A founder leaving the United Kingdom is told the same thing early on, and it is almost true. There is no general exit tax: Britain does not deem a departing individual to have sold their own shares. Set against the Netherlands, where ceasing to be a domestic taxpayer otherwise than by death is a deemed disposal of a substantial shareholding, or Germany, where the same happens from a one per cent stake, the position looks relaxed.
The relaxation is the problem. The United Kingdom charges on the way back instead, charges the estate for years after the move, imposes deemed disposals on trustees, companies and branches, and charges one class of individual on the way out.
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 on assets wherever situated; a non-resident 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 where the person has a substantial indirect interest in that land. Nothing there turns the loss of residence into a disposal; the only emigration related cross reference is to sections 1M and 1N, on returning.
HMRC says the same. The Capital Gains Manual records at CG13400 that individuals ceasing to be resident are “not subject to an exit charge on emigration”: an owner who keeps an asset has not disposed of it, and no legislation deems cessation of residence an occasion of charge. It also keeps him within the charge until the following 5 April, unless split year treatment applies. On the statute and the manual as they stand in September 2026 that point is settled; the exceptions are the subject.
The charge that waits for the return
Section 1M changes the picture. If a gain accrues to a temporarily non-resident individual during the temporary period of non-residence, it 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, only deferred.
Paragraph 110 of Part 4 of Schedule 45 to the Finance Act 2013 requires that at least four of the seven tax years before the year of departure were years of sole UK residence, or split years including such a period, and that the temporary period of non-residence is five years or less.
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 one does not. Paragraph 113 measures the five years between defined residence periods, not from the date of the move.
Dividends of a close company, and what the Finance Act 2026 added
The recapture of close company distributions sits in three places, and the one usually quoted is the narrowest. Section 812A of the Income Tax Act 2007 carries the ordinary case: where a temporarily non-resident individual’s liability for a non-resident year is limited under section 811, his relevant investment income is added to his total income for the year of return. Section 408A of the Income Tax (Trading and Other Income) Act 2005 does the same for dividends of a company that would be close if UK resident. Section 401C of the same Act is narrower than its reputation: subsections (1)(c) and (1)(d) confine it to an individual who stays UK resident for the distribution year and whose charge is cut only by a treaty. All three turn on one definition: the income must arise because the individual was a material participator in the close company, or an associate of one, at any time in the year of departure or the three tax years before it. Reducing a shareholding shortly before leaving does not help.
The Finance Act 2026 widened all three at once. Paragraphs 19 to 22 of Part 3 of Schedule 3 reach payments, including loans, from a subsidiary the close company controls where the payment is reasonably supposed to be intended to avoid the charge, and payments to third parties under arrangements that leave the individual with the benefit. Paragraph 19(4) removes the old carve out for dividends paid out of post-departure trade profits. Paragraph 23(1) gives the new subsections effect for 2026-27 and later years for payments whenever made; paragraph 23(2) does the same for that repeal, for dividends whenever made. Leave first and distribute afterwards no longer works.
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. Section 267, the old deemed domicile rule, went with it.
The tail is what concerns anyone leaving: long-term status does not end on departure but after a run of consecutive non-resident years, whose length the table in section 6A(3) reads off a frozen window, the twenty tax years ending with the last year of residence. Thirteen resident years or fewer give a tail of three; from fourteen it 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 paragraph 46 of Schedule 13 to the Finance Act 2025 protects a narrow group who had already gone, and it has three conditions, not two. The individual must not have been UK domiciled on 30 October 2024, ignoring deemed domicile; must have been UK resident for no tax year from 2025-26 onwards; and must either have been non-resident throughout the three tax years preceding the year in question or resident for fewer than fifteen of the twenty preceding it. The first condition is no formality for a founder with twenty resident years behind him: it turns on common law domicile, which long residence in the United Kingdom tends to attract rather than rule out, and failing it puts him straight back on the ten year table. The third is a moving test: the relevant tax year advances and the second condition’s period grows with it. Take one who has settled that point in his favour and left in 2024-25. He fails both limbs of the third for 2025-26, 2026-27 and 2027-28, because 2024-25 still sits inside the three preceding years and more than fifteen of the twenty are resident. For 2028-29 those three preceding years are 2025-26, 2026-27 and 2027-28, all non-resident, so the first limb is met and he drops out. His tail is three tax years rather than ten, and the domicile question decides which before a single year is counted.
