How the UK Exit Tax Proposal Could Introduce a 20% Charge for Individuals and Businesses

The proposed UK exit tax is a one-off charge, reported at around 20%, on unrealised gains in UK business and investment assets when an individual ceases to be UK tax resident. It remained a proposal only as of September 2026 — not yet law — and some reports suggest it may have been scaled back or not taken forward, though it has not been definitively ruled out in all forms. Anyone considering leaving the UK should therefore monitor Budget statements and official guidance before acting.

Chancellor Rachel Reeves has reportedly been considering a 20% “exit tax” that would apply to high-net-worth individuals (HNWIs) leaving the UK. This UK exit tax proposal would target unrealised gains on business and investment assets acquired while an individual was a UK resident. The exit tax is being discussed as part of the 2025 Budget to help cover the UK’s growing fiscal deficit.

This exit tax would impose a capital gains tax (CGT) on unrealised gains for individuals who have been UK residents and then decide to emigrate or relocate their tax residence. Such a move aims to prevent the avoidance of UK tax when wealthy individuals move their assets abroad without paying tax on the value appreciation that occurred during their time as UK residents.

What is an Exit Tax?

An exit tax is a tax that countries impose on individuals or businesses when they leave the country and cease to be tax residents. Specifically, it taxes the unrealised gains (the increase in the value of assets, such as shares, businesses, or real estate) that have occurred during the time the individual was a resident.

Exit taxes are designed to stop people from leaving a country and selling assets in a way that avoids leaving UK capital gains tax liabilities on gains that built up while they were UK residents.

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Why Might the UK Exit Tax Proposal Introduce?

The UK is facing an economic challenge, and the government needs new ways to generate revenue. Here are some reasons why the 20% exit tax UK is being considered:

1. Raise Revenue

Supporters believe the exit tax could raise around £2 billion for the Treasury by taxing unrealised gains when individuals leave the country. This would help protect the UK’s tax base and prevent individuals from avoiding capital gains tax by emigrating.

• Wealthy individuals can avoid UK CGT by simply moving abroad and holding onto appreciating assets without selling them.

2. Align with International Norms

Other countries, such as France, Canada, and the United States, already impose exit taxes on individuals when they leave. Advocates for the UK exit tax suggest that the UK should adopt a similar approach to maintain consistency with global standards and prevent wealthy individuals from leaving without paying their fair share of tax. 

3. Prevent Tax Avoidance

The exit tax is considered a tool to curb tax avoidance by wealthy individuals who may otherwise leave the country and avoid paying tax on large capital gains. By taxing unrealised gains, the UK government can ensure that these individuals pay tax on their assets while they are residents.

Why is the 20% Exit Tax UK Controversial?

While the proposal aims to raise revenue, critics argue that it could have significant negative consequences. Here are some key concerns:

1. Possible Exodus of Wealth

Business leaders, investors, and tax advisers have warned that even the discussion of an exit tax could encourage wealthy individuals to leave the UK earlier than planned. The concern is that if the tax is introduced, many individuals might accelerate their exit plans to avoid being taxed. This could lead to a reduction in investments in the UK.

2. Practical Challenges in Valuing Assets

One of the major challenges of implementing an exit tax is how to fairly value assets, especially privately held businesses or illiquid investments. Determining the market value of these assets when an individual exits the UK can be complex and subjective. There are concerns that such an approach could create administrative burdens and disputes.

3. Impact on the UK’s Competitiveness

Imposing an additional tax burden on high-net-worth individuals may discourage entrepreneurs from investing in the UK or starting businesses here. The UK already has high corporate tax rates and the highest personal tax burden in decades. An exit tax could send the signal that the UK is no longer a hospitable place for wealth creators.

What the proposal would mean in practice

If the reported 20% exit charge were introduced, it would work as a deemed disposal when an individual ceases to be UK tax resident: unrealised gains on relevant business and investment assets would be treated as if sold at market value, triggering a Capital Gains Tax–style charge. Early reporting suggested the rate would be around 20% on those gains, with the possibility of deferring payment (for example, via instalments or until the assets are actually sold), rather than requiring the full amount immediately.

Worked example: 

A UK‑resident business owner holds shares in their trading company with a base cost of £100,000 and a current market value of £500,000, giving £400,000 of unrealised gains. On ceasing UK residence under the proposal, those gains could be taxed at about 20%, implying a potential exit charge of around £80,000. Depending on the final rules, the owner might be able to defer payment – for instance, spreading it over several annual instalments or paying only when the shares are eventually disposed of – subject to interest and anti‑avoidance conditions.

What Will Be Taxed?

The exit tax would primarily target assets held by high-net-worth individuals that have appreciated in value during their time as UK residents. These could include:

• Business assets (such as shares in private companies)
• Real estate (if applicable)
• Investment assets (stocks, bonds, etc.)

The tax would likely apply when the individual departs the UK, making leaving UK capital gains tax planning particularly important. Their assets could be deemed to have been sold, with tax charged on capital gains accrued during their UK residency.

How Can Apex Accountants Help?

At Apex Accountants, we specialise in helping individuals and businesses navigate complex tax changes and plans. Our services include:

• Tax Planning – We assess your current tax position, reviewing your assets and potential exposure to an exit tax.
  
• Residency & Structuring Advice – We guide you on residency status, structuring your assets in a tax-efficient manner.
  
• Cross-Border Tax Advice – We offer advice on managing your global tax liabilities when relocating or moving assets across jurisdictions.
  
• Budget Monitoring – We stay on top of legislative changes, advising on the best timing for asset disposals or relocation to minimise tax exposure.

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Call Anytime 0203 883 4777

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Conclusion

The proposed 20% exit tax is still under consideration, but it marks a significant change in how the UK may treat wealthy individuals who decide to leave the country. The tax aims to address tax avoidance and boost revenue, but it may also lead to unintended consequences such as driving capital away from the UK and discouraging investment. As the UK’s tax system evolves, it is crucial for high-net-worth individuals and businesses to seek professional tax planning and inheritance tax planning services and advice to plan ahead.

FAQs About UK Exit Tax Proposal

1. When Would the Exit Tax Take Effect?

The exit tax is now understood to be a reported proposal only, initially discussed around the November 2025 Budget but not enacted, with later reporting suggesting it may have been scaled back or not taken forward for individuals. If introduced in future, any start date would depend on the legislative process and government decisions, typically aligning with a specified date in the Budget or the start of a tax year.

2. What Assets Are Exempt From UK Exit Tax?

Typically, primary homes and pensions are exempt from UK exit taxes in many countries. While the UK may follow this pattern, the specifics remain uncertain until the final rules are released.

3. How Can I Prepare for the Exit Tax?

To prepare, review assets with unrealised gains, consider restructuring through trusts or offshore entities, and seek advice on residency status and cross-border tax liabilities to mitigate exposure.

4. Which Countries Have an Exit Tax?

Countries such as France, Canada, the US, and Australia have exit tax regimes that tax unrealised gains when individuals leave, preventing capital gains avoidance by emigrants.

5. How Is an Exit Tax Calculated?

The exit tax would likely calculate gains on the market value of assets at departure, taxing those gains accrued during UK residency. Deferrals may apply under certain conditions.

6. Are There Any Deferrals or Exemptions?

Some countries allow deferrals or exemptions for certain assets like primary homes or pensions. While the UK may follow a similar approach, this is not confirmed yet.