A significant portion of British entrepreneurs could be considering leaving the UK if a proposed increase in Capital Gains Tax (CGT) becomes reality. A new survey conducted by Helm, the UK’s largest entrepreneur network, found that six-in-ten of its members would consider relocating abroad to avoid higher CGT rates under a potential Labour government.
The poll, carried out by Helm between 3 and 5 September, surveyed 154 of its 400 members, all of whom are founders of businesses with a minimum annual turnover of £2 million. Helm members collectively oversee businesses generating over £8 billion in revenue. The results reveal that 60% of respondents are actively considering moving offshore should Labour go ahead with plans to raise CGT. This could see the tax rate for entrepreneurs selling their businesses rise from the current 20% to as much as 45%, in line with income tax for higher-rate taxpayers.
Labour’s proposal to peg CGT to income tax would significantly affect the financial landscape for Britain’s business owners. Currently, CGT stands at 20%, but under Labour’s suggested changes, higher-rate taxpayers could face a near-doubling of the tax on profits made from the sale of businesses. Entrepreneurs argue that this would make the UK a less attractive place for investment and innovation.
Andreas Adamides, CEO of Helm, expressed concern over the survey’s findings, describing them as “astonishing” due to the unusually high response rate. He warned of the potential consequences of such a tax hike: “Entrepreneurs are the lifeblood of Britain. Our poll underscores a crucial point: if Labour aims to support innovation and growth, they must consider the impact of increasing capital gains tax, which could stifle the very spirit that drives our economy.”
Adamides added that some entrepreneurs have already begun relocating to countries with more favourable tax regimes, such as Portugal, which has been nurturing a burgeoning tech scene. He warned that raising CGT could significantly reduce the amount of tax revenue the UK collects from successful business exits, potentially harming the future of British entrepreneurship.
Nimesh Shah, CEO of tax advisory firm Blick Rothenberg, echoed Adamides’ concerns. He highlighted the potential exodus of entrepreneurs, stating, “It is not surprising that so many are considering their future in the UK given the clear signposts from Labour that CGT rates will be increased. The difference between 0% tax if you leave the UK and 45% in the UK is a strong incentive to move abroad.”
Shah added that while many entrepreneurs see the current 20% rate as fair, a steep rise could backfire, reducing overall tax revenue. HMRC projections suggest that a 10% increase in CGT could lead to a £3.4 billion loss in tax revenue over three years, as business owners choose to relocate or delay the sale of their companies.
The poll findings come at a critical time, with the Labour Party actively considering changes to CGT ahead of the Autumn Budget. As Britain’s small and medium-sized enterprises (SMEs) make up 99.9% of the country’s businesses and contribute £2.4 trillion to the economy, any widespread shift in tax policy could have far-reaching implications for the UK’s economic future.
For more information visit: https://www.helmclub.co/