The deemed disposals that do exist, and the six instalments
The exemption for individuals has a hole in it. Section 168 claws back gains held over under sections 165 or 260: where the transferee ceases to be UK resident while still holding the asset, a chargeable gain equal to the held-over gain is deemed to accrue to him immediately before that time, unless he leaves more than six years after the end of the year of assessment of the original disposal. Nor does it apply where he leaves for an employment or office with all duties performed outside the United Kingdom and becomes resident again within three years, still holding the asset. Otherwise it is the emigration of the recipient, not the donor, that triggers it, and an individual pays on the way out.
Section 25 deems a disposal and reacquisition at market value where an asset ceases to be a chargeable asset by moving abroad, or because the person stops trading here through a branch or agency. Section 80 does the same to trustees who cease to be UK resident, reaching in principle the whole of the settled property, and section 185 to companies, save for assets left here in use for a UK permanent establishment.
Section 187, which used to postpone the charge, was repealed by the Finance Act 2019 and is now an empty section. What exists is the CT exit charge payment plan in Schedule 3ZB to the Taxes Management Act 1970. The tax falls due in six equal instalments, the first on the day after nine months from the end of the migration accounting period and the other five on each of the first five anniversaries. Interest runs as if the plan had not been entered into, so the deferral is not free, and security is required only where an HMRC officer sees a serious collection risk. Paragraphs 12 to 14 accelerate it: insolvency, liquidation, leaving one relevant EEA state without entering another, or twelve months of non-payment bring the whole outstanding balance forward, while disposing of an exit charge asset brings forward only the part attributable to it.
The plan is open only to a company with freedom of establishment under Article 49 of the Treaty on the Functioning of the European Union or Article 31 of the EEA Agreement that becomes resident in a relevant EEA state: an EU member, or a state with mutual assistance equivalent to Council Directive 2010/24/EU. That requirement survived Brexit, and the Netherlands meets it. Conditions A, B and C must also be met: an application within nine months of the end of the migration accounting period, a business carried on in a relevant EEA state, and no treaty residence outside the EEA. A third country gives none.
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 an individual resident in the other state on the alienation or deemed alienation of shares in a company resident, under its laws, in the first state, where he, alone or with other connected individuals under the laws of that state, directly or indirectly holds at least 20 per cent of the issued capital of a particular class of shares. It applies only if he was resident in the first state at some time in the ten years before the gains are derived, and the ownership test was already met when he became resident in the other state. Where the first state has already assessed a deemed alienation at emigration, it operates only so far as that assessment is outstanding.
That 20 per cent is not a domestic threshold: neither the Dutch five per cent substantial interest test nor the German one per cent test, but an allocation of taxing rights between two states. Paragraph 7 needs the same caution: its six preceding fiscal years are a treaty margin, not the domestic five year limit.
The position stated honestly
The United Kingdom charges no general exit tax on an individual leaving with assets he bought himself. It charges on return, charges the estate for three to ten tax years after residence ends, imposes deemed disposals on trustees, migrating companies and branch assets, and under section 168 charges a departing donee on a gain someone else held over into his hands. The question is never whether a charge applies on the way out, but when the taxpayer means to return, what the estate looks like a decade later, and whether the party leaving is a person, a trust, a company or a donee.
Rates matter less than sequencing, but they should carry their dates. Gains accruing to an individual are charged at 18 or 24 per cent under section 1H, with section 1I deciding which. Business asset disposal relief and investors’ relief carry 18 per cent for disposals on or after 6 April 2026, having gone from 10 to 14 per cent a year earlier, which makes it the figure most often quoted out of date.
This article is informational and does not constitute tax or legal advice. The treatment of any structure depends on its facts and on the law of each jurisdiction involved. Each engagement is subject to scope and applicable regulation.