Tech entrepreneurs will leave the UK “en masse” if the chancellor announces a significant increase in capital gains tax at this month’s budget, according to a leading industry investor.
Harry Stebbings, a British podcaster turned investor who raised a $400m (£310m) fund this week, said the UK was “a bad place to do business” because of its tax environment.
The Guardian reported last week that the chancellor, Rachel Reeves, was considering raising capital gains tax (CGT) to between 33% and 39% in the budget on 30 October.
Stebbings said plans to scrap the non-dom tax regime had also sent a negative signal but a mooted increase in CGT – which is levied on the sale of assetssuch as shares and second homes – posed the most serious concern to entrepreneurs.
“The stance on capital gains tax is by far the biggest [issue],” he told the Guardian. “Why would you look to invest in the UK if you’re looking at a 35% CGT rate, or wherever it lands.”
The 28-year-old said tech entrepreneurs would leave the UK if a significant increase in the tax was unveiled by Reeves.
“I know fewer entrepreneurs will be here. They will leave en masse,” Stebbings said.
By contrast, a group of millionaire business owners have urged Reeves to raise £14bn through an increase in CGT, arguing it would have no impact on investment in Britain.
The chancellor is considering raising CGT on the sale of shares but not second homes, the Times reported on Thursday.
Keir Starmer, indicated this week that the tax would not rise as high as 39%, describing that number as “getting to the area which is wide of the mark”. However, the prime minister did not elaborate further on the probable rate.
The London-based fund led by Stebbings, 20VC, has become one of the most powerful players in European tech investment after its latest fundraising, which included backing from the Massachusetts Institute of Technology and Josh Kushner, the founder of OpenAI investor Thrive Capital.
Stebbings’s popular podcast, The Twenty Minute VC, has interviewed entrepreneurs including OpenAI’s Sam Altman and LinkedIn’s Reid Hoffman. Stebbings told the Financial Times this week: “We leverage media to be the best investor.”
He said London and the UK faced competition as a tech base, with impressive talent building up elsewhere in Europe including in Paris, Munich and Amsterdam.
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“My job is to invest in amazing founders wherever they are,”Stebbings said. “I hope they are in the UK, in London.”
He said there were “a lot of things” that were “right with this country” and that the tax situation was “fixable”. He added that he would continue to be based in the UK.
Stebbings said the UK still had great potential to create leading tech businesses – pointing to recent success of the fintech sector and Google DeepMind, the London-based artificial intelligence research lab.
“This is the country of Revolut, of Monzo, of TransferWise. We have unbelievable engineers spinning out of DeepMind. We should be building great businesses,” he said.
The Treasury has been approached for comment.
