Why Britain is facing warnings of an exodus from technology companies

British may see exodus of technology companies, warn some analysts. Reason: likely hike in capital gains tax (CGT), proposed by Finance Minister Rachel Reeves . According to a report in CNBC, technology entrepreneurs and investors are expressing deep concern over the government's speculated plans to significantly increase capital gains tax. They fear that such a move could force many entrepreneurs to leave the UK, jeopardizing the nation's vibrant startup ecosystem.

Recent reports suggest that Finance Minister Rachel Reeves is considering raising the capital gains tax rate to as high as 39%, a move that would make the UK's tax regime less competitive compared to other European countries. While Prime Minister Keir Starmer has denied these claims, the looming budget announcement on October 30 has heightened anxiety within the tech community.

What is worrying technology CEOs
In addition to the capital gains tax hike, the government is also exploring plans to reduce the business asset disposal relief (BADR), which currently allows entrepreneurs to pay a lower tax rate on the sale of their businesses. These combined tax changes could severely impact the incentives for entrepreneurs to start and grow businesses in the UK.

Several prominent figures in the tech industry, including Giles Andrews of Zopa, Rishi Khosla of OakNorth, and Victor Riparbelli of Synthesia, have signed an open letter urging the government to reconsider these plans. They argue that higher capital gains tax and restrictions on BADR would make the UK less attractive to entrepreneurs, leading to a potential brain drain.

Venture capitalists and investors also share these concerns. Adam French of Antler and Harry Stebbings of The Twenty Minute VC have both warned of the potential for a mass exodus of entrepreneurs if the government proceeds with the proposed tax changes.

However, not everyone agrees that increasing capital gains tax is a bad idea. A recent report by the Institute for Public Policy Research suggests that many millionaire business owners would support such a move, believing that it would be fair and equitable.

The debate over capital gains tax has significant implications for the UK's tech industry. If the government proceeds with the proposed changes, it could have a chilling effect on entrepreneurship and innovation, potentially harming the country's economic growth.