Almost half (48 per cent) of business owners with turnovers of £5m or more would consider moving their business abroad if tax changes in the upcoming Budget were “clearly unfavourable”, Evelyn Partners has revealed.

The firm said that its study of business owners showed that Chancellor, Rachel Reeves, had been “put on notice” that the UK could lose a sizeable number of owner-managed businesses if the government raises taxes to what they view as unfair levels.

It noted that while the government had ruled out increasing the main rate of corporate tax above 25 per cent and promised to freeze the headline rates of VAT, speculation of changes to other taxes that impact decision making for businesses, such as capital gains tax (CGT) and curtailing business relief, was rife.

Furthermore, the research also found that if higher CGT rates were introduced in the Budget, 46 per cent of business owners would feel deterred from starting a new business.

CGT is currently charged at between 10 per cent to 20 per cent on the gain from selling a business, compared to the 20 per cent to 45 per cent rates levied on income.

Just one in five (20 per cent) business owners ‘strongly agreed’ that the Budget was expected to be good for their business.

Evelyn Partners tax partner, Toby Tallon, said that as entrepreneurial businesses were the “lifeblood” of communities in the UK, the research made 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,” Tallon stated.

“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 per cent CGT rate increase would generate the maximum additional amount (£100m to £200m per year) of additional CGT revenue, whereas a 10 per cent 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 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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