UK Labour Government Hikes Capital Gains Tax, Offers Some Relief to Tech Entrepreneurs
The UK Labour government announced plans to raise the capital gains tax (CGT) rate on share sales, providing some relief for technology entrepreneurs who feared a more intense tax raid on the wealthy. Finance Minister Rachel Reeves increased the lower CGT rate to 18% from 10% and the higher rate to 24% from 20%, expected to bring in £2.5 billion.
Reeves maintained the £1 million lifetime limit on capital gains from the sale of all or part of a company under business asset disposal relief (BADR), quashing fears that the tax relief scheme for entrepreneurs would be scrapped. However, she added that the CGT rate applied to entrepreneurs selling all or part of their business under BADR will be increased to 14% in 2025 and 18% a year later.
The changes form a small part of sweeping fiscal changes laid out in the Labour government’s debut budget, aiming to close a multibillion-pound funding gap in public finances. Reeves’ announcement follows speculation over CGT changes that caused a backlash from tech founders and investors, with the Startup Coalition warning of a potential tech “brain drain.”
Tech entrepreneurs and investors are urging the government to focus on fostering growth and innovation in the UK, messages that were key to Labour’s election manifesto prior to the landslide win that saw Keir Starmer become prime minister.
