Future Retirement Success
  • Politics
  • Business
  • Investing
  • Stocks
  • Politics
  • Business
  • Investing
  • Stocks

Future Retirement Success

Business

£4bn Tax Loophole for Private Equity Executives Under Threat

by May 27, 2024
May 27, 2024
£4bn Tax Loophole for Private Equity Executives Under Threat

Private equity executives have benefited from a tax break worth up to £4 billion under the “carried interest” rules, which Labour aims to abolish if it wins the general election.

The figures, in data obtained by The Times, highlight that a favourable tax treatment of private equity executives’ profits has enabled some of the wealthiest individuals in Britain to reduce their tax liabilities significantly.

Dan Neidle, a prominent tax expert and founder of the Tax Policy Associates think tank, has labelled these rules as a “loophole.” Under the current system, private equity executives invest alongside other investors and receive “carry” or “carried interest” on profits, which is taxed at the capital gains rate of 28%, rather than the combined income tax and national insurance rate of 47%. This constitutes a major part of their remuneration.

The private equity sector has cautioned that altering the tax treatment of carried interest could lead to a mass departure of financial services professionals from the UK and may dampen investment. Some industry voices argue that such a change could be as detrimental to the City of London’s financial hub status as Brexit.

Figures from HM Revenue & Customs, obtained through a Freedom of Information request, reveal that private equity executives paid £1.4 billion in capital gains tax on declared carried interest in the 2021-22 tax year, an increase from £921 million the previous year.

If carried interest were taxed as income, private equity executives would owe an additional £2.3 billion in taxes. Including non-domiciled executives’ carried interest, the total could reach £4 billion, Neidle estimated.

Labour’s proposal to align carried interest with income tax and national insurance contributions could generate substantial revenue for the Treasury, especially at a time when public finances are under pressure.

Despite substantial lobbying from the industry, Rachel Reeves, the shadow chancellor, confirmed on BBC’s Sunday with Laura Kuenssberg that this policy remains part of Labour’s platform.

Adjusting the carried interest regime is being advocated on grounds of fairness. More than 80% of those declaring carried interest also paid the top income tax rate of 45% on their regular earnings, as per the FoI response from the tax authority.

In March last year, Neidle published a paper in the British Tax Review advocating for a change in the tax treatment of carried interest. He questioned the extent to which the tax break would be collected if the law changed, acknowledging that some executives might leave the UK, while others, particularly non-domiciled individuals, might already be considering leaving due to other government changes.

“It’s very hard to justify giving one sector a tax break that nobody else gets. High-earning coders, doctors, lawyers, bankers, and hedge fund managers all pay tax at 47%. Why should private equity be different?” Neidle argued.

The British Private Equity and Venture Capital Association responded by stating it would “work to maintain the internationally competitive arrangements that attract capital and investment professionals to the UK. Whoever wins the election, we look forward to discussing how private capital will continue to be partners for growth in the UK.”

Read more:
£4bn Tax Loophole for Private Equity Executives Under Threat

0
FacebookTwitterGoogle +Pinterest
previous post
Rachel Reeves Pledges No Income Tax or NI Hikes Under Labour
next post
160,000 Rental Properties Lost as Landlords Exit Market Amid Rising Costs and Regulatory Uncertainty

You may also like

South Yorkshire selected for £1.5bn mini-nuclear reactor factory,...

September 23, 2024

10,000 Meta jobs to be axed amid ‘Year...

March 15, 2023

Over 90% of mid-sized businesses struggling to access...

June 26, 2023

Petrol prices rise for fourth month in a...

October 4, 2023

Big four accounting firm EY to shed 3,000...

April 18, 2023

Student loan debt in England surpasses £200bn for...

June 16, 2023

Taxpayers could lose £100m as HS2 land no...

October 20, 2023

EV charging platform Monta closes €80M series b...

January 25, 2024

Video Production Mistakes That You Might Want to...

February 22, 2023

Brits have 1,000 less mortgage deals to pick...

September 13, 2022

    Get free access to all of the retirement secrets and income strategies from our experts! or Join The Exclusive Subscription Today And Get the Premium Articles Acess for Free

    By opting in you agree to receive emails from us and our affiliates. Your information is secure and your privacy is protected.

    Recent Posts

    • Trump ally stands firm against ‘big, beautiful bill’ despite pressure: ‘It’ll completely backfire’

      June 8, 2025
    • Rubio condemns assassination attempt on Colombian presidential candidate Miguel Uribe

      June 8, 2025
    • Obama WH physician says Biden doc should have performed cognitive test

      June 8, 2025
    • Trump warns of ‘serious consequences’ if Elon Musk funds Democrats

      June 7, 2025
    • Musk jokes about reconsidering stance on Big Beautiful Bill after Schiff’s praise

      June 7, 2025
    • Musk deletes explosive posts about Trump and Epstein files

      June 7, 2025

    Categories

    • Business (8,152)
    • Investing (2,019)
    • Politics (15,571)
    • Stocks (3,136)
    • About us
    • Privacy Policy
    • Terms & Conditions

    Disclaimer: futureretirementsuccess.com, its managers, its employees, and assigns (collectively “The Company”) do not make any guarantee or warranty about what is advertised above. Information provided by this website is for research purposes only and should not be considered as personalized financial advice. The Company is not affiliated with, nor does it receive compensation from, any specific security. The Company is not registered or licensed by any governing body in any jurisdiction to give investing advice or provide investment recommendation. Any investments recommended here should be taken into consideration only after consulting with your investment advisor and after reviewing the prospectus or financial statements of the company.

    Copyright © 2025 futureretirementsuccess.com | All Rights Reserved