UK Labour Government Raises Capital Gains Tax, Offers Relief to Tech Entrepreneurs
The UK Labour government announced plans to increase the capital gains tax (CGT) rate on share sales, providing some relief to technology entrepreneurs who feared a more significant tax raid on the wealthy. Finance Minister Rachel Reeves raised the lower CGT rate to 18% from 10% and the higher rate to 24% from 20%, expecting the tax hikes to generate £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), alleviating concerns from entrepreneurs that the tax relief scheme would be scrapped. However, she announced that the CGT rate applied to entrepreneurs selling all or part of their business under BADR will increase to 14% in 2025 and 18% in 2026.
The changes are part of sweeping fiscal changes laid out in the Labour government’s debut budget to close a multibillion-pound funding gap in public finances. The 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.”
Despite the tax hikes, some entrepreneurs and investors expressed relief that their biggest fears did not materialize and appreciated the government’s efforts to strike a balance while maintaining important research and development investment.
Tech entrepreneurs and investors are urging the government to focus on fostering growth and innovation in the UK, which were key messages in Labour’s election manifesto. They emphasize the importance of pursuing reforms that make it easier for startups to attract talent through employee ownership and ensure regulators prioritize innovation and growth.
