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Experts Share: How Will A Possible Wealth Tax Impact Startups And Entrepreneurs?

A wealth tax is a yearly charge on what someone owns. It looks at the total value of things like houses, land, savings, shares, and even expensive items like jewellery or art. After debts are taken off, the rest is taxed.

This is different from income tax, which is based on what someone earns. A wealth tax is about ownership, not income. It applies even if the person made no money from the assets that year.

Some people see this as a fairer way to collect public money. After the pandemic, the gap between the richest and poorest in the UK grew. In 2022, the poorest households lost 7.5% of their income in real terms, according to government numbers. Meanwhile, the richest fifth saw their wealth grow by 7.8%. Labour has not formally proposed a wealth tax, but party figures have said it is one of the options being looked at.

 

Where Has It Been Used?

 

Norway has taxed wealth since the 1800s. People pay 1% on assets worth more than 1.7 million Norwegian kroner, which is about €146,000. For wealth above 20 million kroner, the rate increases slightly. The money goes to both local and national government.

In Spain, residents pay based on a sliding scale. The tax starts at 0.16% and can go up to 3.5% for people with large amounts of wealth. In some areas like Madrid and Andalusia, residents had full relief from the tax, but this changed after a new “solidarity wealth tax” was introduced in 2022 for assets above €3 million. The central government now collects this tax unless the region does it first.

Switzerland also taxes wealth, but each canton sets its own rates. What counts as taxable wealth can vary, but the system has been in place for decades and applies to global assets, unless they are tied to foreign property or businesses.
 

What Do They Actually Tax?

 

France scrapped its full wealth tax in 2018 and now only taxes real estate. People who own property worth more than €1.3 million must pay, even if they live outside France. The highest rate is 1.5%.

Italy taxes assets held abroad. Financial accounts are taxed at either 0.2 or 0.4%. Foreign property is taxed at 1.06%

Belgium brought in a tax in 2021 for large securities accounts. If someone has more than 1 million euros in stocks and funds, they pay 0.15%. In the Netherlands, wealth is taxed as part of income, but the courts found this unfair. From 2023 to 2027, a temporary fix is being used, with different rates for each asset type.

 

What Might This Mean For The UK?

 
The UK has never had a full wealth tax. There are taxes on assets, like inheritance tax or capital gains, but these are only triggered during events like a sale or death.

Introducing a new annual wealth tax would take time. It would also need a clear design… who pays, what gets taxed, and how it’s enforced. The Labour Party has not made a firm pledge, but it has said it is considering ways to deal with inequality and rising debt, which has now reached £2.7 trillion.

Whether a tax like this would work in the UK depends on how it is conducted. Other countries show it is possible, but each one has had to adjust their rules over time. Any future UK version would face pressure to avoid mistakes already seen elsewhere
 

How Will This Impact Startups And Entrepreneurs?

 

Experts have shared whether a possible wealth tax in the UK would be a good or bad thing.
 

Our Experts:

 

  • Amy Knight, Business Commentator, NerdWallet UK
  • Dr Richard Ondimu, Senior Lecturer, The University of Law Business School
  • Alan Jones, CEO, YEO Messaging
  • Martin Hartley, Group CCO, emagine
  • Simon Bones, Founder and CEO, Genous
  • Vipul Sheth, MD, Advancetrack
  • Jeremy Savory, Founder and CEO, Savory & Partner
  •  

    Amy Knight, Business Commentator, NerdWallet UK

     

     

    “A wealth tax could make more entrepreneurs a flight risk”

    “A wealth tax could nudge entrepreneurs who already have one foot out the door to leave the UK for good, taking their assets, capital and future investment potential with them.

    “Over a period of decades, investing the revenue a wealth tax would generate in health, education, and infrastructure could prove advantageous for the economy. But in the near term, the government could end up alienating the business owners and high net worth individuals it needs to keep onside.

    “If more entrepreneurs shift their residency and move their startups overseas, Britain’s loss would be more than just financial – the policy could exacerbate the brain drain, undermining efforts to supercharge the UK’s innovation potential.

    “Those who stay are already looking to offshore roles instead of hiring British talent, hurting the UK labour market when employers are still stinging from this year’s NICs hike.”

