UK Labour Announces Tax Changes Amid Tech Brain Drain Concerns
The UK Labour government has announced plans to increase the rate of capital gains tax (CGT) on share sales, raising the lower rate to 18% from 10% and the higher rate to 24% from 20%. The changes are expected to generate £2.5 billion in revenue, with Finance Minister Rachel Reeves emphasizing the need to drive growth, promote entrepreneurship, and support wealth creation while raising revenue for public services.
However, 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). The rate of CGT applied to entrepreneurs selling all or part of their business under BADR will be increased to 14% in 2025 and 18% in 2026.
The announcement follows speculation over CGT changes, which caused concern among tech founders and investors. The Startup Coalition, a British tech lobby group, warned that the tax plans could result in a tech brain drain, with 94% of founders considering starting a future company outside the UK if the government were to raise the CGT rate.
Tech entrepreneurs and investors are urging the government to focus on fostering growth and innovation in the UK, with some calling for reforms that make it easier for startups to attract talent and ensure regulators prioritize innovation and growth.
The government has been advised to weigh the cumulative effect of policies impacting growth, including those affecting energy costs, employer National Insurance contributions, and tax structures on capital gains and dividends.
