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New Report Finds CGT Reforms Would Spark UK Entrepreneur Exodus

Hannah Skingle

Category: Uncategorized

We recently ran a survey on the proposed changes to Capital Gains Tax (CGT), gathering data to allow a more informed approach to the discussion of these proposals, and their potential effects on the UK entrepreneurial ecosystem. The response we received to the survey was truly outstanding, with almost 500 founders, investors, and advisors contributing their opinions.

The results were deeply concerning: 88% of jobs at would be at risk of being moved abroad; 72% of angels and 67% of institutional investors would be less likely to engage in investing; and 94% of entrepreneurs would actively consider starting their next company abroad.

We’ve now published the full results from this survey in a free report. Alongside them, we provide our thoughts on a potential solution to protect this vital part of the economy, and to ensure the UK can continue to attract the very best companies and talent on an international level.

The proposed changes to CGT

By way of background, in December we reported on some of the proposed changes to capital gains tax (CGT) recommended by the Office of Tax Simplification (OTS). 

To summarise, the key proposals of interest to the UK’s entrepreneurs and startup employees were:

  • To tax the earnings they make when selling company shares at income rates of up to 45%, rather than the current rate of 20%; and
  • To remove the remnants of Business Asset Disposal Relief (formerly Entrepreneurs’ Relief), which allows entrepreneurs to be taxed at 10% on the first £1m of proceeds from share sales in their lifetime.

We thought at the time that the implementation of the changes proposed by OTS would have a profoundly adverse impact on the UK’s startup ecosystem. Our opinion was that they would discourage founders from reinvesting capital into their businesses to drive growth and job creation, push new and existing companies to other jurisdictions with more favourable tax regimes, and make UK companies less attractive to investors. Our survey results now confirm this.

Given that UK startups and scaleups collectively employ over 3.5m people across 40,000 companies, the impact of these changes on the UK’s entrepreneurial ecosystem would be catastrophic. Combined with the effects of Brexit, the UK would risk losing its crown as the startup capital of Europe.

Clearly, there’s a lot at stake here. Read the report to find out more.