    “Growing businesses may take their foot off the gas”

    “The complexity and cost of being tax compliant in the UK already risks deterring some entrepreneurs from scaling. Further increasing taxation on those with the highest income reduces the incentive for businesses to keep growing.

    “Business owners are already dealing with intolerable levels of economic uncertainty, sitting on their hands while Trump’s trade war rages on. More than a fifth (21%) of UK business leaders are pausing their growth plans and major investments, according to NerdWallet UK’s latest business survey.

    “For business owners whose wealth is tied up in their companies, adding more complexity into the mix could increase administrative costs and hold back investment decisions even longer, stalling the growth that the government so desperately needs.”

    “Startups could sell out too soon”

    “Policy changes and global uncertainty are pushing more British entrepreneurs to think about selling their companies, which could prove to be a tragic loss for the UK.

    “Over a third (34%) of UK business owners are currently planning to exit their business in the next five years, according to NerdWallet’s latest research. The introduction of a wealth tax could see this figure increase, with entrepreneurs choosing to quit while they are ahead, instead of continuing to expand their business to its full potential.”

    “New thresholds create new loopholes”

    “A high threshold, which captures only the very wealthiest individuals, could minimise any adverse impact on UK investment.

    “However, for those businesses caught in the wealth tax net, the government will need to be on its guard for a potential increase in tax avoidance. Implementing a new tax will be time-consuming and costly enough, and the resources needed to chase down those who evade it could ultimately make the policy backfire.”

     

     

    Dr Richard Ondimu, Senior Lecturer, The University of Law Business School

     

     

    “Many early-stage ventures and their founders hold most of their wealth in illiquid assets, particularly privately held equity that is difficult to value or sell. A tax on net worth, even on unrealised assets, could strain liquidity, disrupt growth plans, and weaken incentives for innovation.

    “It may also deter early-stage investment if funders expect increased challenges in ‘extracting rent’ or navigating uncertain valuation frameworks.

    “Imposing a tax on illiquid assets poses a significant risk. Such a tax could disproportionately affect entrepreneurs, family businesses, and individuals whose wealth is tied up in non-liquid holdings.

    “These groups may be forced to sell productive assets prematurely or divert funds from growth initiatives merely to fulfill tax obligations, ultimately undermining the economic contributions of high-growth, high-risk enterprises. If founders are forced to quickly raise cash to meet tax obligations, this could lead to the premature sale of equity at a discount, often referred to as a ‘fire sale’.

    “This scenario is especially concerning in private markets, where liquidity is already limited. Such forced sales could result in lowered valuations, commonly known as ‘haircuts’, which would not only reduce investor confidence but also potentially trigger a negative feedback loop affecting the overall market.

    “Another potential consequence of a wealth tax is that investors might strategically shift their capital to lower-tax jurisdictions or restructure their holdings to minimise their exposure.

    “This is especially likely if they perceive the UK as becoming less welcoming to entrepreneurial wealth. Such actions not only erode the domestic tax base but also undermine the intended redistributive and fiscal goals of a wealth tax.“

     

    Alan Jones, CEO, YEO Messaging

     

     

    “A UK stealth wealth tax risks sending the wrong message to business founders and entrepreneurs at a time when we need their revenue generating and innovation skills most. Building a tech business that can compete on the world stage demands personal risk, relentless reinvestment, and long-term commitment—often with founders putting everything on the line.

    “Now a broad wealth tax on top of the penal capital gains tax and reduced entrepreneurs relief will definitely drive talent and capital elsewhere, just as Paris and other hubs are gaining ground over London. If the UK wants to stay Europe’s top tech hub, it should focus on policies that reward scaling and reinvestment, not penalise those taking the risks to build and grow here.”

     

    Martin Hartley, Group CCO, emagine

     

     

    “While the intention behind balancing inequality is understandable, the Government needs to think about the consequences for startups and entrepreneurs if it wants to achieve innovation-led growth.

    “The UK has historically been home to some of Europe’s most dynamic startups, especially in fintech and AI. A wealth tax that deters early-stage investing risks the compromises that status and reputation.

    “Entrepreneurs would take a hit if a wealth tax was implemented, as they are generally asset rich and cash poor. Taxing the value of their businesses seen on paper may force founders to sell stakes prematurely or relocate to more favourable regimes. We may also see a draw back from investors due to lack of incentive.

