Almost half of business owners would consider leaving UK if Budget delivers tax blows

The UK-wide survey of 500 business owners with turnovers of £5m upwards reveals that nearly half (48%) would consider moving their businesses abroad if tax changes on October 30th were clearly unfavourable.

While Labour has ruled out increasing the main rate of corporation tax above 25% and has pledged to freeze headline rates of VAT, income tax and NICs for ‘working people’, speculation is rife that other taxes that directly impact decision making for business owners – namely increasing Capital Gains Tax (CGT) rates and curtailing Business Relief, which can help reduce Inheritance Tax – will be adversely changed in the Budget.

In a further blow for the Chancellor, the research also found that if higher CGT rates are introduced in the Budget on October 30th, this would deter 46% of business owners surveyed from starting a new business. CGT is currently charged at between 10% to 20% on the gain from selling a business, compared to the 20% to 45% rates levied on income.

Furthermore, only 20% of business owners strongly agree that the Budget is expected be good for their businesses.

Toby Tallon, tax Partner at Evelyn Partners commented: “Given that entrepreneurial businesses are the lifeblood of our communities up and down the country, this research makes for extremely worrying reading. Following the prime minister’s comment in August that the Budget was ‘going to be painful’ we’ve seen an influx of queries from business owners who are anxious about what any potential tax changes could mean for them personally and their businesses, with some mulling the option of becoming non-resident.

“The experience of the pandemic taught us that many businesses were able to quickly pivot to remote working. With the technology available today some business owners may decide to up sticks and move either themselves or their operations - or both - abroad if they felt they weren’t being made welcome in the UK.

“Charging CGT at a lower rate on the gains from business sales compared to that levied on income recognises the significant personal and business risks that entrepreneurs take when starting and growing a business. An HMRC report in June 2024 concluded that a 1% CGT rate increase would generate the maximum additional amount (£100m to £200m per year) of additional CGT revenue, whereas a 10% CGT rate increase would result an ever-reducing amount of CGT revenue (lower by as much as £2bn per year). HMRC also added a health warning that: “very large tax rate rises can reduce exchequer yield due to taxpayer behavioural impacts”. This was a clear message that adverse changes to taxes such as CGT rates would have a direct impact on the investment decisions that business owners make in the UK.  This would also have a knock-on affect on the creation of jobs in towns and cities across the UK as well as hampering the much-needed economic growth that the new Government says it wants to prioritise.

“Clearly, public finances are under pressure, but if the Chancellor wishes to ‘create a tax system that supports wealth creation and increases business investment’ as she stated at the International Investment Summit on 14 October, we urge her to listen to the UK business community as illustrated by the results of our survey.”

*The research was conducted by Censuswide, among a sample of 500 18+ UK Business Owners (Businesses with a turnover of £5m+). The data was collected between 18.09.2024-02.10.2024. Censuswide abides by and employs members of the Market Research Society and follows the MRS code of conduct and ESOMAR principles. Censuswide is also a member of the British Polling Council.