UK exit tax: Will Rachel Reeves make wealthy Britons pay to leave the country?

The UK government is reportedly weighing a major new tax reform that could reshape how wealthy Britons handle their money when moving abroad. According to The Times, Chancellor Rachel Reeves is considering introducing a “UK exit tax” formally known as a “settling-up charge” that would require wealthy individuals leaving the country to pay a 20% tax on their business assets.

The proposal aims to align Britain’s tax system with other G7 nations and could generate an estimated £2 billion in additional revenue for the Treasury.

What Is the UK Exit Tax?

Under the current rules, British expats must pay 20% capital gains tax (CGT) when selling UK property valued above £6,000. However, other types of assets — such as company shares, investments, or business holdings — are often exempt once an individual becomes a non-resident.

The new exit tax would close that gap. It would apply to the value of assets at the moment a person leaves the UK, effectively taxing unrealized gains before relocation.

This change would bring the UK closer to systems already in place in countries like Canada and the United States, where expatriation taxes are common.

Why Is the Exit Tax Being Considered?

Experts say the Rachel Reeves tax plan is designed to prevent tax avoidance and capital outflows. Currently, wealthy residents can move to low-tax jurisdictions such as Dubai or Monaco, sell their UK assets, and avoid paying capital gains tax altogether.

James Smith, Research Director at the Resolution Foundation, told The Times that the reform would “ensure fairness and protect the UK tax base.” However, he also warned that early announcements without immediate enforcement could lead to capital flight, as investors rush to move their funds before the rule takes effect.

Flexibility for Investors

Reports suggest that the settling-up charge may include a deferred payment option, allowing individuals to postpone paying the tax for several years if they don’t want to liquidate assets immediately.

At the same time, the Treasury is said to be considering a tax exemption for gains made before an individual arrived in the UK. This would ensure the policy is balanced, fair, and possibly even attractive to foreign investors considering relocating to Britain.

The Government’s Position

The UK Treasury has so far declined to comment on the proposal. Sources inside the department note that the exit tax is one of several tax reform options being explored ahead of the next UK budget.

If implemented, the move would mark a significant shift in Britain’s approach to taxing high-net-worth individuals — ending its status as one of the few G7 nations without an exit tax.

What It Means for British Expats and Investors

For British expats, the proposed UK exit tax could mean paying capital gains on shares, business assets, or other investments before leaving the country — even if those assets aren’t sold right away.

While the measure could increase government revenues, it may also discourage wealthy individuals from moving their residency or investments out of the UK.

Whether this plan becomes law or not, it signals that Rachel Reeves and the Labour government are serious about tightening capital gains tax rules and ensuring that those who benefit from the UK economy contribute their fair share — even when they decide to leave it behind.

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