Budget 2025: Rachel Reeves considers ‘exit tax’ for wealthy Britons fleeing the country
Extremely wealthy Britons leaving the UK for tax havens are being forced to pay a fee when they leave under plans drawn up ahead of this month’s budget.
Chancellor Rachel Reeves is reportedly considering imposing a 20 per cent “settlement charge” on business assets remaining in the UK as she seeks to plug a multi-billion pound hole in the country’s finances.
But shadow justice secretary Robert Jenrick hit out at what he said was a “crazy” idea that would “see wealth and wealth creators rushing for the door… We need more entrepreneurs, not fewer!” “Reeves should ignore this latest desperate move.”
Economists have repeatedly warned Ms Reeves that Labour’s combination of U-turns, high debt and slow economic growth means she must raise taxes or scrap flagship borrowing rules in the Budget.
Ms Reeves herself said higher taxes on the wealthy would be “part of the story” of her eagerly awaited Budget later this month.
The move is thought to raise around £2bn and put the UK in line with most other G7 countries, all of which, apart from Italy, already have their own “exit taxes”.
Currently, emigrants can sell British assets without having to pay capital gains tax (CGT), which is normally charged at 20 per cent.
However, under the new proposals this will change and they will have to pay an ‘exit fee’ when leaving the UK. Times.
It comes as economists warn Ms Reeves will raise taxes faster than any chancellor in more than half a century. Capital Economics said it could raise taxes by up to £38bn in this month’s budget, on top of the £41.5bn it raised last year. This means he has raised more taxes in just 17 months than his predecessors did in the entire parliament since 1976.
The focus on the wealthy follows claims that up to 16,500 millionaires will leave Britain this year due to tax changes and a lack of confidence in the deteriorating economy.
The Henley Private Asset Migration Report predicts the UK will lose twice as much as China and ten times as much as Russia.
James Smith, research director at the Resolution Foundation think tank, said there was “precedent” for the Treasury to follow in creating a reconciliation tax, but warned the move needed to happen “immediately”.
“The idea is that if someone decides to leave the country and move to a low-tax area, they will have to pay tax on any asset ‘gains’ such as shares that remain in the UK.
“This would be different to the current situation where someone moving to somewhere like Dubai, for example, could sell their UK assets after leaving the country and not be liable for UK capital gains tax.
“The risk is that if you announce this and don’t implement it immediately, it could lead to capital flight.”
Professor Andy Summers of the Center for Taxation Analysis, which proposed the policy, said this was made possible largely because of Brexit.
“In the past… the ability to collect settlement fees was constrained by EU rules on freedom of action,” he said. “But those rules no longer apply, so we can do what Australia and Canada (along with many other European countries) have already done, now those restrictions have been relaxed.”
Treasury declined to comment.
