Wealthy Brits who want to move abroad could soon be hit with a punishing new tax raid if the government follows a trend seen across other nations.
It follows growing calls for an “exit tax” – a one-off charge on the assets of high-net-worth people who quit the UK – in a move already sweeping through high-tax European countries such as Germany, Norway and Belgium.
The proposals are designed to stop the country’s top earners from dodging tax by relocating to low-tax havens like Monaco, Switzerland or Dubai.
Germany slaps departing residents with an exit tax on unrealised capital gains at a rate of around 27%. Norway imposes a 38% charge, while the Dutch government is considering a similar system to curb its own millionaire exodus.
Now there are fears that Chancellor Rachel Reeves could introduce the same tactic in Britain. And more people could flee abroad if she pushes ahead with plans to hike capital gains tax (CGT) rates.
Experts say pressure is mounting amid claims that an exodus of the rich from the UK is gathering pace.
New figures from Henley & Partners predict that 16,500 millionaires will leave Britain in 2025 – up 53% from the 10,800 who fled last year. However, these figures have been rejected by the Tax Justice Campaign, which insists claims of an exodus are bogus.
Think tanks and economists have urged the UK Government to act. In September, the left-leaning Resolution Foundation – which has close ties to Labour – demanded that emigrants be forced to pay a CGT bill before they leave.
It said: “An Australian-style exit charge should be introduced that levies capital gains tax when people move out of the country.”
At present, wealthy people can avoid CGT on UK assets simply by moving abroad for more than five years.
Chris Etherington, of accountancy group RSM told the Telegraph: “An ‘exit charge’ on people may be something that is looked at by the Treasury in the future, but it’s unlikely to be high up on the agenda at the moment.
“There will always be some people who wish to move overseas, but the vast majority of business owners do not wish to do so and are satisfied with paying capital gains tax at the current rates.
“However, that could change if capital gains tax rates were pushed up higher, as it might prompt more people to move abroad, with calls for an exit charge likely to increase as a result.”
Mr Etherington noted that Britain has historically resisted such punitive tax traps because governments were less concerned about the wealthy leaving.
But critics warn that could shift under Ms Reeves if tax revenues begin to fall due to a growing flight of entrepreneurs, investors and high earners.
In a sign of what could come, Labour has already announced plans to scrap non-dom tax status – a move expected to raise billions, though experts have warned it could also drive the wealthy abroad.
If Britain did introduce an exit tax, it would align with a broader European clampdown on cross-border tax avoidance.
Labour has not committed to such a policy – but observers say the door has been left open, particularly if CGT is raised and the outflow of wealth accelerates.
Under Germany’s rules, even unrealised capital gains – the increase in asset value on paper – can be taxed on departure. If Britain adopted a similar system, wealthy people leaving the country could face a charge of up to 28%, in line with the top CGT rate.
Critics say such a system would be hard to enforce and could lead to even more aggressive tax planning.
