The UK’s startup community, long hailed as one of the most dynamic in the world, is voicing strong concerns this week in response to rumours of a proposed “exit tax” on entrepreneurs who relocate their companies or assets overseas, sparking a wave of advocacy, petitions, and calls for policymakers to reconsider the measure.
In an unusually unified front, more than 1000 startup founders, investors, and business leaders have signed an open letter to Chancellor Rachel Reeves, urging the government to abandon the idea before it causes lasting damage to the nation’s tech ecosystem.
The letter, coordinated by Dom Hallas, executive director of the Startup Coalition, warns that such a measure would “tell founders that their ideas and innovations aren’t welcome” and risk driving investment and talent away from Britain.
Over the past 15 years, the UK’s startup and scaleup scene has become a global success story. According to research from Dealroom and Tech Nation, UK tech companies attracted over $21 billion in venture funding in 2023, second only to the US globally. Cities like London, Cambridge, and Manchester have become hubs for innovation in fintech, AI, and clean energy.
This success, the letter argues, has been “built on openness and competitiveness”, qualities that made the UK an attractive destination not just for homegrown entrepreneurs but also for global founders who chose to build their companies here.
“These businesses employ thousands, pay taxes, and deliver innovations that improve lives,” the letter reads. “But a potential exit tax risks undoing all that.”
An “exit tax” is designed to tax unrealised gains when an individual or company leaves the country. In theory, it prevents people from avoiding capital gains tax by relocating before a sale.
But critics say such a policy could create a chilling effect on entrepreneurship, especially in a globalised tech sector where founders and investors can easily move between countries.
As Harry Stebbings, venture capitalist and host of The Twenty Minute VC, told The Times, the move could be “the final nail in the coffin” for UK entrepreneurs, a sentiment widely echoed across social media this week.
What makes this protest remarkable is its cross-party and cross-industry unity. Among the signatories is Alex Stephany, founder of social enterprise Beam and one of more than 120 business leaders who previously endorsed Labour as the “party of change.”
His signature, alongside dozens of other tech founders and investors, signals how broad the opposition has become. Names like Barney Hussey-Yeo (Cleo), Alex Macdonald (Sequel), and Hussein Kanji (Hoxton Ventures) have been vocal critics online.
As one commentator on X (formerly Twitter) noted, “When everyone across the UK tech ecosystem mobilises, it’s a real force to be reckoned with, it’s just a shame it takes something as daft as the wealth tax to make it happen.”
Existing tax pressures already bite
The open letter also points out that founders have already absorbed a series of tax changes in recent years. Capital Gains Tax increases, the tapering of Business Asset Disposal Relief, and revisions to the venture capital tax regime have already made the UK less competitive in the eyes of global investors.
According to the British Private Equity & Venture Capital Association (BVCA), these cumulative measures have led many investors to “re-evaluate the UK’s attractiveness as a startup destination.”
Instead of building confidence, the signatories argue, an exit tax would “send the opposite message, that the beatings will continue until morale improves.”
The timing of this debate couldn’t be more critical. Countries like France, Germany, and the UAE have all introduced targeted incentives to attract founders and venture capital. The OECD notes that the UK’s share of global venture funding has already slipped slightly since 2021.
“Founders are being courted around the world,” the letter warns. “We should be building bridges, not walls.”
Economists agree that innovation-led growth will be vital for the UK’s long-term fiscal health. As Oxford Economics recently reported, high-growth firms, which make up just 1% of UK businesses, are responsible for nearly half of all new jobs created in the private sector over the past decade.
With the Chancellor’s budget expected in the coming weeks, all eyes are now on whether the Treasury will respond to the growing backlash.
So far, there’s been no official confirmation that an exit tax is being considered, but the rumours alone have rattled confidence.
The tech sector’s message, however, is clear: Britain’s startup success has been hard-won, and fragile. If the government wants to make the UK “the best place to scale the next generation of global companies,” as the letter puts it, policies must reward ambition, not penalise it.
For now, the founders’ coalition is standing firm. Whether the government listens could determine if the UK remains Europe’s innovation powerhouse, or watches its brightest stars build elsewhere.
