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Fact check: Can british people avoid exit tax by moving to a low-tax country?
Executive Summary
British residents cannot simply avoid UK “exit tax” by moving to a low‑tax country because the UK has tightened residency and deemed domicile rules and introduced residence‑based taxation and transitional measures that can create de facto exit charges or unexpected tax liabilities; careful timing, the Statutory Residence Test and available transition reliefs determine outcomes. Recent 2025 reforms replace domicile with residence-based rules and add reliefs such as a four‑year FIG election and a Temporary Repatriation Facility, so the ability to escape UK tax depends on factual circumstances and planning, not merely physical relocation [1] [2] [3].
1. Why “No Formal Exit Tax” Still Feels Like One — The Hidden Costs of Leaving the UK
The UK does not currently levy a single labelled “exit tax,” but loss of tax reliefs and the interaction of recent reform measures mean individuals who leave face crystallised liabilities and ongoing UK tax exposure. Commentators warn that abandoning the UK’s historic non‑dom protections and changes from the Autumn Budget 2024 may create mechanisms that operate like an exit tax, particularly on unrealised gains, future income streams and corporate structures that previously benefited from domicile rules [1] [4]. The legislative shift away from domicile and toward residence‑based taxation amplifies the importance of exit timing: departing without addressing accrued reliefs, elective regimes or company arrangements can generate significant tax costs that feel like a tax on exit [5] [2].
2. The New Residency Regime: What Replacing Domicile with Residence Actually Means for Movers
From 6 April 2025 the UK’s abolition of non‑dom status and the replacement of domicile with a residence‑centred system mean tax residence, not domicile, now dictates worldwide tax exposure. The Statutory Residence Test remains crucial: breaking UK tax residence requires satisfying connection tests and timing rules, and mistakes can cause an individual to remain UK taxed despite physical relocation [6]. The government introduced transition measures—the four‑year Foreign Income and Gains election and a Temporary Repatriation Facility—to soften the impact for affected taxpayers, but these are conditional and limited in duration; they do not guarantee permanent UK tax avoidance for those moving to low‑tax jurisdictions [3] [7].
3. Practical Traps: Deemed Domicile, Accrued Gains and Company Structures That Bite You on Departure
Even where there is no labelled exit charge, deemed domicile concepts and reform-driven anti‑avoidance measures can crystallise tax when assets are moved or individuals change status. Guidance issued around changes to deemed domicile rules and the abolition of non‑dom protections highlights situations where reliefs are lost or where gains that accrued while a UK resident can become taxable on later disposals, and where company and trust arrangements can trigger anti‑avoidance adjustments [2] [1]. High‑net‑worth individuals and business owners are repeatedly flagged in professional analyses as the most exposed because their wealth often includes unrealised capital gains, offshore structures and income streams that the new rules target; accelerated exit planning is recommended to mitigate these structural risks [5] [8].
4. Conflicting Views and the Policy Context: Revenue Raising Versus Mobility Concerns
Official analysis and fiscal statements present the reforms as a move to a fairer, residence‑based system designed to raise revenue—official estimates projected receipts from the package—while advisers warn such changes risk prompting relocations and require careful transitional design. Media and advisory sources disagree on whether this is tantamount to an exit tax: some frame it as a closing of loopholes, others as the imposition of retroactive burdens on expatriating taxpayers [8] [4]. The government’s introduction of temporary reliefs signals recognition of mobility risks, but the policy intent to capture worldwide income and gains from residents after 2025 remains clear and narrows the opportunity for simple relocation to eliminate UK tax exposure [3] [7].
5. Bottom Line for Individuals Considering a Move: Planning, Timing and No Guarantees
Moving to a low‑tax country will not automatically eliminate UK tax obligations; the outcome depends on your residence status under the Statutory Residence Test, any deemed domicile history, the character and timing of your assets and elections under the new regimes. The safe course is bespoke planning well before departure: determine residence status for the tax year, consider crystallising or reorganising assets where appropriate, evaluate FIG election and Temporary Repatriation Facility eligibility, and obtain professional advice to avoid accidental continued UK tax residence or triggered liabilities. The best available evidence from 2024–2025 shows escape from UK tax via relocation is possible only in specific fact patterns and with careful use of transitional reliefs, not as an automatic consequence of physically moving abroad [6] [3] [5].