The UK government is examining the introduction of a new departure tax that would apply to wealthy individuals who move their tax residency out of the United Kingdom. According to reporting in The Times, Chancellor Rachel Reeves is considering a “settling-up” charge that would tax unrealized capital gains on certain business and investment assets held by high-net-worth individuals at the time they leave the UK.
The measure is being reviewed as part of the Treasury’s broader effort to protect long-term tax revenues and ensure that individuals who benefited from the UK’s financial environment and markets contribute tax on gains accrued while they were resident. Treasury officials have discussed the possibility of allowing payment to be deferred over several years to avoid liquidity issues for individuals whose wealth is tied up in company shares or privately held assets.
How the Proposed Charge Would Work
As reported, the structure being evaluated would operate as follows:
● When a high-net-worth individual changes tax residency, they would be considered to have disposed of certain assets for tax purposes at that moment.
● Any capital gain that accrued while the individual was a UK resident would be subject to capital gains tax (CGT) at the standard rate, currently 20% for most investments.
● The tax would apply whether or not the asset is sold at the time of departure, meaning it would target unrealized gains.
● Treasury officials have indicated that individuals may be permitted to defer payment over several years, depending on the asset class and liquidity.
At present, many individuals who leave the UK can sell certain non-UK assets after relocating and avoid UK capital gains tax, provided they remain non-resident for at least five full tax years. However, any gains on UK property are still taxable even after leaving, and the Temporary Non-Residence Rule can apply if the individual returns to the UK within that five-year period, potentially bringing gains back into the UK tax net. The proposed reform would seek to close this gap by taxing gains that were built up while the person was living in the UK, before they move their tax residency abroad.
Alignment With International Practices
If implemented, the measure would bring the UK closer to several other G7 and OECD countries that already impose exit taxation on departing residents. Most G7 nations have some form of departure-based capital gains system, with the exception of Italy, which currently does not apply an exit tax to individual residents.
The Times reports that the Treasury has modeled the potential revenue impact, estimating that the measure could generate around £2 billion in additional tax receipts over time.
Reactions in the Financial and Business Community
The proposal has prompted a range of responses from economic researchers and tax policy specialists.
According to commentary reported by Gulf News, James Smith, Research Director at the Resolution Foundation, noted that the UK has precedent for applying taxes at the point of exit but cautioned that the timing of implementation would be critical. He warned that if the measure were announced but not enacted immediately, high-net-worth individuals could accelerate relocation plans, resulting in capital flight rather than increased revenue.
Smith also explained that a “settling-up” charge would ensure that gains generated in the UK are taxed in the UK, even if the individual later moves to a lower-tax jurisdiction.
Tax policy scholars note that Brexit has made such a policy more workable. Before leaving the European Union, the UK was constrained by EU rules on freedom of movement, which limited the legality of broad exit taxes. Professor Andy Summers, of the Centre for Analysis of Taxation, stated that those restrictions no longer apply, meaning the UK could adopt models already used in Australia, Canada, and several EU states.
The UK Treasury has declined to confirm whether the measure will appear in the upcoming Budget, but stated that it remains committed to ensuring fairness in the tax system while maintaining the UK’s competitiveness as a destination for investment and business.
Current Status
It is important to note that no legislation has been published, and no final decision has been announced. The measure remains under review within Treasury discussions ahead of the Autumn Budget 2025.
Until formal guidance or draft legislative text is released, the existing UK capital gains tax rules continue to apply.
Final Take
This proposal is not law yet but the signal matters. By considering a tax on unrealized gains at departure, the UK is indicating that long-term wealth mobility planning is becoming more scrutinized. For globally mobile investors, founders, and family offices, the timing of moves, asset structuring, and residency strategy now matters more than ever. The question is no longer just whether the tax is introduced, but how wealthy individuals respond before it is.
