In the autumn budget to be announced later in 2018 the UK government is expected to increase government spending in certain areas including health. This has given rise to speculation as to what tax increases might be required to provide the extra funding.
A think tank known as the Resolution foundation has suggested that the savings could be found by abolishing the tax relief known as the Entrepreneur’s Relief. This provides for people selling their interest in a business to be subject to only half the normal rate of capital gains tax on the disposal, up to a lifetime limit of GBP 10 million for each individual.
The think tank has suggested that this relief only helps a relatively few wealthy individuals and does not achieve its stated aim of encouraging more people to start a business or to provide investment for new businesses. The evidence for this it is claimed is that many people do not know about the relief at the time they start a business.
The think tank describes the relief as expensive, regressive and ineffective. It was initially intended to cost the government around GBP 200 million a year but the relief has been expanded since its introduction and the uptake of the relief has been greater than expected, leading to an average cost for the government of more than GBP 2 billion a year.
The government has so far been reluctant to reduce the entrepreneurs’ relief which helps business owners to pass on a business intact when they are ready to move on or retire.
