What is the UK 'exit tax' on deemed domicile and when did rules change (2017 2018)?

1. The claim that an “exit tax” exists — and what people actually mean when they say it

The popular phrase “exit tax” is used to describe several distinct UK tax consequences that arise when a person who has been taxed as UK resident ceases UK residence. Legally, the UK did not introduce a single stand‑alone exit tax for individuals; instead, it created mechanisms that can produce an exit‑style charge: a deemed‑disposal capital gains tax charge on assets that were sheltered under the remittance basis and the operation of temporary non‑resident rules which can pull gains back into charge if the person returns within five years. Tax commentary stresses that the UK’s approach is a patchwork of existing taxes and anti‑avoidance rules rather than a single statutory “exit tax.” ^{[1] [2]}

2. The 2017 reform that created modern “deemed domicile” and how it worked from April 2017

Finance (No. 2) Act 2017 introduced the core change: an individual who has been UK resident for 15 of the previous 20 tax years becomes treated as domiciled in the UK for income tax, capital gains tax and inheritance tax from 6 April 2017. This Condition A route (and the related Condition B for certain returnees born in the UK) removed the ability of long‑term residents to rely on the remittance basis and exposed worldwide income and gains to UK tax. The 2017 change therefore created the circumstance in which a deemed‑disposal charge on previously untaxed foreign gains could arise when the person ceased residence. The effective start date was 6 April 2017, and this was the principal statutory change commonly referenced as the 2017 reform. ^{[1] [2]}

3. What changed in 2018 and the immediate legislative aftermath people refer to

There was no second, separate overhaul in 2018 comparable to the 2017 Act; instead, 2018 saw implementation, guidance and extension steps as officials and advisers adjusted rules and practice. Commentary from the period (late 2018) emphasised how the 2017 reforms operated in tax year 2017/18 and the resulting practical issues for affected taxpayers. The term “rules changed in 2017 and 2018” often reflects that 2017 was the statutory pivot while 2018 consisted of consequential clarifications, HMRC guidance and industry analysis as the impact became tangible. The legal trigger remained the 2017 Act; 2018 consolidated practical understanding rather than changing the statutory trigger. ^{[2] [1]}

4. Extensions after 2017 — commercial property and later policy reversals by 2025

Following the 2017 core change, Parliament and HMRC extended the reach of capital gains chargeability in later adjustments. In particular, changes from 6 April 2019 brought certain UK commercial property and associated shareholdings within the chargeable perimeter for deemed‑disposal purposes, expanding what could be taxed on exit. Then, in a more radical policy shift, the government announced abolition of the remittance‑basis non‑dom regime from 6 April 2025 and introduced a new four‑year foreign income and gains (FIG) regime plus a Temporary Repatriation Facility (TRF). These 2025 measures replaced deemed‑domicile rules with a residence‑based approach and created transitional arrangements. Thus the policy evolved from 2017’s tightening, through 2019 widenings, to a full system overhaul by 2025. ^{[2] [3] [4]}

5. Practical consequences, contested interpretations and who benefits or loses

For taxpayers, the practical effect is that long‑term UK residents who qualified as deemed domiciled after 6 April 2017 lost the remittance basis and became liable on worldwide income and gains, and could face a deemed‑disposal charge on previously untaxed assets when they leave. Observers differ on emphasis: some government evaluations highlight substantial revenue gains (reporting billions annually) and reduced avoidance opportunities, while advisers point to complexity, transitional rebasing options (for assets to 5 April 2017 in some circumstances) and behavioural responses such as migration decisions. Different stakeholders have clear agendas: HM Treasury emphasises revenue and fairness, advisers emphasise complexity and taxpayer mobility, and commentators note redistributional effects. ^{[5] [4] [6]}