UK Labour Government Raises Capital Gains Tax Rate, Offering Some 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%, expected to generate £2.5 billion in revenue.
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 entrepreneurs’ concerns about the tax relief scheme being scrapped. However, 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 the Labour government’s debut budget, aimed at closing 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, tech entrepreneurs and investors urge 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 startup-friendly policies to ensure the UK remains a globally competitive hub for innovation.
