An exit tax in the Autumn Budget?

Could rumours of an exit tax in the forthcoming Budget be the final straw for internationally mobile individuals? That was one question considered in S&W’s pre Budget webinar on non-doms and residency. 

As S&W’s experts explained, the previous Budget effectively ended the UK’s non-dom regime from April 2025. It was, said Partner Edward Emblem, the removal of an entire regime, albeit with transitional measures.  

“It was an enormous undertaking, decoupling the concept of domicile from taxation,” he said. “Domicile exists as a general law concept. It’s just no longer looked at as a basis for determining one’s tax position.”

That has introduced significant changes and complexity: 

• The abolition of the remittance basis for tax, with those who have been in the UK for more than four years now taxed on a worldwide basis
• A new four-year window for new arrivals – the FIG (foreign income and gains) regime, which UK domiciled individuals can also benefit from if they meet the criteria
• The new three-year temporary repatriation facility, which allows individuals meeting specific criteria to bring previously untaxed foreign income and gains into the UK at a reduced 12% rate, rising to 15% in the third year
• A wide range of changes for offshore trusts

“And that’s before we’ve even got on to inheritance tax,” he added.

“It’s a lot to take on board.”

This has all prompted a surge of interest in restructuring, looking at the available reliefs and reviewing non-UK resident trusts. It’s also, though, prompted some to reconsider their future in the UK.

“Although we've seen some of the expat community excited by the ability to use the FIG regime as an opportunity to come back into the UK, inevitably there have been quite a few individuals who have decided that the UK might not be the place for them whilst the rules are as they currently stand,” said Emblem.

“We’re seeing an increasing trend in new queries around the pros and cons of upping sticks.”

Of S&W’s non-UK domiciled client base, about 8% left the UK before April 2025, while another 10% have accelerated their departure or are looking to leave.

One key exception, as Director and US specialist Sarjal Patel noted, has been UK resident US citizens.

“We have to remember that US citizens have been used to this worldwide taxation system for many years. The US is one of those unique jurisdictions that taxes its taxpayers based on citizenship as opposed to residency,” he explained.

“For the vast majority of our UK resident US citizens, the plan is to stay.”

Despite this, the new rules have incentivised many other individuals to look abroad, and that has led to speculation that the government may introduce an exit tax.

The attraction for the government is obvious, according to S&W Director Simon Miller.

“While some have already left the UK, there are also a large number of people who are still planning to but haven't yet,” he explained.

“These are the type of people that an exit tax might be more targeted towards.”

Despite this, there would be significant complications as well as political costs to implementing such a tax, Miller said.

Instead of presenting the UK as open to investment, open to business and pro-growth, as the government wants, it could prove a disincentive for people to come into the UK, Miller warned.

For these reasons, Miller’s betting against it.

“I would say it’s probably not going to happen,” he said.

In any case, since such a change would probably be brought in immediately, there’s little individuals can do with the Budget less than two weeks away, unless their plans are already well-advanced.

“Otherwise, the message is probably to hold tight at the moment.” There is, after all, plenty to be getting on with.

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