Chancellor Rachel Reeves is said to be weighing a “20% settling-up charge”, effectively an exit capital-gains tax on business assets, aimed at people who cease UK residency and move to low-tax jurisdictions. The Treasury reportedly models that the charge could raise roughly £2bn a year and bring the UK into line with most other G7 countries that operate departure taxes. But the headline revenue estimate belies thorny legal, technical and political trade-offs: implementation, timing, valuation, avoidance and behavioural responses could reduce receipts, weaken investor confidence, and produce unintended social consequences.

What The Proposal Would Do, And How It Fits With Other Changes:

Under the reported plan, an individual who stops being a UK-resident would be treated as having “disposed” of certain assets (notably shareholdings and other business interests) and liable for tax at around 20% on unrealised gains. The Treasury is said to be considering a deferred-payment option for people who do not want to liquidate immediately, and a symmetrical change to stop new arrivals benefiting from pre-arrival gains being CGT-free. Proponents say that makes the regime “fair and symmetrical”.

That symmetry is central politically: officials want departure and arrival rules to mirror each other so the UK does not both lose future taxable gains and deter new mobile capital from relocating here. The move would sit alongside other measures Reeves has signalled for the 26 November Budget: higher levies on private wealth and property, reforms to ISAs and capital gains, and further tweaks to the non-dom transition introduced earlier in the Parliament.

What Supporters Say, Fairness, Closing A Loophole, And International Precedent:

Advocates argue the tax remedies an anomaly: wealthy people can currently cease UK residency and then sell UK assets offshore, escaping UK capital gains tax on future growth. James Smith, research director at the Resolution Foundation, told reporters an exit charge would mean those “who decide to leave the country and relocate to a low-tax jurisdiction would have to pay tax on any asset ‘gains’, like shareholdings, that remained in the UK.” He added the UK is “something of an outlier” for not already having such a mechanism. Supporters point out that most G7 economies have some form of exit tax, and the move would therefore be a normalising reform rather than an outlier policy.

Tax campaigners and some progressive economists frame the tax as redistributive, aimed at wealth that largely accrues through property and market structures rather than productive labour. The Tax Justice Network has repeatedly challenged hyperbolic claims of a “millionaire exodus,” arguing migration figures cited in public debate are often unreliable and that the mobility of the wealthy is exaggerated in media coverage, a point that undercuts the most alarmist warnings about capital flight. “The millionaire exodus myth” report argues that the headline migration numbers are proportionally tiny and should not be treated as proof that taxes automatically drive away wealth.

What Opponents And Markets Warn, Capital Flight, Timing And Complexity:

Opponents, the Treasury’s natural adversaries in the City, some Conservative politicians and vocal business groups respond with warnings that the tax could backfire. Shadow figures and industry spokespeople argue it would accelerate the very departures it seeks to deter. Robert Jenrick called the idea “crazy”, saying it would “see wealth and wealth creators sprint for the door”. Financial lobby groups and private equity voices stress that announcing a departure tax without immediate effect risks triggering an exodus as owners accelerate moves or restructure holdings.

Beyond politics, tax professionals flag practical obstacles: valuing illiquid private companies; policing deferral regimes; enforcing collections across treaty-shy jurisdictions; and closing opportunities for avoidance through trusts, partnerships, or residency gamesmanship. Firms such as RSM have summarised these technical headaches, saying the regime would be resource-intensive and legally complicated to construct. The combination of valuation disputes and cross-border enforcement could drive the effective yield well below headline estimates.

The Contested Evidence On A “Millionaire Exodus”:

A central claim used to justify the tax, that wealthy people are leaving in droves because of recent tax reforms, is disputed. Reports that thousands of millionaires will flee this year have been traced back to opaque compilations (Henley/New World Wealth) that analysts and academic critics say use inconsistent methods and produce unreliable numbers. The Financial Times and independent researchers have cast significant doubt on the scale of departures, while the Tax Justice Network has called the “exodus” narrative a myth amplified by PR and lobby groups. If departures are small in absolute terms, fears about a mass flight of capital may be overstated.

That does not mean behavioural responses are absent; some ultra-mobile individuals will relocate in response to tax incentives, but the aggregate empirical weight is contested, and official HMRC data on non-dom departures will not be available until 2027, leaving Ministers and Brexit-era policymakers to rely on imperfect private data sets.

Political Strategic Tensions Inside Labour:

Reeves has attempted to pre-empt the “scaremongering”, telling journalists that warnings about mass departures after prior measures had proved exaggerated: “that scaremongering didn’t pay off, because this is a brilliant country and people want to live here,” she said during IMF meetings. Still, the proposals risk reopening powerful intra-party tensions between the government’s growth agenda and left-wing demands for tougher wealth taxes. Some Labour MPs fear measures that could depress investment in constituencies reliant on private sector employment; other parts of the party and activist groups push for bolder redistributional change.

On The Treasury’s Calculus: £2bn Is Not An Iron-Clad Number:

The Treasury’s headline estimate, c. £2bn, should be read with caution. Revenue projections for behavioural-sensitive taxes are notoriously volatile. Capital Economics predicted an even larger potential package for the November Budget overall, yet independent forecasters warn the OBR’s updated productivity and growth assumptions could change the fiscal gap materially, forcing Ministers to mix measures across revenue and (potentially) efficiency savings. The practical yield from an exit tax depends on design details: whether a generous deferral is allowed, the scope of assets covered, anti-avoidance strength, and the speed of implementation.

