A founder preparing to leave the United Kingdom is told the same thing early on, and it is true. There is no exit tax. Britain does not deem a departing individual to have sold their shares on the way out. Set against the Netherlands, where emigration is a deemed disposal of a substantial shareholding, or Germany, where the same happens from a one per cent stake, the position looks unusually relaxed.
The relaxation is the problem. What the United Kingdom does instead is charge on the way back, charge the estate for years after the move, and impose real deemed disposals on trustees, on companies and on branches.
The statute, and what HMRC says about it
The territorial scope of capital gains tax sits in section 1A of the Taxation of Chargeable Gains Act 1992. A UK resident is charged on gains from the disposal of assets wherever situated. A non-resident is charged on three categories only: assets with a relevant connection to a UK branch or agency, interests in UK land, and assets deriving at least 75 per cent of their value from UK land. Nothing there turns the loss of residence into a disposal, and the only emigration related cross reference points to the temporary non-residence rules of sections 1M and 1N, about returning rather than leaving.
HMRC says the same in its own manual. The Capital Gains Manual records at CG13420 that individuals ceasing to be resident are “not subject to an exit charge on emigration”, and CG13400 explains why: an owner who keeps an asset has not disposed of it, and no legislation deems departure a disposal for all categories of person. On the statute and the manual as they stood in August 2026, the point is settled rather than arguable.
One timing detail survives. The individual remains within the charge to capital gains tax until the following 5 April, unless split year treatment applies.
The charge that waits for the return
Section 1M is the rule that changes the picture. If an individual is temporarily non-resident and a gain accrues during the temporary period of non-residence, the gain is treated as accruing instead in the period of return, and section 1M(4) adds that no double taxation arrangement prevents that charge from arising. The tax is not avoided by leaving. It is deferred until the taxpayer comes back.
Two conditions have to be met, and they are usually reported as one. Paragraph 110 of Part 4 of Schedule 45 to the Finance Act 2013 requires that at least four of the seven tax years immediately preceding the year of departure were years of sole UK residence, or split years including such a residence period, and that the temporary period of non-residence is five years or less. Someone who fails the four of seven test is never temporarily non-resident, however briefly they stay away. Someone who meets it is exposed for the whole of a five year absence.
Section 1N takes assets acquired during the absence out of the recapture, so gains on assets held before departure come back into charge while a genuinely new asset bought and sold abroad does not. Neither condition can be read off a calendar: the five years run between defined residence periods rather than from the date of the move.
Dividends of a close company, and what the Finance Act 2026 added
The regime is not confined to capital gains, and this is where the comfortable version of the British position does the most damage. Section 401C of the Income Tax (Trading and Other Income) Act 2005 recaptures distributions of close companies received during the absence and taxes them in the year of return. A relevant distribution is one made to the individual because they were a material participator in a close company, or an associate of one, at a relevant time. That relevant time is any time in the year of departure or in any of the three tax years before it, so reducing a shareholding shortly before leaving does not remove the exposure.
The Finance Act 2026 widened the net. Paragraph 19(2) of Part 3 of Schedule 3 inserts new subsections into section 401C reaching payments, including loans, made by a subsidiary controlled by the close company where it is reasonable to suppose the payment is intended to avoid a relevant distribution, and payments to third parties under arrangements that leave the individual with the benefit. The amendments have effect for 2026-27 and subsequent tax years in relation to payments made by companies whenever made. The old advice, which was to leave first and distribute afterwards, no longer survives contact with the statute for anyone who intends to return inside the five year window.
The inheritance tax tail
From 6 April 2025 inheritance tax stopped following domicile and started following residence. Section 6A of the Inheritance Tax Act 1984 makes an individual a long-term UK resident at all times in a tax year if they were UK resident for at least ten of the previous twenty tax years. Section 267, the old deemed domicile rule, went with it.
