British technology entrepreneurs and investors are sounding alarms over potential tax changes that could lead to a mass exodus of business founders from the U.K. The concern stems from reports that Finance Minister Rachel Reeves may raise capital gains tax (CGT) on share sales as part of a broader strategy to balance the nation’s budget, set to be announced on October 30.
The proposed CGT increase, which could bring the rate up to 39%, would significantly impact profits made from selling investments such as company shares. In addition, there are plans to reduce the business asset disposal relief (BADR), a scheme allowing entrepreneurs to pay a lower 10% tax on the sale of their businesses. These changes, while not officially confirmed, have caused widespread anxiety in the tech and business community.
More than 500 entrepreneurs signed an open letter to Reeves earlier this month, urging her to avoid the proposed tax hikes. The letter, published by The Entrepreneurs Network, emphasized that raising CGT or cutting BADR could severely weaken the U.K.’s startup ecosystem. Entrepreneurs argue that such a move would stifle the motivation to build businesses, reduce competitiveness, and ultimately push talent out of the country.
Some prominent figures in the tech space, including Giles Andrews of Zopa, Rishi Khosla of OakNorth, and Victor Riparbelli of Synthesia, warn that raising CGT would lead to a less favorable environment for business growth. The letter highlighted the risk of the U.K. having the second-highest CGT rate in Europe, which could deter innovation and entrepreneurship.
Adam French, partner at venture capital firm Antler, expressed concern about complacency within the U.K.’s tech ecosystem. He pointed out that cities like Paris and Berlin are becoming more competitive for talent, and the U.S. is also a prime destination for entrepreneurs seeking a more favorable tax environment. Venture capitalist Harry Stebbings, known for his podcast “The Twenty Minute VC,” added that raising CGT could lead to an “en masse” departure of entrepreneurs from the U.K.
Despite the opposition, some voices argue in favor of raising capital gains tax. The Institute for Public Policy Research, a center-left think tank, recently published a report in which millionaire business owners welcomed the idea of raising CGT to match the higher income tax rate. According to the report, the tax rate is not the primary factor driving investment decisions. Entrepreneurs tend to prioritize access to financing, market opportunities, and broader economic conditions over tax rates.
The upcoming budget announcement on October 30 will be closely watched by the tech community, with the potential for significant policy changes that could reshape the U.K.’s business landscape.