Britain is the worst place in Europe to get rich
Success has become a liability in Britain, and uncertainty the defining feature of our economic landscape – it is little wonder that our most dynamic founders, investors and wealth creators are looking for a change of scenery, says Stephen Kenny
In the Autumn Budget, the Chancellor said twice that she had made the tax system fairer and stronger for the future. Launching a call for evidence on how our tax system can better back entrepreneurs and, rather poetically, painting a picture of spades in the ground and cranes in the sky, she spoke of kindling the entrepreneurial spark needed to “make Britain the best place in the world to start up, to scale up, and to stay.”
In reality, however, the Budget lacked even a flicker of that promised spark. Weeks, even months, of speculation culminated in an extremely dull Budget where the most exciting event was the OBR publishing most of the content before the Chancellor had even started her speech. Whilst the tweaks to Enterprise Management Incentives (EMIs) and the Enterprise Investment Scheme (EIS) offer a glimmer of hope to businesses, they do little to counter the damage caused by the persistent speculation, uncertainty and shifting policy signals that have marked this fiscal cycle.
Fairness and stability
I have worked with entrepreneurs and business leaders for most of my career; it is one of the things I love most about my job – collaborating with creative, ambitious people who build something from the ground up. I have come to realise that what they want from the UK tax system is simple: fairness and stability. Both have been seriously undermined in recent years, not just by Labour but by successive governments.
Entrepreneurs need to know that, if they work hard to build a business in the UK, they, their workers and their investors will be taxed fairly. Part of this is knowing how they will be taxed. Rampant speculation about exit charges, increases to Income Tax and new wealth taxes leaked in the lead up to the Budget only serves to push them towards those other jurisdictions that are tripping over themselves to attract these individuals.
Barely a day goes by without speaking to someone thinking of leaving the UK, often driven by the feeling they are “not welcome” or that the country is “anti-business”. If last year’s changes to Business Property Relief weren’t bad enough, the enduring speculation of future punitive changes has been, for many, the final nail in the coffin. Success has become a liability, and uncertainty the defining feature of our economic landscape – it is little wonder that our most dynamic founders, investors and wealth creators are looking for a change of scenery.
The UK has enormous potential to build a fair and thriving economy that looks after people and businesses alike, but the government needs to send a clear message that hard work and success are welcome here. Freezing Income Tax thresholds (so there will have been no increase in nearly a decade) and reducing salary sacrifice contributions sends precisely the wrong message. Where is the incentive for employees? The reality will mean higher tax on workers and, most likely, businesses picking up the cost over the next few years through higher wage inflation to compensate. Combined with last year’s increase in employer National Insurance, these changes feel punitive rather than supportive.
If the UK wants to attract entrepreneurs who are bold by nature, the Chancellor must match that boldness. Reviewing the Foreign Income and Gains regime, reconsidering the Inheritance Tax changes to Business Property Relief, ensuring tax bands keep pace with inflation and incentivising people to save for their future are not radical asks – they are the baseline for a competitive economy. Above all, businesses and entrepreneurs need certainty. A tax system that is stable and principled, not one where rumours of new levies constantly shift the ground beneath our feet. Until that certainty exists, the UK will struggle to convince the most ambitious to build their businesses – and lives – here.
Stephen Kenny is partner and head of private client at PKF Littlejohn