The part that concerns anyone leaving is the tail. Long-term UK resident status does not end on departure. It ends after a run of consecutive non-resident years whose length depends on how much of the preceding twenty years was spent resident. Thirteen years of residence or fewer produce a tail of three tax years. From fourteen years the tail rises one year at a time, so someone resident for the full twenty remains within the worldwide inheritance tax net for ten tax years after leaving. A transitional rule in Schedule 13 to the Finance Act 2025 protects a narrow group who had already gone, broadly those not UK domiciled on 30 October 2024 and not UK resident since.
This is the real departure cost for most estates, and it is not a capital gains tax question at all. A deferred exit charge on a shareholding is a known and financeable number. Ten years of continuing exposure of a worldwide estate is neither.
The deemed disposals that do exist, and the six instalments
The absence of a general exit charge is a statement about individuals holding their own assets. Section 25 of the 1992 Act treats an asset as disposed of and reacquired at market value when it stops being a chargeable asset, and section 80 does the same to trustees who cease to be UK resident, reaching in principle the whole trust fund. Held-over gains under sections 165 or 260 are clawed back if the transferee ceases to be resident, as HMRC confirms at CG13410: there it is the emigration of the recipient, not the donor, that triggers the charge.
Section 185 does the same to companies, which are treated on ceasing to be UK resident as having disposed of and reacquired all their assets at market value immediately before that time, save for assets that stay in the United Kingdom in use for a UK permanent establishment.
The deferral route is where most published material goes wrong. Section 187, which used to postpone the charge, was repealed by the Finance Act 2019 and now appears on the statute as an empty section. The deferral that exists today is the CT exit charge payment plan in Schedule 3ZB to the Taxes Management Act 1970. The tax becomes due in six equal instalments, the first on the day after the nine months beginning with the end of the migration accounting period, the other five on each of the first five anniversaries of that day. Interest runs as if the plan had not been entered into, so the deferral is not free, and security is required only where an officer of HMRC considers there would otherwise be a serious risk as to collection.
The eligibility test carries a structuring point that is easy to miss. The plan is open to a company entitled to freedom of establishment under Article 49 of the Treaty on the Functioning of the European Union or Article 31 of the EEA Agreement which ceases to be UK resident and becomes resident in a relevant EEA state, meaning an EEA state that is a member of the European Union or a party to an equivalent mutual assistance agreement with the United Kingdom. That destination requirement was not repealed when the United Kingdom left the European Union, and the Netherlands, as a member state, satisfies it. What is verified is the destination requirement and nothing beyond it. Conditions A, B and C still have to be met in the individual case: a claim within nine months of the end of the migration accounting period, a business carried on in the destination state, and no treaty residence outside the EEA. Migration to a third country gives no plan at all.
What the treaty with the Netherlands does, and what it does not
Article 13 of the 2008 convention between the Netherlands and the United Kingdom connects a Dutch departure charge to a British arrival. Paragraph 6 lets a state tax gains of an individual resident in the other state on the disposal or deemed disposal of shares in an entity resident in the first state, where that individual holds at least 20 per cent of the issued capital of a particular class of shares and was resident in the first state at some time in the preceding ten years. Where the first state has already assessed a deemed disposal at emigration, the paragraph operates only so far as part of that assessment remains outstanding.
That 20 per cent is not a domestic threshold. It is neither the Dutch five per cent substantial interest test nor the German one per cent test: it allocates a taxing right between two states. Paragraph 7 needs the same caution, and its six preceding years of residence are a treaty margin, not the domestic five year limit.
The position stated honestly
The correct summary is longer than one line and shorter than a memorandum. The United Kingdom charges nothing on departure. It charges on return, through the recapture of gains and of close company distributions. It charges the estate for between three and ten tax years after residence ends. And it imposes immediate deemed disposals on trustees, on migrating companies and on branch assets.
Rates matter less than sequencing, but they should carry their dates. Gains of individuals are charged at 18 or 24 per cent under the rule in section 1I. Business asset disposal relief and investors’ relief carry 18 per cent for disposals made on or after 6 April 2026, after two increases in two years, which makes it the figure most often quoted out of date.
The planning question in a British departure is therefore never whether an exit charge applies. It is when the taxpayer intends to return, what the estate looks like in the decade after the move, and whether the party leaving is a person, a trust or a company, because only one of the three walks out without a bill.