Alternative designs and safeguards that matter, and the political choices they require

A credible exit tax could be designed alongside a suite of safeguards to limit unintended consequences. Options discussed by tax experts include:

• Immediate effective date for new residents — to deter pre-emptive exits if the policy is announced. But this raises fairness issues.
• Deferral with robust security — allow payment to be deferred on illiquid holdings provided secure undertakings are lodged; interest charged to reflect time value.
• Narrow scope initially — apply first to listed shareholdings and large private equity stakes where valuation is clearer; expand later to complex trusts.
• Reciprocity with arrival rules — remove the pre-arrival CGT exemption to restore symmetry and avoid arbitrage.
• Targeted thresholds — exclude small savers and set generous exemptions for family businesses with anti-avoidance triggers to protect jobs and local investment.

These design choices are political decisions as much as technical ones. A punitive architecture risks signalling hostility to the international investors and entrepreneurs the UK wants to attract; a lenient architecture risks producing little revenue and being seen as symbolic. Both outcomes carry political costs.

Voices From Civil Society And The City:

Campaign groups favouring tougher wealth taxation frame the exit charge as overdue. The Tax Justice Network says the public conversation has been distorted by noisy private wealth reports and calls for evidence-based reform that strengthens the tax base without ceding space to offshore secrecy. Progressive campaigners argue that stepping up collection on mobile capital is essential to fund public services and restore fairness.

By contrast, City trade bodies and private client advisers warn the policy will raise compliance costs and complicate Britain’s pitch to attract global talent at a time when competitors such as Dubai, Switzerland and Singapore are aggressively marketing residency and tax packages. The government will have to weigh those reputational costs against the immediate fiscal need.

Bottom Line — A Fight Over Revenue, Narratives And The UK’s Economic Model:

The “settling-up charge” is an emblematic policy: it sits at the intersection of fiscal necessity, political ideology and an increasingly mobile global wealth class. If the Chancellor chooses to proceed, the detail will determine whether the measure is a pragmatic loop-closure of an emerging tax loophole or a headline-driven policy that triggers avoidance and reputational damage.

The strongest case for Reeves is procedural and technical: publish rigorous impact assessments, commit to clear transitional rules, and show evidence that revenue estimates are robust to behavioural change. The weakest case is political: relying on alarmist migration statistics and launching a policy without operational readiness risks political overreach and potential revenue illusions.

Conclusion: A Test Of Power, Fairness, And Credibility.

Rachel Reeves’s proposed “settling-up charge” is more than a fiscal adjustment; it is a test of Britain’s political will, administrative capacity, and economic integrity. Touted as a pragmatic move to restore fairness and plug a £2bn fiscal gap, it exposes a deeper reckoning with decades of state complicity in wealth protection, loophole politics, and moral exceptionalism for the rich.

The government’s claim that Britain is witnessing a “mass exodus” of millionaires has become central to the policy narrative, yet the data behind that claim remains deeply suspect. Analysts and campaigners note that while the Henley Private Wealth Migration Report predicts 16,500 millionaires could leave the UK this year, independent reviews by the Tax Justice Network and LSE Centre for Economic Performance reveal that the actual numbers are “negligible, far lower than the narrative suggests.” In reality, fewer than 0.3% of Britain’s three million millionaires have emigrated in the past decade.

What makes matters worse, experts warn, is that tax migration data is unreliable, incomplete, and will not be comprehensively updated until 2027 due to HMRC’s delayed methodology overhaul. “We are legislating based on conjecture,” one senior HMRC analyst told the Guardian, “because the underlying data architecture doesn’t yet capture who’s leaving, what assets they hold, or what jurisdictions they’re moving to.”

That opacity has created fertile ground for political mythmaking. The notion of a millionaire stampede serves as both a convenient justification for new levies and a deflection from the state’s chronic failure to collect taxes from those who remain. “It’s easier to tax the imaginary emigrant than to confront the entrenched tax avoidance at home,” said Robert Palmer, director of Tax Justice UK.

Analysts such as Dan Neidle of Tax Policy Associates warn that the £2bn revenue projection may be more optimistic branding than fiscal realism: “Exit taxes are only as strong as the enforcement and valuation systems that underpin them. HMRC currently lacks the administrative depth to monitor global asset disposals or to pursue wealthy leavers through offshore jurisdictions.”

Indeed, the UK’s track record on wealth enforcement remains dismal. While the U.S., France, and Canada operate robust exit regimes backed by comprehensive wealth registries and asset-tracking mechanisms, Britain remains years behind, hampered by fragmented data, outdated legislation, and a chronic shortage of investigators at HMRC.

Even within Whitehall, scepticism lingers. One Treasury insider described the proposal as “symbolic politics that risks overpromising and underdelivering.” If the exit tax collapses under legal complexity or yields less than expected, Reeves could face a credibility crisis that undermines Labour’s broader reform agenda.

Critics argue that the Chancellor’s drive to demonstrate fiscal discipline risks substituting real structural reform with performative gestures. As economist Grace Blakeley observed in the New Statesman, “The problem isn’t that Britain’s rich are leaving; it’s that too many of them have already left the tax system.”

In that sense, the “settling-up charge” could become a parable of Britain’s modern political economy, an attempt to reclaim fairness from a system that has long been designed to avoid it. Reeves’s challenge is not merely to impose new taxes, but to prove that the British state can once again enforce its own laws on those who benefit most from its protections.

If she succeeds, the measure could mark a decisive break with decades of indulgence for the financial elite and restore a measure of fiscal sovereignty. If she fails, hobbled by poor data, weak enforcement, and exaggerated narratives, the policy will stand as another hollow symbol of a government trapped between aspiration and accountability.