Chancellor Rachel Reeves is reportedly weighing a 20% tax on business assets of wealthy individuals quitting the UK, a move aimed at curbing high‑net‑worth emigration.
According to the Times, the Treasury has prepared proposals for a "settling-up charge" on assets, which would align the UK with the majority of other G7 countries and generate an estimated £2 billion for the public coffers.
Expat status offers a 20% capital gains tax exemption on the sale of certain other assets, such as stock in numerous firms, but not on the sale of UK real estate and land worth £6,000 or more.
When leaving the nation, the value of these assets would be subject to a 20% levy under the new regulations. According to a government source, the settling-up fee included a number of tax possibilities that Treasury was modeling before to the budget, but they emphasized that no choices had been made.
In not already having such a tax on the books, the UK was “something of an outlier”, an expert told the Times.
James Smith, the research director at the Resolution Foundation thinktank, said:
“The idea would be that if someone decides to leave the country and relocate to a low-tax jurisdiction they would have to pay tax on any asset ‘gains’, like shareholdings, that remained in the UK.
This would be different from the situation at the moment where, 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.
The risk, of course, is that if you announce it and don’t bring it in immediately then it could lead to capital flight, as people try to leave the country before it comes into effect. But there are ways in which it could be brought in immediately.”
According to reports, the plan would let people postpone paying the fee for a number of years if they didn't want to sell their assets right now.
According to the Times, it would probably be paired with a law that would eliminate the need to pay capital gains tax on earnings from investments made before entering the UK. According to tax experts, this would guarantee "fair and symmetrical" tax treatment in the end and would also entice investors to move to the UK.
The Treasury would not comment.
How could this affect foreign investment into UK businesses?
High-net-worth individuals and investors may view the new duty as an interference to investing in UK companies, stewing advanced exit costs if they choose to leave. This could reduce the appeal of the UK as a base for transnational business and wealth operation, especially compared to further duty-friendly authorities.
The duty adds to a growing perception of rising duty burdens and nonsupervisory query in the UK, which has formerly seen restrained foreign direct investment( FDI) growth due to once political changes and Brexit-related trade complications. query frequently leads investors to defer or reduce investment commitments.
Since FDI contributes significantly to job creation, invention, and profitable growth, any decaying in investor confidence could decelerate these benefits. Investors may prioritize countries with clearer and further favorable duty administrations.