UK Labour Government Increases Capital Gains Tax, Offering Some Relief to Tech Entrepreneurs
The UK Labour government has announced plans to raise the rate of capital gains tax (CGT) 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%, which is 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 rate of CGT 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 only a small part of sweeping fiscal changes the recently-elected Labour government laid out in its debut budget to close a multi-billion-pound funding gap in public finances. Prior to Reeves’ announcement, the anticipation that CGT would increase had caused angst for tech founders across the country, with the Startup Coalition warning that there was a risk Reeves’ tax plans could result in a tech “brain drain.”
Following Reeves’ budget speech, Startup Coalition’s executive director Dom Hallas said, “Any budget with increases to CGT and NI, gradual increases to BADR and taxes on investors going up, is never easy and today will be hard for founders seeing taxes on their businesses rise.” However, he added that the government had listened to ensure that entrepreneurs’ biggest fears had not materialised and some balance had been struck, including maintaining all important R&D investment.
