UK to Impose 32% Tax on Private Equity Carried Interest from April 2025

Private equity (PE) investment companies in the UK will face a significant tax increase on carried interest, with the tax rate set to rise to 32% from April 2025. This announcement was made by British Chancellor of the Exchequer Reeves in his recent financial report, which outlined plans to increase taxes across various sectors.

The current tax rate on carried interest stands at 28%. The proposed tax increase is expected to generate an additional £300 million in tax revenue by April 2030, approximately £60 billion yen.

Michael Moore, Chief Executive of the British Private Equity and Venture Capital Association (BVCA), acknowledged the need for a tax system that reflects the long-term, risk-taking nature of PE investment. He stated that the tax increase would help ensure the continued growth and competitiveness of the UK’s private equity sector in an increasingly global environment.

The UK’s decision to increase taxes on private equity carried interest is part of a broader effort to reform its tax system and promote economic growth. The move is expected to have significant implications for private equity firms operating in the UK, and may influence investment decisions in the sector.