UK faces founder exodus in wake of tax hiking Budget
Britain could suffer an exodus of business owners if the Chancellor follows through with rumours of a crackdown on wealth at the upcoming Budget.
A fresh poll of founders has shown that four in 10 UK-based entrepreneurs would weigh up whether to leave the UK were Rachel Reeves’s speech to contain either a hike to capital gains tax or a shake-up of inheritance tax gifting rules.
As many as 42 per cent of business owners would consider moving their entire business abroad if either the basic or top rate of capital gains tax were hiked to help plug the government’s £30bn fiscal shortfall. And 40 per cent would shift their residency if reliefs on gifting assets are tightened up, according to the poll from audit shop S&W.
Many economists expect ministers to unveil a radical shake-up of inheritance tax as part of a wide package of changes required for the government to stay within its self-imposed fiscal rules. The Treasury is reportedly considering clamping down on gifting rules from parents to their children, capping the overall amount a mother or father can pass on to their offspring irrespective of whether it is made seven years before their death.
Also rumoured to be under consideration is an extension of that so-called ‘seven-year rule’ to a decade, to make more gifts liable to inheritance tax.
Budget speculation sapping confidence
“Our research sends a clear message to the Chancellor: further tax rises on risk-takers and wealth creators could drive more of the UK’s most successful businesses and their owners out of the country,” said Toby Tallon, tax partner at S&W. “Business owners are not just concerned, they’re ready to act.”
The poll is the latest evidence of growing unease among businesses and individuals over the avenues ministers may pursue in order to reset the public finances. Several business groups have warned of the damage inflicted on the UK economy by months of speculation over the contents of the Budget.
The Chancellor sought to address those concerns at a speech billed by the government as a “scene setting” address on Wednesday. She said the UK faced “big challenges”, meaning “each of us must do our bit for the security of our country and the brightness of its future”.
Any acceleration of entrepreneur departures would add to growing fears that a ‘brain drain’ from the UK is under way. Several high-profile business leaders and entrepreneurs have quit Britain in the past year, amid fears the economy will struggle to shake off over a decade of low growth and concerns about its ballooning tax burden.