Founders Call for Major Changes to UK Tax System | Founders Pulse

As the UK government evaluates tax incentives, founders are calling for a system that rewards risk, simplifies compliance, and incentivises growth in our latest Founders Pulse.

The UK tax system is often seen as a barrier to growth. From complexity and unpredictable changes to burdensome regulations. The Government has opened a formal Call for Evidence – an opportunity for UK founders to influence how the country can support scaling businesses.

Founders Pulse facilitates this direct line to the government, enabling founders to voice their concerns. In our latest Pulse, founders shared the urgent need for policies that incentivise risk-taking, keep talent in the UK, and provide the support needed to scale.

Key Issues with the UK Tax System

Founders have spoken loud and clear about the barriers they face. These issues are making it harder to build, scale, and retain talent in the UK:

• Talent and Hiring: The current EMI scheme is limiting the ability to attract and retain top talent, especially for businesses scaling rapidly in sectors like AI and deep tech.
  
• R&D Complexity: Founders are struggling with the R&D tax relief system, finding it too complex and inaccessible, which hinders innovation in tech-driven industries.

76% of respondents said they had actively considered relocating their tax residency or their company HQ outside of the UK. One respondent went as far as to say they “hadn’t spoken to a single entrepreneur in the last year who hasn’t considered relocating outside the UK.” Clearly, action is needed, fast. 

Founders’ Top Priorities for Tax Reform

We asked founders what needs to change, and three priorities emerged:

• Stronger incentives for high-growth businesses: Founders want a tax system that rewards risk and scales with the needs of their growing companies.
  Simplified tax processes: Tax compliance should be easier, allowing founders to focus on building their businesses rather than navigating red tape. One founder put it frankly, “we’re entrepreneurs trying to grow, we haven’t got time for mastering the intricacies of tax systems with no help from HMRC.”
• Support for attracting and retaining talent: With global competition for skilled workers, the UK needs a tax environment that makes it easy to hire top talent and incentivise them to stay.

What We’re Calling For on Your Behalf

The key changes founders are calling for are:

• Higher limits for EMI schemes: Founders want the EMI scheme limit raised to £500,000 and extended to contractors and fractional advisors.
  
• A Scale-Up EMI Tier: A new tier that continues providing equity incentives as businesses grow beyond the 500-employee mark, ensuring that key talent is retained through hyper-growth.
  
• Restore Entrepreneurs’ Relief: Founders want Entrepreneurs’ Relief back with a £10m lifetime limit and a 10% rate, making it more rewarding to scale and reinvest in the UK.
  
• Support for R&D in Deep Tech: Founders are advocating for SEIS Gen-2, which would double R&D funding limits and extend eligibility windows, addressing the high cost of innovation in sectors like AI.
  
• Simplicity!: On the whole, it seems that the process is unnecessarily complex. 

We’ve taken these actions to government – now we’re working to ensure they become reality.

What’s Next: Shaping the Future of UK Tax Policy

The UK has incredible potential to lead the world in entrepreneurship, but we need tax policies that reflect the ambitions of its founders. We are working hard to ensure that the government listens and implements the changes needed to keep the UK at the forefront of global innovation.

If you haven’t already, join Founders Pulse and be part of the conversation. The more founders who contribute, the stronger our case will be.

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