With the Autumn Budget approaching and Repeat Entrepreneur Relief making headlines in The Times, new research shows why backing founders to build again would pay for itself.
In May, we set out why the UK needs Repeat Entrepreneur Relief. It is a targeted capital gains tax deferral for founders who reinvest their exit proceeds into British startups, scaleups and growth funds.
Now the proposal is with the Treasury ahead of the Autumn Budget, and it is back in the news, with The Times covering the plan.
Before submitting it, Founders Forum Group commissioned Beauhurst Insights to test whether the policy would work in practice. The research found that it would more than cover its own cost.
Repeat Entrepreneur Relief: At A Glance Only 1 in 8 UK founders who sell a company build another Experienced founders’ companies raise 61% more capital and are 25% larger by headcount Around £22,500 cost per reinvesting founder vs. an estimated £740,000 in employment taxes per new business Breaks even if it persuades fewer than 1 in 200 exited founders to reinvest The Founder Flywheel Is StallingAround 800 UK founders sell their companies every year, and many of those deals put significant capital into the hands of British entrepreneurs. Yet very few of them reinvest that capital into the next generation. Only one in eight goes on to build again.
As a result, around 10,200 UK founders have built and sold a company and not returned. Each of them has the networks and the hard-won experience of starting a business.
That matters because repeat founders know how to raise investment, how to hire, and how to avoid the mistakes that cost first-time founders years. Companies started by experienced founders raise 61% more capital and are typically 25% larger by headcount than comparable firms in the same sector, region and founding year.
Founders tell us the right incentive would change their decision. Through Founders Pulse, 72% of the founders we polled said Repeat Entrepreneur Relief would make them significantly more likely to build again.
How Repeat Entrepreneur Relief Would WorkRepeat Entrepreneur Relief (RER) would introduce a targeted Capital Gains Tax (CGT) deferral for founders who reinvest their exit proceeds into new UK-headquartered businesses or growth vehicles. The relief would be capped at £250,000 of reinvestment, in line with the SEIS lifetime funding cap, which makes it a practical tool for investment.
The idea has been tested elsewhere. The US Qualified Small Business Stock scheme is widely credited with creating Silicon Valley’s culture of reinvestment, and France offers a similar deferral for founders who reinvest their proceeds.
A Policy That Pays for ItselfThis Budget comes at a time of tight fiscal constraints, so the research weighed the policy’s cost against its returns.
RER would cost the Treasury around £22,500 per reinvesting founder. Each new business it helps create would generate an estimated £740,000 in employment taxes over ten years, which is more than thirty times the cost of the relief. That figure doesn’t count corporation tax, VAT, or the extra success a business can gain from having an experienced founder in charge. It also leaves out the wider economic return if money reinvested into growth funds or vehicles also qualified for RER.
To break even, the relief would need to persuade fewer than one exited founder in 200 to reinvest who otherwise wouldn’t have done so. If it raised the refounding rate from 12% to 20%, each year’s exits could generate around £47m in employment taxes over ten years, against £3.6m in relief.
Carolyn Dawson OBE, CEO of Founders Forum Group, said: “We know the founders who often build Britain’s strongest companies are those who’ve done it before. Repeat Entrepreneur Relief helps them do it again, here. Keeping capital in the UK, supporting the next cohort of successful British businesses makes this one of the simplest decisions for the Treasury to make in this Budget.”
What Else Founders Need From This BudgetRepeat Entrepreneur Relief is one of four policy asks in Founders Forum Group’s Autumn Budget submission, sent to Government earlier this month. Each is designed to help British companies grow faster and stay in the UK as they scale. The other three are:
Expand the Enterprise Management Incentive (EMI) scheme further so it reflects the size and ambitions of today’s UK startups and scaleups, and helps them keep attracting top talent. Introduce a Digital Adoption Tax Credit to recognise that the biggest cost of adopting digital tools and AI is often the technical staff needed to roll them out and make sure they deliver real productivity gains. Create an “investor route” to the Global Talent Visa so successful investors who want to back UK scaleups or regulated growth funds can come to the UK, increasing the capital available to fast-growing businesses.The submission also carries a clear message from founders on CGT. Raising it in this Budget would discourage entrepreneurs from taking risks and push them out of the UK. Founders make a large net contribution in tax and jobs, so the UK benefits when they want to start, scale and keep their businesses here. A CGT rise would work against that.
Britain already produces world-class founders. With the right incentives in this Budget, more of them will build their second, third and fourth companies here.
Read Founders Forum Group’s full Autumn Budget submission here.
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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seen at 16:45, 12 October in Tech Nation.