UK Chancellor of the Exchequer Rachel Reeves has promised to make “necessary”, “urgent” and “very tough” choices to restore stability to the country’s economy.
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LONDON — British technology bosses and investors warn entrepreneurs could be forced to leave the UK if the government goes ahead with controversial plans to increase capital gains tax on share sales. I am doing it.
Recent media reports have suggested that Chancellor of the Exchequer Rachel Reeves is planning to increase capital gains tax (CGT), which applies to profits investors make on the sale of investments, and The Guardian reports , the tax rate could jump to 39%. Last week, British Prime Minister Keir Starmer told Bloomberg that such speculation was “off base.”
Reeves is expected to announce sweeping fiscal reforms during his October 30 budget proposal, aimed at closing a multibillion-dollar funding gap in the budget.
The government also plans to raise capital gains tax on stocks and other assets by “several percentage points,” the Times reported. This means that anyone who sells stock in an acquisition, initial public offering, or secondary sale of stock will be taxed on any gains. In value.
Reeves also plans to cut the so-called Business Asset Disposal Relief (BADR), which allows entrepreneurs to pay a reduced 10% tax rate on profits from the sale of a company, according to Bloomberg. Reported.
CNBC has not been able to independently verify these reports. The Treasury Department did not respond to requests for comment.
Some entrepreneurs and investors have warned that the UK could face an exodus of technology entrepreneurs as a result of reported tax changes.
In an open letter to Mr Reeves earlier this month, more than 500 entrepreneurs urged the Chancellor of the Exchequer to resist calls for higher capital gains tax and restrictions on the business asset disposal relief scheme.
A letter published by the Entrepreneurs Network on October 13 said: “An increase in CGT or any restriction on BADR would make this relief less competitive while other countries around the world are making it more competitive. “I will do it,” it says.
“It would mean the UK’s CGT rate would be the second highest in Europe and would jeopardize the success of our start-up ecosystem by significantly weakening the incentive for individuals to build businesses.”
The list of signatories includes Giles Andrews, co-founder of digital bank Zopa, Rishi Khosla, CEO of financial platform OakNorth, and Victor Riparbelli, president of artificial intelligence company Synthesia.
They suggested the plans would make it harder for entrepreneurs to set up business in the UK, or force them out of the country.
“By discouraging entrepreneurs from starting and growing their businesses, the Treasury could ultimately lower the overall tax burden,” the letter said.
Adam French, a partner at seed investor Antler, told CNBC in an email: “We have noticed a growing sense of stress in the UK tech ecosystem around proposals such as this. “If implemented, it would send a very negative signal,” he said in an email.
“There is a real risk that the UK tech industry will become complacent, alongside increased competition for talent from Paris and Berlin and a brain drain to the US,” French added.
Harry Stebbings, the venture capitalist known for his popular tech podcast The Twenty Minute VC, told the Guardian last week that entrepreneurs would leave the UK if the government raised capital gains tax.
Mr Stebbings said the government’s plans for capital gains tax were the “biggest” issue for entrepreneurs. “We know fewer entrepreneurs are going to come here. They’re going to leave en masse.”
Not everyone agrees that capital gains taxes should not be raised to shore up public finances.
In a report released last week by the centre-left Public Policy Institute, a group of billionaire business owners said they welcomed an increase in the tax rate on capital gains to match the increase in income tax.
The analysis found that capital gains taxes were not the main factor in investment decisions, with entrepreneurs focusing on issues such as access to financing, market opportunities, and broader economic conditions.
