Exit tax regimes – Could these be coming to the UK?

Recent media coverage has publicised the possibility of a new tax on people who leave the UK, calling it an “exit tax”.

This type of regime already exists in several countries, including France, Spain, Canada and Australia, and is now being discussed as a possible option for the UK Government to raise revenue.

What is an exit tax?

An exit tax in the UK would impose a levy, likely 20 per cent, on gains accumulated while a person was a UK tax resident.

Unlike Capital Gains Tax (CGT), which applies to assets when you sell them, a regime like this could mean assets, such as shares and property, could be treated as though they had been sold at the point a person leaves the UK.

Tax would then be calculated on the increase in value to date.

What is the current tax situation when you leave the UK?

Currently, individuals who leave the UK can typically dispose of assets after departure without incurring UK CGT, as long as they remain abroad for a minimum of five years.

However, a move towards a more immediate exit tax could have a consequential impact on those considering a change in residence, potentially restricting international mobility.

How could an exit tax affect you?

Business owners would need to take extra care because shareholdings in trading companies, growth shares and other long-term investments may carry unrealised gains.

An unexpected tax charge at the point of departure could prove challenging, particularly where assets are difficult to sell, as the individual may not have the cash available to settle the bill at that time.

What should you do now?

At this point in time, there is no certainty as to whether an exit tax will even be introduced or what it might entail, making it difficult to effectively plan.

However, the ongoing discussions serve as a reminder that decisions around residence, investment timing and business succession should be made carefully, with future implications in mind.

Professional advice can help ensure that long-term plans remain in tandem with your goals. Get in touch today to discuss your tax liabilities.