As the UK’s Labour Party announces their first budget today, many are predicting that the country will lose thousands of tech entrepreneurs to other more favourable locations, including the UAE, mostly due to the expected increases in tax.
According to AGBI, more than four in five company investors and founders have made it clear that these changes in tax will make them consider relocating. The capital gains tax (CGT) that will be imposed on entrepreneurs during the sale of their business has been proposed to see a stiff increase of about 10%, as proposed by Rachel Reeves.
This new figure, set to sit between 33% and 39%, will see it coming pretty close to income tax rates, forming part of an effort to fill a fiscal gap supposedly left by the Conservative government – according to Labour, anyway.
The other major change that would affect businesses is the supposed intention to completely scrap (or maybe just restrict) Business Asset Disposal Relief (which used to be known as Entrepreneur’s Relief).
How Have British Tech Founders Responded?
It’s too early to tell exactly what entrepreneurs will do, but there’s no doubt about the fact that many British tech founders have already started exploring their options in terms of relocation, and one of the top options that has emerged is Dubai.
Dubai has been a favourable location for a little while already, but it now stands in even more stark contrast to the UK with its low tax rates and environment that’s conducive and encouraging for entrepreneurship.
Indeed, there’s been a pull from Dubai for quite some time, with the city boasting an environment that supports entrepreneurs and offers not only excellent tax benefits but a high standard of living too.
British business owners have expressed not only surprise and unhappiness at the budget proposal but also confusion over why the government would intentionally create an environment in which there’s little reward for being successful. Especially in terms of businesses creating jobs for so many people.
The growing feeling among entrepreneurs seems to be that these changes will have a really detrimental effect on the overall attractiveness of the UK as a location for startups to choose to be established. Not only that, but businesses that are founded in the UK will have decreasing potential for growth and scalability.
And these opinions aren’t just whispers on the streets. Indeed, these thoughts have been made clear by means of a survey conducted by the Startup Coalition earlier in the week, a London-based organisation that reportedly represents more than 700 investors and founders in the UK.
Removing Incentive for Success in the UK
The overwhelming feeling among business owners in the UK seems to be that this proposed tax change has led to a whole lot less motivation to go ahead and build large-scale businesses in the UK. By implementing tax in every aspect of professional life – during the creating process, on spending and now CGT – it’s just becoming more and more expensive to thrive as a business owner.
However, the concerns voiced by entrepreneurs aren’t only about themselves and their own professional prospects. Not only would these tax changes make the UK less attractive for business, but during a time in which people are able to work remotely and businesses can thrive while having employees all over the world, the government is playing a dangerous game.
Now, business owners are experiencing not only a pull from other desirable locations like Dubai but there’s a very real push from the UK government too.
Indeed, why would ambitious entrepreneurs choose to stay in an environment that doesn’t seem to value growth and professional success when there are locations, like Dubai, that offer a growth-forward mindset alongside low taxes, a high quality of living and barely any crime?
While the budget is being announced as we speak, we’ll have to wait and see what the long-term consequences are for this move and just how UK-based business owners will react.
