Six in ten UK business owners say they would be deterred from starting a new company if Capital Gains Tax is increased in the Autumn Budget, highlighting growing concerns over the impact of higher taxation on entrepreneurship and investment.
Research commissioned by professional services group S&W found that 60 per cent of 500 business owners surveyed would reconsider starting a new business if the Chancellor raised CGT.
The companies represented in the survey had annual turnovers ranging from £5mn to £500mn or more, with the findings pointing to concerns among established business owners as well as entrepreneurs.
More than half of respondents, 54 per cent, said they would consider moving their business overseas if taxes increased further.
The prospect of higher personal taxation could also affect decisions over where business owners choose to live. Half of those surveyed said they would consider leaving the UK if CGT were increased in the Autumn Budget, while 51 per cent said they would consider leaving if a wealth tax were introduced.
The findings come as the Government faces pressure to raise additional revenue while attempting to encourage economic growth and investment.
Among potential Budget measures, further increases in employer National Insurance contributions and CGT were joint top concerns, with 41 per cent of business owners selecting each.
A wealth tax was cited by 28 per cent, while 25 per cent were concerned about reductions in pension reliefs and 24 per cent about further changes to inheritance tax.
Toby Tallon, tax partner at S&W, said the findings represented a warning about the potential consequences of further tax increases.
“Business owners are sending a clear warning to the Chancellor: further tax rises risk undermining confidence, discouraging investment and prompting more entrepreneurs to look overseas.
“While the government has limited options when it comes to raising additional revenue to fulfil its spending commitments, Capital Gains Tax and the possible introduction of a wealth tax are areas business owners will be watching particularly closely.
“If the UK wants growth, it must remain an attractive place to start, scale and sell a business. As the Budget approaches, business owners will be looking for measures that back ambition, encourage investment and strengthen the UK’s reputation as a competitive place to do business.”
The survey also suggests that the potential impact of tax changes could extend beyond existing businesses to decisions about whether new companies are created in Britain at all.
Emma Queen, tax partner at S&W, said entrepreneurs were an important source of investment, innovation and employment.
“Entrepreneurs play a vital role in driving innovation and job creation across the UK, so it should be a real concern for the government that six in 10 business owners say they would be deterred from starting a new business by a rise in Capital Gains Tax, while 50% say they would consider leaving the UK as a result.
“Business owners need the confidence to make long-term decisions about investment and hiring. As the Chancellor prepares for his Autumn Budget, there is an opportunity to reinforce that confidence with measures that support entrepreneurship, encourage ambitious founders to build and grow their businesses in the UK, and ensure the country remains an attractive home for entrepreneurial talent.”
The findings underline the sensitivity of business owners to changes in the tax environment, particularly where decisions involve investments that may take years to generate a return.
For policymakers, the challenge is to balance the need to raise revenue against the potential behavioural response from entrepreneurs and investors whose businesses, capital and personal tax residence can be internationally mobile.
Leave a Comment