UK Entrepreneurs Ratchet Up Selling Off Their Businesses

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Bearing the brunt: Institute of Directors chief economist Anna Leach
British business owners spooked by impending tax hikes accelerate plans to sell off their businesses, as executives of UK-listed companies dump shares

Nearly one third of UK business owners have speeded up plans to sell their companies over the past year, with nearly one quarter motivated by fears over a hike in capital gains tax (CGT).

Close to 29% have accelerated plans to sell their companies, with 23% of those acting because of concerns over higher CGT. 

Evelyn Partners, a wealth management and professional services group, surveyed 500 owners of business with turnovers of at least £5m.

Currently, capital gains tax (CGT) in Britain is around 20% if you want to sell your business but the Government is widely expected to hike taxes in the 30 October Budget in an attempt to put the public finances on firmer ground.

The Treasury has denied a story in The Guardian that it is modelling a range of between 33% and 39% for hiking CGT.

Capital gains tax currently raises £15bn a year.

What is capital gains tax?
  • Capital gains tax is a levy raised on the increase in value of an asset between the points of purchase and sale.
  • The rate varies depending on the asset concerned, but rates are much lower than the highest rates of income tax.
  • CGT, which raised £14.4bn in 2022-23, is paid by around 350,000 people but just 12,000 of them account for two-thirds of the total intake.

Laura Hayward, tax partner at Evelyn Partners, said business owners were “on edge” ahead of the budget.

UK executives dump shares

Meanwhile, UK executives have more than doubled the rate in which they are cashing in shares in their own listed companies, again prompted by fears of a hike in CGT.

Since the country’s 4 July election, directors of listed companies have sold shares at an average rate of £31m a week, more than double the £14m pace of the previous six months, regulatory filings show.

According to research by investment platform AJ Bell, about £440m worth of shares in UK-listed companies have been cashed in. 

“My sale was purely down to concerns about the CGT changes,” one executive at a London-listed group who sold shares in September told the Financial Times. “The chancellor’s approach of leaving the whole economy in limbo over potential changes is not at all helpful.”

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Prime Minister Sir Keir Starmer paved the way for tax increases when he warned that the state of the nation’s finances was “worse than we ever imagined” and said “those with the broadest shoulders should bear the heavier burden”. 

The Institute of Directors’ economic confidence index, which measures business leaders’ optimism about the economy, registered a decline from -12 in August to -38 in September as company directors digested news of this impending higher tax burden. 

Anna Leach, chief economist at the Institute of Directors, told the Financial Times that businesses were concerned they would bear the brunt of tax changes after Labour ruled out rises for working people.

“They have ruled out everybody else,” she said.

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