UK’s AI Ambitions Threatened by Tax Hikes
The UK’s goal of becoming a global artificial intelligence hub is being questioned by tech bosses and venture capitalists following the government’s announcement to increase taxes on businesses.
Tax Hikes Spark Concern
Finance Minister Rachel Reeves revealed plans to hike capital gains tax (CGT) rates, which will bring in an additional £2.5 billion to the public purse. The lower CGT rate will increase to 18% from 10%, while the higher rate will climb to 24% from 20%. Although the hikes are less severe than initially feared, they have sparked concerns among tech executives and investors.
Impact on Businesses
Paul Taylor, CEO of fintech firm Thought Machine, expressed concerns that the hike in National Insurance (NI) contributions will lead to an additional £800,000 in payroll spending for his business. “This is a significant amount for companies like us, which rely on investor capital and already face cost pressures and targets,” he said.
Haakon Overli, co-founder of European venture capital firm Dawn Capital, warned that increases to capital gains tax could make it harder for startups to thrive in the UK. “If we are to have the next NVIDIA built in the UK, it will come from a company born from venture capital investment,” he said.
Government Consultation
The government is consulting with industry stakeholders on plans to up taxes on carried interest. Anne Glover, CEO of Amadeus Capital, welcomed the consultation, saying that it was essential to engage with investors and business leaders to ensure that tax reforms do not stifle innovation.
Investment in Technology
The UK government has committed to mobilizing £70 billion of investment through the National Wealth Fund, a state-backed investment platform modelled on sovereign wealth vehicles. This move has been welcomed by venture capitalists, who believe that investment in technology will lead to long-term growth.
Challenges Ahead
Tech entrepreneurs and small businesses are bracing themselves for significant challenges ahead, including rising employer National Insurance contributions and minimum wage increases. Steve Hare, CEO of accounting software firm Sage, said that the budget would mean “significant challenges for UK businesses, especially SMBs.”
Government Support Needed
Sean Reddington, founder and CEO of educational technology firm Thrive, urged the government to provide support to offset the pressures of heightened taxation and rising debt on small businesses and the self-employed. “The crucial question is how businesses can maintain profitability with increased costs,” he said.
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