UK income tax a barrier to entrepreneurialism

Thursday 15 March 2012

The 50 per cent tax rate faced by high earners is dissuading entrepreneurs from growing their businesses, it has been suggested.

Martin Dunne, accounts, tax and business adviser at Sayers Butterworth, suggested many business leaders do not see the point in trying to maximise growth and their personal wealth at present.

He claimed that the higher rate of tax, introduced as a budget deficit measure, has "badly damaged" the economy.

"For all the politicians banging on about it being small businesses that are going to kick start our economy and take us out of recession - to go and introduce 50 per cent tax rates is a huge disincentive to these guys to go out and make money," Mr Dunne commented.

"And so from a business perspective, I think it puts people off doing business in the UK. Why do it here - when you're going to have to pay 50 or 60 per cent income tax - if you can go somewhere else around Europe and do it?"

On a positive note, he said improvements to Enterprise Investment Scheme tax relief are welcome for people who own a business.

In 2011, the entry point was raised from the 20 per cent income tax rate to 30 per cent to encourage investment, Mr Dunne noted.

"That will encourage entrepreneurial people and businesses, and investment in those businesses, which is great," he added.

"Although even then, the government tripped themselves up - because they announced it in last year's Budget and it's not actually going to come into place until April 2012."

Posted by Steve Williams