Understanding the UK’s Possible Exit Tax and What It Could Mean for You?

As the Autumn 2025 Budget draws closer, Chancellor Rachel Reeves faces a tough challenge: a huge hole in the UK’s finances that urgently needs to be filled. With the pressure on to raise revenue, rumours are flying about possible tax changes, and one idea in particular is making headlines: the so-called “Exit Tax.”

The idea behind this proposed tax is simple but controversial. It would target people who move their tax residence out of the UK, potentially taxing them on the gains from assets like property, shares, or business interests as if they had sold them before leaving. In other words, it could mean paying tax just for moving abroad.

For anyone with significant assets, business ownership, or plans to relocate to lower-tax jurisdictions, this rumour is one to take seriously. It highlights a growing focus on ensuring wealthy individuals and business owners continue to contribute to the UK’s tax base even after they leave.

What Is the UK’s Proposed Exit Tax?

Imagine you have a valuable stamp collection. You've owned it for years, and its value has soared. If you sell it while living in the UK, you’d pay Capital Gains Tax (CGT) on the profit.

In some cases, individuals with significant assets such as ownership stakes in a business or valuable collections may choose to change their country of residence before selling those assets. Depending on the tax rules of each jurisdiction, this can affect whether and how capital gains are taxed. While such arrangements can influence the timing and location of tax liabilities, any benefits are typically limited to specific circumstances and time frames.

If introduced, the Exit Tax could significantly reshape how Capital Gains Tax (CGT) works. It is like a "settling-up charge" levied on you as you leave the UK. Essentially, the government’s position would be: “Your asset has gained value while you were a UK resident, and you are required to pay tax on that unrealised gain before you leave.”

Current speculation points to a 20% tax on the increase in value (the gain) of certain business assets such as shares in a UK company for individuals relocating to low-tax jurisdictions.

Unlike traditional Capital Gains Tax, which is paid when an asset is sold, this proposed charge would apply at the point of departure. In other words, you could be taxed on unrealised gains before you even sell the asset which is a major and potentially costly shift.

 Why the UK Government Is Considering an Exit Tax

One of the objective of the proposed UK Exit Tax would be to ensure that wealthy individuals pay their "fair share" of Capital Gains Tax (CGT) on the value built up while they were UK residents, thereby capturing lost tax revenue and disincentivizing the growing trend of business owners leaving the country to sell their assets tax-free in a lower-tax jurisdiction.

Critical need for the Treasury to secure new revenue streams to close the substantial deficit in the public finances, as this specific charge targets wealth that would otherwise escape the UK tax system entirely, providing a means of bolstering the national accounts without breaking manifesto promises on core taxes.

 Key Challenges and Risks with the UK’s Exit Tax

 While it sounds simple, an Exit Tax creates some big headaches:

·      How do you pay an exit tax on an asset you haven’t actually sold? For many, this could create serious cash flow problems potentially forcing business owners to sell part or all their companies just to cover the tax bill. The government might offer some form of deferral option to delay payment, but that would likely add another layer of complexity and uncertainty.

·        How do you accurately determine the value of a private company’s shares or a complex business asset at the exact moment someone leaves the UK? It’s far from simple. Valuing private or illiquid assets could pose a significant challenge, leading to disputes, delays, and plenty of uncertainty.

·        Critics say the proposed tax sends the wrong message: “Welcome to the UK, just don’t expect to leave without a hefty bill.” Such a policy could make the   UK far less appealing to entrepreneurs, investors, and internationally mobile professionals who value flexibility and tax stability.

·        If you pay an Exit Tax when leaving the UK but your new country also taxes you when you eventually sell the asset, you could end up being taxed twice.   Without updates or renegotiations to existing tax treaties—a process that’s slow and complex—this risk could become a real concern for anyone moving     abroad.

 Strategic Steps to Protect Yourself Before the Exit Tax Arrives

At this stage, nothing has been officially confirmed. However, when new tax measures are announced, they often take immediate effect to prevent a rush of people acting before the rules change. In practice, this means that if an Exit Tax is introduced in the Budget, there may be very little time to prepare or act before it becomes law.

Confirm Your Tax Status: Check your UK tax residency for the current year. Timing is critical under the complex Statutory Residence Test, so a specialist can help optimise your departure.

Review Your Assets: Identify any business assets, such as UK company shares, with significant unrealised gains and estimate the potential tax liability if Exit Tax were applied.

Explore Alternatives: If an Exit Tax is introduced, selling assets before leaving may be simpler. You’d pay the standard CGT rate, but the liability is clear, and the proceeds are available to cover it.

The UK government has proposed the introduction of an Exit Tax, representing a potential change to the current tax framework. If implemented, this measure could have significant implications for individuals and businesses, regarding cross-border moves, asset disposals, and long-term financial planning. The proposal may have implications for the timing and application of tax obligations, which could be relevant for investment and wealth management considerations.

 How Water & Shark Can Support You Through These Changes

 At Water and Shark, we support clients in navigating potential tax changes, evaluating their liabilities, and planning strategically to manage risk. Our team can   provide guidance on residency rules, asset valuations, and structuring considerations, helping clients make informed decisions and plan with greater clarity in  anticipation of any upcoming changes.

 FAQ: UK’s Proposed Exit Tax

 1.  What is the UK’s proposed exit tax?

 2.  Who will be affected by this tax?

 3.  Why is the UK considering an exit tax?

 4.  Has the exit tax been implemented yet?

       Not yet. It’s still under review. The UK government is consulting on how and when it could be introduced.

 5.  How can you prepare for potential changes?

       Review your asset structure, seek professional tax advice, and plan ahead if you’re considering relocating or restructuring internationally.