Autumn Budget 2025 – expectations and speculation regarding a potential UK “exit tax”
Ahead of the Autumn Budget 2025, there has been intense speculation regarding the nature of reforms to the UK tax landscape which the Chancellor is expected to announce on 26th November 2025, including whether a so-called “exit tax” for individuals leaving the UK could be introduced.
Under existing UK tax rules, in respect of individuals who cease to be treated as UK tax residents before disposing of capital assets, any gains arising are often outside the scope of UK capital gains tax (except in respect of direct and indirect disposals of UK property). While the temporary non-resident rules mean that capital gains which individuals trigger during a limited period of non-UK tax residency (i.e. 5 tax years or less) are chargeable in the year of return to the UK, this anti-avoidance rule does not address longer-term emigration.
It is in this context that speculation has grown around the potential introduction of an exit tax in the UK, either at this Budget (which is now rumoured to be unlikely) or at some point in the future.
General exit tax principles
While exit tax regimes vary between countries, they typically share a common principle, which is to preserve the chargeability of unrealised capital gains accrued by individuals or businesses which subsequently cease to be tax resident in their respective jurisdiction. These gains represent the increase in value of assets — such as shares, intellectual property, or other business holdings — that have not been sold before the exit tax trigger event occurs (which is usually when an individual ceases to be a tax resident of the relevant jurisdiction).
Some countries offer flexibility in how and when an exit tax liability is satisfied. Deferral or guarantee options, or instalment plans may be available, which are especially useful when the assets involved are illiquid. In certain cases, relief may also be granted if the taxpayer returns to the original jurisdiction within a specified timeframe.
A potential UK exit tax?
While the UK does not currently have an exit tax which applies to individuals ceasing to be UK tax resident, it does have regimes for trusts and companies that cease to be UK tax resident. Broadly, under these current rules, a trust or company is deemed to dispose of all of its assets — subject to certain exclusions — and immediately reacquire them at market value before losing UK tax residency, with any resulting gains being subject to UK capital gains tax (in respect of trustees) and UK corporation tax (in respect of a company).
A potential exit tax on individuals could be modelled on the existing rules that apply to trusts and companies when they cease to be UK tax resident (as outlined above). Alternatively, the Centre for the Analysis of Taxation has proposed a rebasing on arrival and deemed disposal on departure (“ROA-DDD”) model. Under this proposal:
- assets would be rebased to market value when an individual first becomes UK tax resident, such that any gains made by individuals while non-UK tax resident are excluded from UK tax; and
- individuals would be deemed to dispose of their assets at the end of their final year of UK tax residency, such that all gains accrued while UK tax resident would be brought into the scope of UK capital gains tax (even if such assets have not actually been sold by or at the date of departure).
There are many examples of exit taxes applying to individuals in other jurisdictions with the UK being an outlier among major global economies, as being the only G7 country (aside from Italy) to not have a wider exit tax on individuals on departure in respect of unrealised gains. The remainer of this article provides, by way of comparison and example, a high-level overview of the French, German and Australian exit tax regimes as they apply to individuals.
A brief comparison of three exit tax regimes
France
France imposes an exit tax on individuals who, following a period of tax residency in France for at least six out of the last ten years, cease to be French tax resident, in respect of:
- unrealised capital gains on French or foreign company shareholdings which exceed €800,000 or represent ownership interests of at least 50%;
- receivables arising from deferred consideration, including earn-outs; and
- deferred capital gains from prior sales.
The exit tax liability is triggered on the transfer of the individual’s tax residency, with the applicable rate being 30% (12.8% income tax and 17.2% social security contributions), however, the taxation may be deferred either automatically or on receipt of sufficient guarantees depending on the destination country. In all cases where the exit tax is triggered, the individual is subject to reporting requirements, including the filing of an exit tax return.
Assuming the tax charge is deferred, if the relevant assets are then sold within the applicable monitoring period (which is currently either 2 or 5 years, depending on the value of the assets on departure), the deferral is revoked and the exit tax becomes immediately payable. However, if the relevant assets are held for the full monitoring period (whether or not they are then subsequently sold), or the individual regains French tax residency during the monitory period, the exit tax is fully waived.
Germany
Germany’s exit tax on unrealised capital gains applies to individuals terminating their German tax residency (having previously been subject to unlimited tax liability in Germany for at least seven of the last twelve years) who, at some point in the five years prior to leaving, have held an interest of at least 1% in a German or foreign company.
The exit tax (which is typically payable either immediately on departure or in annual instalments) is chargeable at the personal income tax rate plus a solidarity surcharge and is calculated based on the market value of the asset.
Also, extended tax liability can arise in respect of German citizens who:
- cease to be German tax resident;
- were subject to unlimited tax liability in Germany in at least five of the last ten years; and
- are subject to low taxation abroad or have significant economic interests in Germany.
Such German citizens are treated as continuing to be German tax resident in respect of all domestic income for a further ten years.
Australia
Australia imposes an exit tax on individuals ceasing to be Australian tax residents (excluding temporary residents) in respect of unrealised capital gains accrued on assets other than direct and indirect interests in Australian real estate (“Taxable Australian Property”). When an individual ceases to be Australian tax resident, they are deemed to have disposed of such non-Taxable Australian Property assets at market value. Direct and indirect interests in Taxable Australian Property held by non-Australian tax residents remain subject to tax on disposal and so are not included in calculating an exit tax liability.
Any exit tax is payable immediately, unless the individual makes an “exit election”, in which case their non-Taxable Australian Property assets are instead treated as Taxable Australian Property assets. This keeps the assets within the Australian tax net even after the individual becomes non-tax resident and such tax is deferred until sale. Importantly, this deferral election must be made on an all-or-nothing basis — either all eligible assets are included, or none. Partial elections on an asset-by-asset basis are not permitted.
The exit tax calculation is based on the market value of the asset on the date that the individual ceases to be Australian tax resident. Individuals electing to defer are subject to more complex rules in respect of any tax arising on the subsequent disposal of assets.
