A survey of 500 business owners, each with turnovers of £5 million or more, revealed that nearly half (48%) would consider relocating their businesses abroad if the tax changes set for 30th October were deemed unfavourable.

While Labour has committed to keeping corporation tax at its current rate of 25% and freezing VAT, income tax, and National Insurance Contributions for ‘working people’, there is widespread speculation about potential changes to other business-critical taxes. In particular, business owners fear increases to Capital Gains Tax (CGT) and potential cuts to Business Relief, which helps reduce Inheritance Tax.

The research also delivered further concern for the Chancellor: 46% of respondents stated they would be deterred from launching new ventures if CGT rates were raised in the forthcoming Budget. Currently, CGT is charged at 10% to 20% on profits from the sale of a business, compared to the higher 20% to 45% rates applied to income.

Moreover, only 20% of business owners expressed strong confidence that the Budget would benefit their businesses, adding to the uncertainty surrounding the government’s fiscal plans.

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 (£100 million to £200 million 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 £2 billion 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 effect 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.”

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