Calls for the Chancellor, Rachel Reeves, to bring in a tax on people emigrating from the UK on their accrued but unrealised gains are “fundamentally flawed”, industry figures have warned.

The exit tax was proposed by economists at CenTax, the Institute for Fiscal Studies, and the Resolution Foundation, urging the government to implement a levy that would aim to raise up to £500m a year and discourage wealthy individuals from departing the UK.

However, DeVere Group CEO, Nigel Green, stated that while this may sound like a quick fix to help close the budget gap, the proposal fell short of addressing the core issues and risked pushing the UK into an “economic trap that will have long-term consequences”.

“The proponents of the exit tax are missing the point,” he continued. “At a time when economic growth needs a boost, and international competition for talent and capital is at an all-time high, this tax would do more harm than good.

“The problem that academics and policy advocates fail to acknowledge is that policies like this discourage people from coming to the UK in the first place.

“Worse still, it sends a negative message to the global investment community that the UK is hostile to wealth creators and innovators. It’s, therefore, fundamentally flawed.”

The IFS also proposed that new arrivals should be exempt from UK capital gains tax (CGT) on gains they made whilst living abroad.

DeVere argued that while the government may believe that imposing a tax on those leaving the country would help close a revenue gap, it overlooked the broader economic impact of such a move.

“Discouraging their arrival or encouraging their departure through punitive taxes risks undermining the very foundations of the UK economy,” noted Green.

“If the UK introduces an exit tax, it will find itself in competition with nations like Switzerland, Singapore, and Dubai - countries that offer low taxes and a more welcoming environment for wealth and investment.”

Furthermore, he warned that the exit tax could trigger a ‘talent drain’, with businesses, entrepreneurs, and skilled professionals seeking potentially more favourable environments elsewhere.

“This would result in a loss far exceeding the projected £500m in annual revenue,” Green said.

“The true cost would be a diminished tax-paying workforce, fewer investments, and ultimately, a less competitive UK.

“Instead of introducing an exit tax, the government should be focusing on policies that encourage wealth creation and attract global talent.

“Rachel Reeves and her advisers should look at ways to make the UK a more attractive destination for high-net-worth individuals by improving infrastructure, simplifying the tax code, and reducing regulatory barriers that hinder business growth.”

The IFS also called for CGT to be equalised with income tax, but Spencer West LLP international private wealth partner, Stephen Abletshauser, warned this could lead to wealthy individuals leaving the UK.

"If CGT is indeed equalised with income tax, material proportions of wealth generators will without doubt leave the UK for many years," he stated.

"This will only further exacerbate the tax gap. There is a feeling that the social contract is broken in that double taxation in the form of IHT is deemed ‘fair’ whereas successive governments do not address the fact that nearly a quarter of households pay no income tax and only 11 per cent of the working age population pays more than basic income tax.

"We are a far more mobile society culturally and economically than 10 years ago even. The global competition for wealth generators to relocate to their jurisdiction is fierce and the likes of Greece, Spain, Italy, Portugal, Singapore, UAE, the Caribbean, and the USA will benefit from ill-advised tax grabs."

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