Renewed political debate about taxing wealth has prompted speculation that the UK could introduce an exit tax, sometimes described as an “exit charge” or “settling-up charge”. The UK does not currently impose a general Capital Gains Tax (“CGT”) exit charge on individuals who cease to be UK resident. Leaving the UK does not, by itself, normally cause an individual to be treated as disposing of all their assets at market value.
That position could very well change. An individual exit charge was considered ahead of the 2025 Budget and has subsequently featured in evidence before the Treasury Committee, although it was not ultimately adopted. For UK residents holding assets with substantial unrealised gains—particularly founders, entrepreneurs and private-company shareholders—the introduction of a UK exit tax could be highly significant.
Does the UK Currently Have an Exit Tax?
There is currently no general UK exit tax for individuals. Ordinarily, an individual who ceases to be UK resident is not treated as selling their assets merely because they leave the UK. However, several existing rules can still impose UK tax during or after a move abroad. Anyone considering leaving the UK should therefore obtain advice before changing residence, disposing of assets or extracting funds from a company.
Existing UK Tax Traps When Moving Abroad
1. Temporary non-residence and Capital Gains Tax
An individual who disposes of assets while temporarily non-UK resident may become liable to CGT if they subsequently return to the UK within the relevant period. These rules can apply where someone leaves the UK, realises gains while living in a lower-tax jurisdiction and then returns. The precise result depends on matters including the person’s residence history, the length of their absence and the type of asset disposed of.
2. Non-resident CGT on UK property
Non-UK residents can remain liable to CGT on disposals of UK residential and commercial property. The charge may also apply to certain indirect disposals, including interests in entities whose value is derived principally from UK land. Rebasing rules may limit the taxable gain in some circumstances, but they must be applied carefully.
3. Temporary non-residence and company distributions
Special rules may apply where a shareholder receives dividends or other distributions from a closely controlled company while temporarily non-resident. Depending on the circumstances, those distributions can be brought into charge when the individual returns to the UK. Moving abroad before extracting retained profits from a UK company therefore requires particularly careful planning.
4. The existing corporate exit charge
The UK already has an exit-charge regime for companies. Under section 185 of the Taxation of Chargeable Gains Act 1992, a company that ceases to be UK resident may be treated as disposing of certain assets at market value. Exit-charge payment plans may be available under Schedule 3ZB to the Taxes Management Act 1970. This corporate regime is separate from the possible introduction of an exit tax for individuals.
What Could a UK Exit Tax Look Like?
A number of countries already impose exit taxes on individuals. Canada, Australia and South Africa use relatively broad deemed-disposal models. France and Germany have more targeted regimes, focusing principally on substantial shareholdings. The United States applies a different form of expatriation tax to certain individuals who relinquish US citizenship or terminate long-term permanent residence.
If the UK adopted elements of the broader models, a UK exit tax might operate as follows:
- When an individual ceased UK tax residence, specified assets would be treated as sold and immediately reacquired at market value.
- CGT would be calculated on the unrealised gain that had accrued up to the exit date.
- Existing CGT exemptions and reliefs might apply, although new legislation could restrict them.
- The applicable rate could follow the prevailing CGT rate or be set at a separate exit-tax rate.
- Payment might be due immediately or deferred until the asset was actually sold, potentially subject to interest, security or reporting requirements.
A properly designed exit-tax regime would also need to address:
- minimum asset-value or gains thresholds;
- exemptions for pensions, homes and other specified assets;
- relief for short-term UK residents;
- rebasing for assets acquired before UK residence began;
- the treatment of trusts and jointly held assets;
- losses and subsequent falls in value;
- payment deferral for illiquid assets;
- double-tax relief; and
- the interaction with the UK’s double-tax treaties.
Could a UK Exit Tax Be Introduced Without Warning?
There is a genuine risk that a future UK exit tax could include anti-forestalling provisions. Anti-forestalling rules prevent taxpayers from acting between the announcement of a measure and its formal commencement. They have become a regular feature of UK tax legislation.
A future exit charge could therefore apply from the date of a Budget announcement or another specified date, rather than from the beginning of the following tax year. Whether that would happen—and whether earlier transactions or residence changes would be protected—would depend entirely on the legislation.
Would Split-Year Treatment Prevent an Exit Charge?
Not necessarily. Under the UK Statutory Residence Test, an individual is legally either UK resident or non-UK resident for the tax year as a whole. Where split-year treatment applies, the year is divided into a UK part and an overseas part for specified tax purposes.
During the overseas part, the individual is normally taxed as though non-UK resident for many Income Tax and CGT purposes. Consequently, gains realised during that part are often outside UK CGT, subject to important exceptions. These include temporary non-residence, disposals of UK land, gains attributed from certain trusts or companies; and other anti-avoidance provisions.
However, split-year treatment would not necessarily prevent a future exit charge. New legislation could define the taxable event by reference to the start of the overseas part, the end of the tax year, treaty residence, the date the individual physically leaves the UK; or a separately defined migration date. The protection offered by split-year treatment would therefore depend on the wording of any new exit-tax legislation.
What Can You Do If You Are Considering Leaving the UK?
Individuals considering ceasing UK residence should review their position before moving or disposing of assets. Relevant steps may include:
- confirming whether split-year treatment will apply and establishing the precise split-year date;
- documenting the acquisition cost and current market value of material assets;
- reviewing unrealised gains and available CGT reliefs, in particular, SEE;
- examining proposed share sales, dividends and company distributions;
- considering the temporary non-residence rules and exposure to non-resident CGT on UK property;
- considering continuing UK Inheritance Tax exposure;
- checking the relevant double-tax treaty; and
- assessing tax and reporting obligations in the destination country.
Planning must take account of the law in force at the relevant time. Leaving the UK quickly in response to rumours can create unexpected tax liabilities and may not protect against anti-forestalling legislation.
Frequently Asked Questions
Is there currently an exit tax for individuals leaving the UK?
No. The UK does not currently impose a general deemed disposal exit tax on individuals who cease UK residence. Existing CGT, company rules, temporary non-residence and anti-avoidance rules may nevertheless apply.
Could the UK introduce an exit tax?
Yes. The concept has been considered in policy discussions, although no general individual exit tax has yet been enacted.
What assets could a UK exit tax cover?
Depending on its design, it could cover business shareholdings, quoted shares, investment funds and other assets carrying unrealised gains. Pensions, homes or assets below a threshold might be excluded, but this cannot be assumed.
Would the tax apply to the entire value of an asset?
A conventional exit tax would normally apply to the unrealised gain rather than the asset’s entire value. For example, if shares purchased for £1 million were worth £5 million upon departure, the potential taxable gain would ordinarily be £4 million.
Can split-year treatment protect gains realised after leaving the UK?
It can protect some gains realised during the overseas part of a qualifying split year. It does not protect every gain, and it cannot be assumed to provide protection against a future exit-tax regime.
Can someone avoid CGT by leaving the UK temporarily?
No. Temporary non-residence rules can bring certain gains and company distributions into charge if the individual returns to the UK within the relevant period.
Specialist Advice on Leaving the UK
Ceasing UK tax residence requires careful planning, particularly for founders, entrepreneurs, company shareholders and individuals holding assets with significant unrealised gains. Rebecca Sheldon has significant experience advising on UK tax residence, split-year treatment, temporary non-residence and the taxation of individuals leaving the UK. She can be instructed directly, through licensed access or through solicitors.