Left-wing tax campaigners are constantly pushing each other to new extremes. With Labour in power they’re fighting to get the attention of PM Keir Starmer and chancellor Rachel Reeves, by suggesting one new tax raid after another.
The Resolution Foundation, whose boss Torsten Bell is now a Labour MP, is among the most active. It has already targeted savers by calling for a £100,000 lifetime cap on Isa savings in the autumn Budget on October 30.
It also wants Reeves to hike capital gains tax and slap inheritance tax on unused pension pots. As if that wasn’t enough, it’s calling for hikes to national insurance, business rates, council tax and road pricing, too.
That’s an awful lot of tax hikes but its latest suggestion is the most radical yet.
Thousands of millionaires and entrepreneurs are said to fleeing the UK ahead of Labour’s Halloween Budget. They want to get out before Reeves gets stuck into their money.
The Resolution Foundation doesn’t like that and has dreamed up a plan to punish them.
By hitting them with an exit tax.
Currently, entrepreneurs and investors pay no capital gains tax (CGT) on UK shares if they leave Britain for more than five years.
The Resolution Foundation wants this rule scrapped and a CGT-style exit charge applied instead, according to today’s Daily Telegraph.
With CGT rates set to rise in the Budget, this could cost relocating Brits up to £45,000 of every £100,000 they have.
As yet, it isn’t clear whether this exit charge will apply to assets, such as property and businesses. But I bet it would.
The UK already faces a net loss of up to 9,500 millionaires this year, more than double the 4,200 who left in 2023, according to the Henley Private Wealth Migration report 2024.
Talk of an exit tax could turn that into a stampede.
I can see the appeal to Labour social warriors. And it could deliver a short term cash injection for the Treasury. But I fear it would wreak long-term damage.
As will other Labour taxes.
The proposed raid on foreign non-doms has persuaded many to up sticks and take their tax revenues elsewhere.
Instead of raising £3billion as Reeves hopes, it could end up costing the UK £1billion in lost revenues.
An exit tax would have a similar result.
Constant Labour tax threats are causing widespread alarm, and there’s another six or seven weeks of this before Reeves delivers her Budget.
The message is out there – the UK is not a welcoming place for people who want to set up businesses. Instead, entrepreneurs are being treated as a combination of cash cow and social pariah.
True, the US has an exit tax. But it’s also the best place on earth to build a business, and most entrepreneurs wouldn’t leave anyway.
The UK is a grey and rainy island that’s had to work hard to attract hyper-mobile entrepreneurs.
We’ve got precious little in the way of natural resources. And the few we do have, such as North Sea oil, looks set to be wiped out by Labour tax raids.
Labour has our financial services sectors in its sights, too, with talk of a windfall tax raid on the big banks.
By threatening to punish anybody who’s had enough with an exit tax, too, Labour will deter global entrepreneurs from coming to the UK and setting up businesses in the first place.
It will also drive existing talent abroad before they build their capital gains. They’ll find a country that will let them keep their money rather than grabbing it at every opportunity.
And doesn’t block the exits if they want a change of scene.
Ultimately, an exit tax will cost more than it saves. Let’s hope Reeves ignores it but the idea is out there now, and soon all the other left-wing think tanks will be calling for it too.
