Hostile UK tax system is crushing entrepreneurship
Britain’s tax system is crushing entrepreneurs and needs to be changed if the government wants more people to start, scale and sell a business, a tax expert has warned.
Praveen Gupta, UK head of tax at UK top 10 accountancy and business advisory Azets, which has offices across the south west, including in Gloucester and Bristol, said the current system needed changing to encourage entrepreneurs to start businesses, hire staff and help the economy grow.
“There is no incentive to set up, scale and sell a business in the UK.
“It costs more than ever to recruit staff and if you are able to sell your company, the Treasury takes a bigger slice of the proceeds than it has in decades.
“We understand the government needs to balance the books, but right now the tax system is preventing entrepreneurs from doing what they do best and the economy is suffering as a result.
“There’s a real risk the UK will lose the next generation of Bransons, Dysons and Bartletts unless something changes – either because they’ll go abroad or because they won’t take the leap and start their own businesses.”
Praveen proposes a four-part solution to take the shackles off would-be UK entrepreneurs:
- Raise the Employment Allowance rate to £50,000.
- Slash the rate of Capital Gains Tax (CGT) to 10% for people selling a business.
- Restore the Business Asset Disposal Relief (BADR) lifetime limit to £5m.
- Introduce a two-year Employment Tax Roadmap.
He said: “This approach would make it easier for businesses to hire, reward founders who have successfully exited a company – especially an SME – and provide stability for the UK business community about the government’s plans for Employment Tax policy.
“Any impact this would have on Treasury income would be offset by the fact that there would be more money going into the economy as a result of these changes, and more jobs created across the UK.”
Praveen explained that raising the employment allowance to £50,000 would give employers more confidence in managing their costs and improve their willingness to hire new staff.
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“A £50,000 employment allowance threshold would cut the National Insurance costs of the SMEs in the UK, as an employer wouldn’t have to pay anything unless their wage bill was more than £333,333 – currently NIC is due when a wage bill reaches circa £70,000.
“This small change would make a significant difference to SMEs – and to the UK’s employment figures – as firms would be more willing to hire people as they would know the NI costs could be managed and they’d have the funds to do it.”
When it came to changing CGT and BADR, Gupta argued that a new CGT threshold and a restored £5m BADR limit would enable successful entrepreneurs to benefit more from business sales – and potentially make them more willing to invest their earnings back into UK businesses.
“Entrepreneurs typically don’t retire – many of them invest some of their hard-earned money from selling their businesses into start-ups or new companies looking to scale.
“Taking less of the money they make from selling a company would give them a larger amount to invest in new businesses, effectively creating an army of business angels who could help the entrepreneurs of the future grow.”
Praveen also called for a rolling two-year Employment Tax Roadmap, which he said would allow business owners time to plan ahead of any new changes being introduced.
“The last two Budgets have had a significant impact on businesses, and both have given them little time to get ready for any changes the new tax year brings,” he explained.
“An Employment Tax Roadmap would enable business leaders to plan more effectively and budget more accurately, which create more stability for businesses and the economy – in terms of growth, tax revenues and recruitment.”
Praveen added: “If the UK wants to avoid its entrepreneurs becoming an endangered species and really fuel economic growth, the government needs to take action now and evolve the tax system into something that encourages rather than stifles entrepreneurs and which gives them the stability they need to start and scale businesses.
“If it can achieve that, the economy and the country will be much better off.”
Figures from Companies House analysed by Azets show that there were nearly 13,700 fewer company incorporations in the 2025 calendar year compared to 2024.
Data from the ONS [ons.gov.uk] shows there were an estimated 104,000 fewer payrolled employees between March 2025 and March 2026.
Based on data from the ONS [ons.gov.uk], there were an estimated 29,000 fewer vacancies in the UK between January and March 2026 compared to October to December 2025 and there were an estimated 65,000 fewer vacancies during January to March 2026 compared to a year ago.
Figures from the ONS show that around 75,000 more people aged 16 to 34 left Britain than arrived in 2025. This gap has grown every year since 2022.