(Bloomberg) -- Chancellor of the Exchequer Rachel Reeves is considering raising taxes levied on entrepreneurs when they sell their businesses, as part of her push to raise as much as £40 billion ($52 billion) to balance Britain’s budget.
Britain’s finance minister is looking at cutting a capital gains tax easement known as business asset disposal relief in her spending plan on Oct. 30, according to people familiar with the matter. The policy allows entrepreneurs to pay a reduced tax of 10% on profits they make from the sale of their companies, rather than the standard 20% levy for higher-rate taxpayers.
Such policies are subject to last-minute changes and may or may not be represented in the final document published in less than two weeks, according to the people, who requested anonymity to discuss unannounced measures. The Treasury didn’t immediately respond to a request for comment.
Cutting the relief is likely to be part of a broader set of changes to capital gains tax by Reeves after she ruled out increases to several broader levies. That has left her with fewer tools to raise the £40 billion that government officials say is needed to fill a budgetary hole left by the previous Conservative administration, deliver an increase to public spending and to meet her rule of having day-to-day expenditures covered by tax revenue.
Business asset disposal relief is one of several capital gains tax reliefs where Reeves is considering making changes at the budget, according to the people. Reliefs covering charitable gifts, investment and property have also been under review, they said.
Labour’s election promises mean Reeves is having to look at increasing taxes on the wealthy, property, inheritance and pensions.
Capital gains tax rates vary between 10% and 28%, and ahead of the budget, speculation has mounted about whether the chancellor will bring its levels into closer alignment with income tax, which is levied at 20% to 45% on earnings above a tax-free allowance. Nevertheless, Prime Minister Keir Starmer signaled in a Bloomberg Television interview earlier this week that a Guardian report that Reeves could raise the levy to 39% was “wide of the mark.”
Business asset disposal relief was formerly known as entrepreneurs’ relief and was introduced by then-Labour Chancellor Alistair Darling in 2008. The policy cost the Treasury approximately £1.5 billion in the 2023-24 tax year, according to data from His Majesty’s Revenue & Customs.
Edward Troup, a former head of HMRC who advised Labour on tax compliance prior to the general election, said in 2019 that entrepreneurs’ relief should be scrapped because it helps “those who have already made their gains and provides no incentive for real entrepreneurship.”
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