We've been here before, the last two years in fact, when speculation over Capital Gains Tax rates triggers a frenzy of activity. The Budget will take place on 28 October, and already there's a sense of here we go again.
Many owner-managed businesses already feel that the rewards for taking commercial risk have been steadily eroded, and another increase in CGT rates could be the final nail in the coffin for entrepreneurship in the UK. Founders often spend years, sometimes decades, building businesses, creating jobs, investing in innovation and driving economic growth, all with no certainty of success. For many, the prospect of eventually selling their business and retaining a meaningful proportion of the value they have created is a key part of the entrepreneurial journey.
If the tax burden on that exit continues to rise, the incentive to start, grow and ultimately commercialise businesses in the UK risks being significantly weakened. Successive governments have spoken of fostering enterprise; however, tax policy must support that ambition rather than undermine it, and that has not happened recently as Capital Gains Tax rates have increased and Business Asset Disposal Relief (BADR) has eroded.
Any further increase in CGT rates, or further restrictions on BADR, would make the UK a less attractive place to invest personal capital, create employment and build long-term value. At a time when economic growth remains a national priority, policymakers should be asking how to encourage more entrepreneurs, not how to make the rewards for entrepreneurship even less compelling. My hope is that they will see sense and reverse this trend. Any increase in UK Capital Gains Tax rates must be matched with extended tax relief or lower tax rates for those who are investing and working hard for the UK to build a better future.
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