Founders may be forgiven for thinking themselves as the targets of government tax-raising plans in Europe.
2024 saw several governments increase a wide variety of taxes on capital. There are worrying signs this trend will continue in 2025, as governments continue to face a “perfect storm” of budget deficits, increased spending, and weak growth. They are increasingly turning to businesses as a key means to plug revenue gaps. Furthermore, they frequently appear indifferent to the plight of smaller, founder-led businesses.
This is deeply concerning for founders. Having sacrificed income for the good of their business, many are now sitting on significant unrealised capital gains that have built up over years, if not decades.
Now those gains are at risk of being heavily taxed – often with limited warning – by governments trying to refill their coffers.
Founders considering selling part or all of their equity may want to do so sooner rather than later. The implications of landing the wrong side of a tax increase could be significant.
Many countries tighten their tax regimes
Belgium’s political landscape has undergone a significant shift with the formation of a new federal government, led by Prime Minister Bart De Wever of the Flemish nationalist N-VA party. Sworn in on 3 February 2025, this government has introduced a new 10% capital gains tax, which has critical implications for small business owners looking to sell some or all of their business shares.
Read more here about how this change impacts Belgian businesses.
In the UK the Labour government has increased capital gains tax (CGT) for businesses and individuals, bringing them closer in line with personal tax rates. Meanwhile, tax exemptions under Business Asset Disposal Relief (BADR, formerly known as Investors’ Relief) have been slashed from £10m/€12m to just £1m/€1.2m as of October 2024.
Additionally, Norway announced changes to its exit tax rules in early 2024 which mean that founders moving abroad must pay a 37.8% tax on assets in Norway over €43,000 – whether realised or not. Founders with “paper wealth” above that amount who want to leave the country, will need to find the money. It’s a big change to the previous rules, which exempted unrealised assets from the tax.
Could Eurozone’s biggest economies be next?
Europe’s largest economies are by no means immune.
The French government recently collapsed after failing to pass a budget that included billions of euros of spending cuts. The new prime minister may opt to tighten the screws on businesses in order to ease the pain elsewhere. If that happens, staunch resistance from opposition parties is unlikely.
Financial pressures also led to the fall of Germany’s coalition government, after it failed to agree a plan to plug a €9bn hole in its spending plans. Snap elections may be called in 2025, the outcome of which is very hard to predict.
Implications for founders
Many founders of successful software companies looking to exit, or offload shares, haven’t taken the plunge due to the lack of realistic options for selling their business.
Given the increased political and economic uncertainty, some may be thinking about revisiting those plans. There is every chance the new capital taxation rules could lead to even greater market volatility. In the worst cases, we could see a “stampede to the exit,” with founders faced with subpar valuations and reduced net gains.
This is very different from the financial stability most founders feel they deserve after years of hard work.
The best route to a favourable sales outcome is good advice, in good time.
Upliift offers founders a route to a full or partial exit with a partner which understands the European landscape deeply. We offer a straightforward, simple process, a valuation in days, and the ability for founders to remain involved in the business, if they wish. We protect companies’ brand, culture, and customers. We buy and hold forever.
Get in touch if you would like to find out more about us, or to request a no-commitment valuation.
