As the Autumn Budget approaches, one of the tax-measures that may come into focus is the potential introduction of an “exit tax” for individuals who relinquish UK tax residence whilst holding assets that have appreciated in value but remain unrealised. This concept has gained traction amid growing concern about the erosion of the UK tax base when high-net-worth individuals depart the UK, particularly in the wake of recent changes to the non-dom rules.
Currently, when individuals become non-resident in the UK, they may avoid UK capital gains tax (CGT) on gains accrued while UK resident, provided the assets are disposed of after becoming non-resident, and certain temporary non-residence rules apply. The proposed exit tax would alter this dynamic by treating the departure of a UK resident as a de facto disposal of assets (or otherwise taxing gains) even if no actual sale has occurred.
Why the Government Might Introduce an Exit Tax
There are several inter-linked drivers behind the suggestion of an exit tax. One is the pressure on the Chancellor to raise additional revenue. Simultaneously, there is growing focus on what is often described as base-erosion: when individuals relocate overseas, their unrealised gains may escape UK taxation entirely. Reports such as one by the Centre for Tax Policy (CenTax) highlight the fact that the UK is unusual among major economies in lacking a CGT-style exit tax for emigrants. The model they propose involves a “rebasing on arrival and deemed disposal on departure” regime (ROA-DDD).
Another impetus comes from external commentary such as by the Resolution Foundation, which has suggested that taxing gains when individuals move country could form part of a wider package of tax reforms intended to improve fairness in the system. Some MPs have also raised the subject, noting that comparable jurisdictions (for example Australia, Canada or the USA) already impose forms of exit tax on individuals leaving with significant assets.
Given these pressures, the possibility of an exit tax being announced in the upcoming Budget cannot be discounted. However, as with all proposed tax changes, the detail will matter and until legislation is drafted, it remains subject to change.
What an Exit Tax Might Look Like in Practice
If the UK introduces an exit tax, it may draw on existing rules that apply to trusts or companies that cease UK residency. For example, under certain trust rules, a trust is deemed to dispose of its assets (with some exceptions) at the point it permanently ceases UK residence, bringing any gains into charge.
For individuals, one model under consideration is the ROA-DDD approach. Under this we might see two key features. First, when a non-resident individual arrives in the UK, their assets could be rebased to market value at the date of arrival, meaning any pre-UK gains would escape UK tax. Second, when an individual departs the UK, their assets could be treated as if disposed of (even if they are not sold) at the date of their final year of residence, so that any gains built up while UK resident fall within UK CGT.
In effect, this means that gains made while UK resident could become taxable even if the assets are never physically sold before the move overseas. Additional matters under consideration include whether the tax would apply to all assets or only certain categories, whether payment could be deferred pending actual sale of the asset, what anti-avoidance provisions would be included, and how the rule would interact with existing CGT regimes and double-taxation treaties.
It is already the case that non-residents are subject to UK CGT on disposals of UK real estate, but broadly a wider exit tax would extend the reach significantly, especially for mobile individuals, entrepreneurs and families with cross-border wealth.
Implications for Internationally Mobile Individuals
For individuals considering emigrating, or for those who already hold assets with significant unrealised gains, the emergence of an exit tax poses important planning questions. Firstly, there is the risk that a future tax charge could apply retrospectively, or at least apply from the date of departure, even though the asset has not been monetised. That means the timing of a move, or of disposing of an asset, could have material tax implications.
Secondly, if assets continue to be held through trusts or corporate structures, the design of these vehicles may affect whether and how the exit charge applies. Structuring issues such as whether the asset is held personally, within a trust or within a company may therefore require early review. Thirdly, individuals should consider whether accelerating disposal of certain assets, particularly ones with large unrealised gains, makes sense before any new tax becomes law (bearing in mind the usual risks of acting on impending changes).
Another implication is that standard expatriation planning may need to be revised. Where previously leaving the UK might have allowed deferral or avoidance of UK CGT, the proposed exit tax would close this route. For high-net-worth individuals and families with international mobility, the planning window may be narrowing.
What You Should Be Considering Now
While it is not yet confirmed that the exit tax will be introduced, there are proactive steps worth taking. Review your asset portfolio and identify assets with significant unrealised gains, especially those that may be held personally rather than through structures. Consider whether a move overseas is on the horizon and assess how that might trigger a tax event under a possible new regime. Evaluate your ownership structures – are assets held within trusts or companies? How might those interact with exit taxation?
Even if you are not planning to depart the UK imminently, the mere possibility of new rules means now is a good time to revisit your long-term tax planning. Engage with your advisors to understand the potential impacts and to assess options such as early disposal or restructuring, while being mindful that acting too hastily in response to anticipated tax changes can carry its own risks. Legislation may change, timing may shift, and unintended consequences may arise.
In Summary
The idea of a UK exit tax is gaining serious attention as the Autumn Budget approaches. Though the measure is not yet confirmed, the thinking behind it reflects concerns about revenue, fairness and the integrity of the UK tax base. For internationally mobile individuals and families with substantial unrealised gains, the potential implications are significant: moving overseas may no longer provide a clean tax break on assets built up while resident. The design of ownership structures, the timing of departure, and the way assets are held all matter. Early review and planning therefore remain key, even in the absence of a final announcement.
How We Can Help
At Williamson & Croft, our team specialises in advising internationally mobile individuals, families and their advisers on UK tax planning, residence issues and cross-border wealth structuring.
We can help you review your current position in light of the potential exit tax, identify assets at risk, evaluate structuring options, and design a forward-looking plan that aligns with your
Let us help you stay ahead of the curve and protect your interests as the UK tax regime evolves. Get in touch today.