Chancellor Rachel Reeves is reportedly drawing up plans to introduce a new 20% tax on the assets of individuals who decide to leave the United Kingdom.
Aligning with Global Standards
This proposed 'settling-up charge' would target assets like shareholdings held by those relocating, particularly to low-tax jurisdictions. The move is designed to bring the UK's tax policy in line with most other G7 nations, where similar taxes are already common. According to reports from the Times, the UK is currently 'something of an outlier' for not having such a levy.
How the New Tax Would Work
Under the new system, the 20% charge would be applied to the value of these assets at the point of exiting the country. This closes a significant loophole. As expert James Smith, research director at the Resolution Foundation thinktank, explained: "At the moment, if someone relocates to somewhere like Dubai, for example, they can sell off their UK assets after they have left the country and not be liable for any UK capital gains tax." This new charge would ensure tax is paid on those gains.
The Treasury predicts the measure could raise approximately £2 billion for the public purse. To mitigate concerns, the scheme is expected to include a provision allowing individuals to delay payment for several years if they do not wish to liquidate their assets immediately.
Potential Risks and Accompanying Measures
One significant risk identified by experts is the potential for capital flight if the policy is announced but not implemented immediately, as people might try to leave before it takes effect. However, analysts suggest there are ways to introduce the charge without delay.
Furthermore, the Times indicated that this policy would likely be combined with another measure to stop capital gains tax being applied to profits made from investments before an individual arrives in the UK, creating a more balanced system for both entry and exit.
