Transcription
The UK wants to join other western countries like the US, Canada, and Spain in having an exit tax. This would be a 20% tax on unrealized capital gains when you leave the country.
Mainly, it will affect businesses. For example, if you started a consulting business from the ground up from 0 and now it's worth £10 million or more importantly the government determines that it's worth £10 million, you need to pay a 20% exit tax, 2 million, even if you don't have 2 million in your bank account. That is the scary part that they can determine the value of different businesses and different assets without you even having the liquid cash to pay for the tax.
Real estate wouldn't be included, but crypto cryptocurrencies are considered capital assets in the UK and they're subject to capital gains taxes. So therefore, they would also be included even if you don't want to sell them. Let's say you bought Bitcoin when it was $10,000 and now it's $100,000. Let's say you bought 10 of them, so you made $900,000 in gains. Even though you don't want to sell it because you think it's going to go to a million, you have to pretend to sell it or you at least have to sell a certain amount in order to cover the 20% exit tax, which is going to be over 150,000 in this example. So you might end up paying millions in taxes in things that you're not selling in money that you don't actually have available to pay for this exit tax.
That is why it's so dangerous and that is why so many million millionaires are going to continue to leave the UK. Currently over 16,000 millionaires are living the UK per year and they're going to places like Dubai if they're able. They're getting Irish passports. And that is something that I recommend all my UK citizen clients. Are you able to get an Irish passport by descent or by connection or by living there or by having some family there? If you're not, look at citizenship by investment. Look at citizenship by merit. We've already helped UK citizens, which were never part of the citizenship market. They never cared about having a second passport. Now they do because they see the control that the UK government wants. They think that their password might be cancelled in the future or they think that these taxes are going to get more and more strict.
Therefore, they need a second option for the countries that you can actually go and move to because just having a second passport isn't really going to help you. It's going to help you for more mobility to have another country to go and actually live in. If you get an Irish passport, you can move anywhere in the European Union. You can move to Poland, which in my opinion has a very similar lifestyle to the UK and much better safety, much better society in general, a lot less illegal immigration, for example. And you can just go to Poland, set up a business in Poland, pay 9% tax or 19% tax instead of paying huge taxes in the UK, and at least you get safety and a cohesive society in return.
Dubai and the UAE would be the easiest choice for any UK millionaire. This is what I would personally do if I was in London right now and I have a couple million dollars or I have many many millions of dollars or I have a business that is valued at 100 million but I don't want to sell it. I don't want to pay this 20% exit tax. I'm going to leave before they actually implement it and it's going to happen. There's a high chance it's going to happen. It's going to officially be launched. I would set up a business in Dubai. Buy property in Dubai. Make investments in Dubai. Get a UAE golden visa for example, move my tax residency officially because it's not just getting a residency permit, buying a house somewhere, and done deal. You have to actually become a tax non-resident in the UK, become tax resident in the new country, move your life over, move your operations over, and now in the UAE, for example, you have a 9% corporate tax, extremely low safety, great networking, no crazy illegal immigration, and overall again a much more cohesive society than you have in the UK. And you're not getting penalized with this 20% crazy exit tax.
When you tax wealth, wealth moves. It goes to Dubai. It goes to Switzerland. It goes to places like Paraguay for people that want to have places that are more free. Panama, Mexico, Thailand. There's also so many options in the European Union, even if you can't get an EU passport. Italy with a flat tax, €200,000 per year. Greece also has a flat tax. Portugal has a tax incentive program. There's so many options that it just doesn't make sense for a millionaire to stay in the UK anymore.
In order to make sure that we don't get nailed by the HMRC and we actually become a tax non-resident if you're a UK tax resident right now you have to look at the statutory residence tests in the UK. I've left the link in the description and you can check out the page from the HMRC directly. You have automatic overseas tests and automatic UK tests. What they mean is that you'll be non-UK resident for the tax year if you were resident in the UK for less than 16 days. Essentially, if you spend fewer than 16 days in the UK tax year, you're officially a non-UK resident. And that would be my personal recommendation. Spend as little time as possible in the country.
The second overseas test applies to people that have already left the UK. The second test, you'll be non-UK resident for the tax year if you're a resident in the UK for none of the three tax years before the current tax year and you spend fewer than 46 days. So once you leave the first year, you have to be careful, but the years after you can spend a little bit more time. Don't get too carried away with it. And then the last one is you'll be non-UK tax resident if you work full-time overseas, if you have a company overseas, if you have assets overseas, and you spend fewer than 91 days in the UK, the number of days on which you work for more than three hours per day in the UK is less than 31, and there is no significant break from your overseas work. They're very detailed, very strict, so make sure you go through them.
The next ones are the automatic UK test. This is where a lot of people get trapped. The first one is obvious. 183 days in UK territory gets you UK tax residency. Basically like every other country. But if you spend little time in the UK, for example, you'll be UK tax resident if you have or have had a home in the UK for all or part of the year. Basically part of the year. If you have a home for three months, let's say, there is or was at least one period of 91 consecutive days when you had a home in the UK. This applies if you had a home for 5 months, 4 months, whatever time in the year, at least 30 of those 91 days fall in the tax year when you had a home in the UK and you've been present in that home for at least 30 days at any time during the year. So if you have an available home and you spend time in it, even if you don't spend the six months, you could still be trapped. And at that time you had no overseas home or if you had an overseas home, you were present in it for fewer than 30 days. This is what happens to a lot of people that get a residency permit, for example, in Dubai and then just go to Dubai once every six months and then they spend four months in the UK. They are still by UK law UK tax resident especially if they have the next one which is sufficient ties test.
You have family tie, accommodation tie which is having property. The family tie is for example somebody that has a wife and children in the UK and then moves somewhere else but his children let's say they're seven and 10 years old they still go to school in the UK. His wife is still in the UK. Close family still living in the UK if that counts. Accommodation, you have an available property. A work time, you have to go to the UK for clients. You have to go to the UK for conferences. You have to go to the UK for UK sourced income. And a 90-day time. If you are resident in the UK in one or more of the three tax years before the one you are considering, you also have to check whether you have a country time.
There are so many ways to get trapped as a UK tax resident. You have to be extremely careful and you have to make sure that the paperwork in your new country is done properly. Don't just get some shady company in UAE, go every six months and then spend the rest of the time in the UK. That will definitely not work. Make sure you set up properly in a new country. Actually become tax non-resident. Remove your ties to the UK as much as possible and if you can get a second passport in order to have as many options as possible. As a millionaire, you can never have too many plan B's. It's always better to have plan B, C, D, so that you can always be protected.
If you want to see all the countries around the world that UK citizens are choosing for more freedom, less taxes, less regulations, you can check out this video right here. There's over 30 countries that I recommend to UK citizens. Check them out right here.