporarily non-resident.

In the run-up to the 2024 Autumn Budget, the Centre for Tax Policy (CenTax) published a report highlighting the issue. It argued that the UK is unusual among major economies in not having a CGT exit tax, even when emigration isn’t tax-motivated. The report proposed a model known as ‘rebasing on arrival and deemed disposal on departure’ (ROA-DDD), which would tax gains made while UK resident and exempt gains made before arrival.

The Resolution Foundation has also supported the introduction of CGT exit charges. In its Revenue and Reform report published in September 2024, it recommended taxing capital gains when individuals move country, as part of a wider package of reforms to make the tax system fairer.

The idea of an exit tax was raised again by Labour MP Connor Naismith, in an article on PoliticsHome, in which he noted that countries such as Australia, Canada and the USA already levy exit taxes on individuals who emigrate with significant assets.

What might a UK exit tax look like?

An exit tax for individuals could draw on the existing rules for trusts or companies that cease to be UK tax resident. For example, under the rules for trusts, a trust is deemed to dispose of all its assets (subject to some exclusions) and immediately reacquire them at market value before ceasing to be UK resident, with any resulting gains subject to CGT.

For individuals, the ROA-DDD model proposed by CenTax would work by:

• Individuals arriving in the UK having their assets rebased to market value at the date of arrival, so that any gains made before becoming UK resident are not taxed, and
• Individuals leaving the UK being treated as having disposed of their assets at the end of their final year of residence, bringing into CGT all gains accrued while UK resident – even if the assets haven’t actually been sold.

If an exit tax is announced in the Budget, we’ll be looking for further detail on:

• Whether it will apply to all assets or whether some will be exempt,
• Whether there will be an option to defer payment (for example, until the asset is actually disposed of),
• What anti-avoidance rules will be introduced to ensure the measure works as intended, and
• How the new charge will interact with existing CGT rules and international tax treaties.

It’s worth noting that non-residents are already subject to UK CGT on disposals of UK land and property.

The introduction of a wider exit tax would have implications for internationally mobile individuals including entrepreneurs and high net worth families.

What could individuals consider doing?

While we don’t yet know whether an exit tax will be announced in the Budget, those considering a move overseas may wish to:

• Review their assets to identify those with significant unrealised gains and assess how these might be affected if an exit tax is introduced,
• Think about accelerating disposing of assets they already plan to sell, to avoid potential future dry tax charges,
• Consider whether holding assets through a trust or corporate structure could be beneficial, and
• Subscribe to receive our Budget analysis and register for one of our Budget events to stay informed about any developments.

How we can help

If you’re considering a move overseas, or you’re concerned about the potential impact of an exit tax, we can:

• Review your current position and advise on the potential impact of a new exit tax, including planning opportunities and risk mitigation, and
• Help you with the structuring and timing of asset disposals.

If you’d like to discuss any of the above, please speak to your usual Saffery contact or get in touch with Alexandra Britton-Davis.

Disclaimer

We will not know until 26 November whether this change will be introduced. This article is based on potential impacts and should not be relied on as financial or legal advice. Acting solely on anticipated tax changes could leave taxpayers worse off. For guidance tailored to your circumstances, please consult a qualified professional.