UK Labour Government Raises Capital Gains Tax, Offering Relief to Tech Entrepreneurs
The UK Labour government has announced plans to increase the capital gains tax (CGT) rate on share sales, providing some relief to technology entrepreneurs who feared a more severe 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), quashing fears that the tax relief scheme for entrepreneurs would be scrapped. However, 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 are part of sweeping fiscal measures in 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 industry figures appreciate that the government has listened to entrepreneurs’ concerns and maintained important research and development investment. However, there are calls for the government to focus on growth-oriented policies to ensure the UK remains a competitive hub for innovation.
