Tech leaders in Britain have warned that the government’s continued tax hikes could force entrepreneurs and investors to leave the United Kingdom. This warning comes following reports that Finance Minister Rachael Reeves plans to raise the capital gains tax, which is the tax imposed on profits from investments.
Reports suggest that this tax could go up to 39%. In response, British Prime Minister Keir Starmer dismissed these rumors, stating in an interview with Bloomberg that “speculation is far from reality.” He added that it is important to assess the state of the economy when taking over the government.
Reeves is expected to announce comprehensive financial changes on October 30th in an attempt to fill a significant funding gap in the government’s budget. The government also plans to increase taxes on stocks and assets, meaning individuals selling their shares in takeover deals or initial public offerings will be subject to taxes on their profits.
Furthermore, it is expected that the Entrepreneur’s Relief, known as “BA DR,” will be reduced, which allows business owners to pay a reduced tax rate of 10% when selling their companies.
Entrepreneurs and investors have expressed concerns that these changes may lead to brain and technology drain from the United Kingdom. In this context, over 500 business leaders signed an open letter to Finance Minister Reeves expressing their opposition to tax hikes. In the letter, published by the business network, they pointed out that increasing the capital gains tax or any restrictions on “BA DR” could weaken competitiveness, making the United Kingdom have the second-highest capital gains tax rate in Europe, posing a threat to startups.
Among the prominent figures signing the letter are Zopa Digital Bank founder Giles Andrews, OakNorth finance platform CEO Rishi Khosla, and Synthesia AI company CEO Victor Riparelli.
Adam French, partner at investment firm Antler, expressed his concern about these proposals, stating that implementing them could be a step towards disaster. He noted a real risk of the tech sector declining in the UK amidst increased competition from Paris and Berlin for talent.
On the other hand, a group of millionaire businessmen welcomed the tax rate increase, as long as it is balanced with income tax, as a report from the Public Policy Institute shows that the capital gains tax is not the main factor in investment decisions, but other factors such as access to financing and market opportunities.
