The UK government has abandoned plans to introduce a controversial “exit tax” after a concerted backlash from the country’s tech and startup community. The measure, which had been under consideration for inclusion in the Autumn Budget on 26 November, would have targeted business owners relocating abroad. Its removal is being interpreted in the ecosystem as a signal that ministers are wary of undermining the UK’s reputation as a base for globally ambitious founders.
Background on the Proposed Exit Tax
The proposed exit tax was designed to levy a 20 percent charge on unrealized gains from UK business assets when an individual ceased to be a UK tax resident. It would have applied to shares in private companies and other financial instruments, even if those assets were not actually sold at the time of departure. Supporters framed the idea as a way to raise additional revenue without reviving previously rejected tax increases.
Tech Community Mobilizes Against the Levy
The startup ecosystem reacted quickly once reports of the proposal surfaced, warning it would discourage entrepreneurs from building long term in the UK. More than 1,500 founders, investors, and operators signed an open letter coordinated by the Startup Coalition, arguing the tax would effectively tell innovators that their businesses were not welcome. Signatories ranged from early stage operators to high profile industry figures such as Hussein Kanji, Harry Stebbings, Barney Hussey-Yeo, Alex Macdonald, Charles McManus, and Andrew Sheffield.
Arguments From Founders and Investors
In the open letter, tech leaders warned that imposing an exit levy would clash directly with the government’s stated ambition to drive economic growth through innovation. They argued that at a time when founders can easily relocate and are being courted by jurisdictions worldwide, the UK should be removing barriers rather than creating new ones. The message was clear that policy should focus on attracting talent and capital, pooling investment, and giving globally minded entrepreneurs every reason to start and scale companies from the UK.
Government Decision Ahead of the Autumn Budget
According to Startup Coalition executive director Dom Hallas, government sources confirmed that Chancellor Rachel Reeves has decided not to include the exit tax in the Autumn Budget. A source close to the Chancellor said this administration wants to position itself as firmly pro-business and to strengthen the UK’s appeal to leading investors and founders globally. The spokesperson added that introducing an exit charge risked signaling that the country is less welcoming to entrepreneurs and international talent, which the Chancellor does not want to do.
Ongoing Debate Around Exit Levies
Despite the outcome, the broader debate around exit taxes is unlikely to disappear, as some economists and policymakers continue to see them as a tool to protect tax bases. Academic research from the London School of Economics and the Centre for the Analysis of Taxation has noted that the UK lags peers such as Australia, Canada, the United States, France, Germany, and Japan, all of which apply some form of exit levy. Advocates claim such measures can provide vital revenue and counter the impact of wealthy individuals moving assets offshore, even as entrepreneurs remain skeptical of the potential chilling effect on investment.
For now, the decision to drop the exit tax proposal is being welcomed by UK founders and investors as a sign that their concerns have been heard. The episode underscores how sensitive high growth sectors are to perceived policy shifts, especially when they affect mobility, ownership, and long term incentives. As the Autumn Budget approaches, attention will now turn to what alternative measures the government pursues to raise revenue while sustaining the UK’s status as a competitive hub for technology and innovation.