    “If the UK Government goes ahead with the tax, it must clearly communicate what it means for different businesses. Failing to do so would send the wrong signal at a time when the market is already volatile.”

     

    Simon Bones, Founder And CEO, Genous

     

     

    “A wealth tax could impact entrepreneurs in two ways: first, should a putative valuation of a business that hasn’t been sold or where the shares haven’t been realised be included in entrepreneurs’ or investors’ wealth caclulations and taxed accordingly, and (b) what does it do to the incentive to build a business in the first place.

    “The first is the biggest risk for entrepreneurs. An illiquid major shareholding in a business that may or may not end up being worth anything is tough to get taxed against; if the entrepreneur scrapes everything they have to fund a business, should they be taxed when they may not even be drawing a salary and can’t pay? Do they get refunded if the business goes under subsequently? And what about wealthy investors who may worry that their risky investments will cost them and may still never pay out?

    “The best approach here would be to give an exemption for unquoted shareholdings in start-up businesses (longstanding family firms that aren’t quoted shouldn’t get the same exemptions).

    “There are some practical challenges in that but we have SEIS/EIS/VCT schemes that variously try to define what a risky start-up is, and something similar could be built. Do this properly and it also gives a financial incentive to risking existing wealth on investing in or starting new ventures, supporting innovation.

    “As to the second argument that wealth taxes disincentivise entrepreneurship? Here, this is a self-serving argument with far less practical validity. As someone who has benefited from the then entrepreneur’s relief, I can say that I was delighted to qualify for it but it had absolutely nothing to do with the decision of whether to start up a business.

    “And any entrepreneur who would not start a business because they expect it to be so valuable that it would incur wealth taxes (which are only levied at pretty high personal valuations in most contexts) and they object sufficiently in principle to paying tax on such gains that this becomes a barrier either (a) is delusional; (b) has a serious lack of judgement, or (c) is probably sufficiently unpleasant that most of us would prefer they wasted their shareholders’ investments in another jurisdiction.”

     

    Vipul Sheth, MD, Advancetrack

     

     

    “There’s no question that a wealth tax would risk a mass exodus of capital, talent, and enterprise from the UK. We’re already seeing signs that some business owners and high net worth individuals are quietly restructuring assets or considering overseas moves – more out of uncertainty than greed.

    “From our vantage point as an outsourcing partner to hundreds of firms across the country, the biggest impact would likely be felt in sectors like tech, finance, and entrepreneurial SMEs – the very businesses the UK relies on for jobs, innovation, and long-term economic growth. Many of these operate in or near growth hubs such as the South East, Manchester, and the West Midlands.

    “In conversations I’ve had with other business leaders, too many have told me they’d give serious consideration to leaving the UK entirely if a wealth tax came in, because the risk and uncertainty would simply become too great.

    “What’s often missed in this debate is that these entrepreneurs are already major contributors to the UK economy – through income tax, where the top 1% contribute 29% – and creating highly skilled employment and paying significant corporation and business taxes. If they leave, that revenue simply gets collected outside the UK.

    “A wealth tax might raise short-term headlines, but it would damage long-term tax revenues, stifle investment, and make the UK less competitive globally. If entrepreneurs decide the UK is no longer worth the risk, they’ll simply set up shop elsewhere – and once they’ve gone, it’s incredibly hard to bring them back.”

     

    Jeremy Savory, Founder and CEO, Savory & Partners

     

     

    “Sir Keir Starmer’s refusal to rule out the wealth tax is not good news for the UK. Public data shows more millionaires have left UK per capita than any other country in the world, and the PM’s remarks are adding fuel to the fire – the movement will now intensify and soon the whole point of it will be redundant.

    “Many of those most affected have already left, and without an exit tax, their assets and future tax contributions are gone. Moreover, this tax will kill entrepreneurship in the UK, with high corporate and personal tax rates, business leaders will look at more attractive jurisdictions.

    “Instead of further taxing residents who already pay VAT and multiple other taxes, the UK should tax foreign property buyers, as Singapore does or impose annual fee of £300, 000 for those that are currently non-doms, to achieve fairer wealth redistribution without driving away those who contribute to the economy.”

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