Some of Britain’s most prominent entrepreneurial voices are pressing the Treasury to introduce a targeted tax incentive designed to keep the proceeds of successful exits circulating within the domestic start-up ecosystem, rather than drifting into passive wealth management or overseas opportunities.
The proposal, which has been dubbed “repeat entrepreneur relief”, would allow founders who sell shares in their companies and reinvest the gains into a new venture within twelve months to defer capital gains tax indefinitely. The liability would only crystallise when the new shares were eventually sold without further reinvestment.
The idea has been put forward in various forms by the Founders Forum Group, Schroders and UK Private Capital as part of a recent Treasury consultation on the tax treatment of entrepreneurs. Each submission makes broadly the same case: that the UK’s tax framework does a reasonable job of supporting businesses as they grow, but does far too little to encourage founders to recycle their capital and experience once they have cashed out.
UK Private Capital, the trade body representing venture capital and private equity firms, argued there is a compelling rationale for aligning tax incentives with the post-exit phase, when founders hold significant capital, possess hard-won operational expertise and face decisions about where to base themselves and where to deploy their money next.
The Founders Forum Group, co-founded by Brent Hoberman and Jonnie Goodwin, drew a comparison with the American Qualified Small Business Stock scheme, under which founders pay no capital gains tax on gains of up to $10 million or ten times their original investment. The group described that exemption as a primary driver of the reinvestment culture that has long defined Silicon Valley, where exit proceeds are routinely funnelled straight back into the next generation of companies.
A survey conducted by the Founders Forum Group found that nearly nine in ten founders said such a measure would make them more likely to reinvest in the UK, with more than seven in ten describing the effect as significant.
The lobbying comes at a sensitive moment for the government’s relationship with the entrepreneurial community. Since taking office, Chancellor Rachel Reeves has progressively increased the rate of business asset disposal relief, the levy formerly known as entrepreneurs’ relief, from its longstanding rate of ten per cent to fourteen per cent last year, then to eighteen per cent from this month. The standard capital gains tax rate remains at twenty-four per cent.
Many founders have argued that the increases make Britain a less attractive place to build and exit a business, though a number of tax analysts have countered that the previous relief was poorly targeted and did relatively little to encourage genuinely productive reinvestment.
The government has sought to balance these changes with fresh incentives at the earlier stages of the company lifecycle. In November, Reeves extended a package of measures making it easier for founders to offer equity to employees and raise capital, provisions that came into force last week.
A Treasury spokesperson pointed to these steps as evidence that the government has the right economic plan in place, highlighting changes to the enterprise management incentive scheme and venture capital tax schemes that are expected to support around £100 million of additional investment annually.
Whether the Treasury is willing to go further and address the post-exit gap that the lobbying groups have identified remains to be seen, but the volume of submissions suggests the argument for repeat entrepreneur relief is gathering serious momentum.
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Founders push for ‘repeat entrepreneur relief’ to keep exit capital flowing back into UK start-ups