Concerns Over Proposed Exit Tax
The warning follows reports that Chancellor Rachel Reeves is considering a 20 per cent tax on the assets of founders who build businesses in the UK and later move abroad for tax reasons. The measure is expected to raise around £2 billion to help close a fiscal gap estimated at £30 billion. However, many within the startup ecosystem argue that such a policy risks undermining confidence and discouraging investment.
Those signing the open letter include the founders of AI talent platform Beamery, fintech firm Cleo, and investors such as Dawn Capital and Harry Stebbings’ 20VC fund. The letter, organised by the Startup Coalition, calls for the government to support rather than penalise entrepreneurs, stating: ‘We share the Government’s ambition for growth and sound public finances, but progress will only be achieved by making the UK the best place to scale the next generation of global companies, not by punishing those who choose to leave.’
A Call to Support, Not Punish Founders
The signatories argue that a punitive tax on founders who relocate would damage the UK’s global competitiveness at a time when other countries are actively seeking to attract entrepreneurial talent. The letter urges the government to build 'bridges, not walls,' encouraging investment and innovation rather than creating new barriers.
It also points to the 'painful burden' of existing taxes, including recent increases to Capital Gains Tax, as a growing concern for the tech sector. ‘We should be under no illusion that these changes have already made global tech founders and investors question the competitiveness of the UK,’ the letter states. ‘Instead of rebuilding trust with entrepreneurs, a potential exit tax sends the opposite message.’
Industry Reaction
Prominent investors have been quick to criticise the proposed policy. Venture capitalist Harry Stebbings described it as the 'final nail in the coffin' for the UK’s startup scene, warning that the country has already lost many of its most successful entrepreneurs. ‘This will make the few stragglers who remain, including me, leave’.
The issue has drawn further attention following reports that Nik Storonsky, co-founder and CEO of Revolut, relocated to the United Arab Emirates earlier this year in response to changes in UK tax rules. Critics argue that an exit tax would accelerate this trend, undermining the UK’s status as a global hub for technology and investment.
Balancing Revenue and Growth
Supporters of the proposed tax argue that it would ensure fairness and contribute to restoring public finances. However, opponents maintain that such measures risk diminishing the UK’s attractiveness for founders who drive innovation, job creation, and long-term economic growth.
The Startup Coalition’s letter concludes that true growth will come from policies that foster confidence and stability for entrepreneurs, not from those that appear to penalise success. As global competition for investment intensifies, many in the tech community are urging the government to prioritise innovation-friendly reforms over short-term fiscal gains.
