Calls grow for Reeves to step back from capital gains tax raid on entrepreneurs
Over a thousand entrepreneurs have signed an open letter to the Chancellor Rachel Reeves warning of the punitive effect of a potential hike in capital gains tax at the Budget on 30 October.
Nearly 1,200 entrepreneurs have now warned of the risks that could follow the rumoured rise in Capital Gains Tax (CGT) and restriction of Business Asset Disposal Relief (BADR).
These risks – outlined in an open letter to Rachel Reeves from The Entrepreneurs Network – include a lack of incentives and encouragement for founders to start and build businesses in the UK, which they say will jeopardise growth in the start-up ecosystem.
Signatories include Pip & Nut founder Pip Murray, Allica Bank chief executive Richard Davies, Zopa co-founder Rishi Khosla, Oaknorth Bank co-founder Oana Jinga and Yonder co-founder Tim Chong.
The pleas follow recent reports that Rachel Reeves could be plotting to hike taxes for entrepreneurs selling their businesses as part of her strategy to plug a £40bn fiscal “black hole”.
The tax relief currently allows entrepreneurs to pay a reduced capital gains tax of 10 per cent on sale profits, compared to the standard 20 per cent rate for higher-rate taxpayers.
“Many fledgling startups offer employees stock options or shares as part of their compensation package as they cannot compete with the higher salaries of established big corporates,” the letter said.
“Further restrictions to BADR would reduce this incentive, making it even harder for startups to attract the talent they need to scale while denying workers the chance to own a piece of Britain’s growing companies.”
A separate letter signed by 66 founders and chief executives, had said that while members of the group “do not want to relocate, founders are increasingly considering leaving the UK” if there is a hike in CGT.
Philip Salter, founder of The Entrepreneurs Network, said taking away incentive is “putting off” current and future founders from starting and building businesses within the UK.
“One thing to say is that entrepreneurs don’t normally come out and speak in public and put their name to petition like this, so it shows how serious it is for them,” he told City PM.
Responding to the letter last week, a Treasury spokesman said: “We’re supporting businesses through pledges to make the business rates system fairer, to cap corporation tax at 25 per cent and to publish a business tax roadmap so that future investments can be planned with confidence.”