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The results of a new survey suggest that one-fifth of UK-based entrepreneurs earning more than GBP150,000 are planning to flee Britain in search of countries with more favorable tax rates.
The poll of more than 300 entrepreneurs by business advisors Tenon also found that many more may follow in an attempt to escape the 50% rate of income tax, due to be introduced from next April on annual incomes above GBP150,000, with nearly half of the respondents (48%) still deciding what action to take.
According to the survey, 75% of entrepreneurs feel that the government has not done enough to support small businesses. Of the initiatives the government has introduced since the financial crisis, only 37% of small- and medium-sized businesses (SMEs) have felt any benefit.
Tenon points out that in the last month, high profile names such as the actor Sir Michael Caine and the artist Tracey Emin have threatened to change their tax residency to countries with more favorable tax rates. Popular locations for redomiciling include Monte Carlo, Guernsey, Liechtenstein, and the Cayman Islands.
Andy Raynor, Chief Executive of Tenon Group, noted that entrepreneurs are showing their disapproval of the tax measures by "letting their feet do the talking."
"They are unhappy with the government’s new taxing structure and making it plain for everyone to see. It is their way of showing this rise in income tax will be self-defeating," he observed.
“Feedback from clients shows this tax increase is the final nail in the coffin," he added. "They feel they have been on the receiving end of a long list of blows from the government which has continued to remove incentives for small businesses."
Although the new 50% rate is now just a few months from becoming reality, advisors say there are several options that those with incomes above GBP150,000 have to lessen its impact, for example by using all tax-free Individual Savings Accounts allowances and disposing of assets before April 6, 2010, to take advantage of the relatively low 18% capital gains tax – especially as Chancellor Alistair Darling may target this tax for an increase in the next budget.
"By being smart about the timing of financial decisions and ensuring that you take full advantage of tax allowances and tax-efficient savings vehicles, people can, to some extent, mitigate the effects of the new top rate of tax," said David Kilshaw, head of private client advisory at KPMG in the UK.
KPMG's private client team have compiled a list of their top ten tips for high earners in anticipation of the new tax rate:
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