Founders Rally Against Reeves’ Exit Tax

Over 150 business leaders have signed an open letter to Chancellor Rachel Reeves condemning her proposed ‘exit tax’ on entrepreneurs leaving the UK.

The so-called ‘exit tax’, which would place a tax on anyone looking to leave the UK after building a business there, is rumoured to be announced in the upcoming Autumn Budget on the 26th November.

Whilst understandably unpopular, it was reported by The Times that an exit tax would raise £2 billion for the Treasury. The problem? Many founders have come together to warn that it could do more harm than good.

So, what is an exit tax? And why are business leaders rallying against it?

What Is An Exit Tax?

An exit tax is a kind of Capital Gains Tax, applied when someone leaves a country whilst still holding assets that have increased in value there, even if they haven’t sold them yet.

Under an exit tax, or at least the one being discussed by the Treasury, wealthy people would be treated as if they had sold all their assets on the day they leave the UK. They would then pay Capital Gains Tax on the profits made on those assets whilst they were residents in the UK.

Currently, if someone leaves the UK for 5 tax years and then sells shares in a UK company, they won’t have to pay the 20% Capital Gains Tax on the increase in value. Rachel Reeves’ plan would change that. Under the new guidelines, shareholders would have to ‘settle up’ the 20% tax bill before they go, with an option to actually pay it out once the share is sold and the cash is released.

This is just one of the latest revenue-generating tax ideas that Reeves is discussing to help plug the £30 billion ‘back hole’ in UK finances.

Why Is The Government Considering An Exit Tax?

Labour are in a tricky spot. Public spending is out of control, and the country is losing millions of pounds just paying off interest on public debt.

Some think tanks, who have likely been advising Reeves on the upcoming budget, have pointed out that the UK is unusual for not having an exit tax, given so many other countries do.

In short, their argument is basically that if someone builds wealth in the UK, then the UK should be able to tax that wealth when they leave. And whilst the idea is pretty unpopular, it’s not unique.

What Countries Have An Exit Tax?

An exit tax as a concept isn’t something new, in fact, quite a few big economies around the world have one. Some of these include:

Canada: Which has a ‘departure tax’, taxing unrealised gains on the day a person is no longer a tax resident.

Australia: A ‘deemed disposal’ rule, which also treats a person’s assets as ‘sold’ once they stop being a resident.

France: That charges an exit tax on shareholdings valued over €800,000 when a person moves abroad, with deferred payment allowed within the EU.

Spain and Norway: Who have a tax on shares or business stakes when a long-term resident leaves.

The US: Which has an expatriation tax on high net worth individuals who renounce their citizenship, taxing unrealised gains as if they are sold the day before they leave.

And whilst the UK currently does not have a tax like this on individuals, trusts and companies do have to pay some form of exit tax already when they move their tax residence abroad.

Why Are Founders Rallying Against The Exit Tax?

More than 150 founders, which represent more than £10 billion in UK economic value, including big names like Cleo, Dawn Capital and Notion Capital, have signed a letter to Rachel Reeves rallying against the tax. Pulled together by Dom Hallas of the Startup Coalition, the letter warns that the tax could be a ‘dangerous signal’ to aspiring entrepreneurs in the UK.

It reads: “A potential exit tax would not only tell founders that their ideas and innovations aren’t welcome, but that they should either get out early or not come at all. We share the government’s ambition for growth and sound public finances. Progress on these will only be achieved by making the UK the best place to scale the next generation of global companies, not by punishing those who choose to leave.

“At a time when founders are being courted around the world, we should be building bridges, not walls. We should attract talent and capital, pool investment, and deliver policies that lower barriers and give globally minded founders every reason to build in the UK and scale to the world.” (SME Magazine).

Will An Exit Tax Even Work?

Many have come out criticising the tax for a number of reasons. Firstly, some argue that the UK would risk an even bigger exodus of high-net-worth individuals before the policy comes into place. Already, the UK has reportedly lost 16,500 millionaires in 2025 according to Forth Capital.

It would also, some argue, deter young people from wanting to build businesses in such a high-tax environment. That way, the people driving the economy will just start businesses elsewhere.

But one of the biggest criticisms is that it would actually have an adverse effect on the economy. If big companies, high net worth people and corporates are driven out by taxes, then the £2 billion earning that the treasury expects would just vanish into thin air, leaving the debt even harder to repay.

Is The UK Still An Attractive Place To Build A Business?

Whilst the letter from 150 founders sounds extreme in light of a simple tax rise, the truth is that the exit tax is just another notch on the UK’s tax belt. For many, the rise in even more taxes makes them question whether the UK is still an attractive place to build a business.

For many founders and investors, the fear is that an exit tax could push the UK further into this ‘unattractive’ territory, forcing talent away when the UK needs them most.

David Soffer, Editor in Chief at TechRound, commented “An exit tax is the worst of both worlds. It punishes success and it also stops people coming here at a time where we should be encouraging more companies, more innovators, and more startups into what should be (and what traditionally has been) one of the best places to build a successful, prosperous business.

“The Chancellor and the rest of the government should think strongly about continuing to tax businesses and impose more and more regulation. If taxes were reduced and regulation were slashed, UK businesses would thrive and more companies would be encouraged to come here.”

Will The Exit Tax Come Into Effect?

Whether or not the exit tax comes in remains to be seen. However, if it does, it’s likely that entrepreneurs and investors will have a lot of questions.

For now, maybe Rachel Reeves should focus on pulling talent in, not pushing it away. After all, if it’s taxes she wants, then she needs to retain those paying the biggest bills.