Some of the world’s largest private equity firms, including Blackstone, KKR, and EQT, are urging the UK government to reconsider proposed changes to the taxation of carried interest, according to a report by the Financial Times.
They are warning that the reforms could make the country a less attractive destination for global investors and dealmakers.
Concerns within the private equity sector are mounting as UK Chancellor Rachel Reeves plans to reclassify carried interest as income rather than capital gains. Industry leaders fear this change could expose dealmakers to UK taxation long after they have left the country, creating significant financial and administrative burdens.
Private equity firms have begun advising their employees to limit time spent in the UK until greater clarity on tax obligations emerges. Executives at major buyout firms are delaying relocations from the US to London as uncertainty over the tax landscape grows.
One European head of a leading US buyout firm noted, “Some individuals are hesitant to commit to moving or even spending time in the UK until there is more certainty on the tax basis.” Another top-10 global firm echoed these concerns, stating in a government consultation response that the proposed tax changes could hinder their ability to operate effectively in the UK. Michael Graham, a funds tax partner at DLA Piper, highlighted a trend among fund clients, saying, “Management is advising employees from other jurisdictions to avoid visiting the UK until further clarification is provided under these new rules.”
Historically, carried interest has been taxed as capital gains, meaning executives relocating outside the UK were generally not subject to additional UK taxes. However, under the new proposal set to take effect in April 2026, non-UK residents would be subject to income tax on carried interest derived from work performed in the UK.
This shift means that a private equity professional residing in Paris but travelling to London regularly or an executive who leaves the UK and later receives carried interest for past deals could still face UK tax liabilities.
Some firms have suggested introducing a time limit on the number of years the UK government can claim tax on carried interest earned after an executive has moved abroad, as well as establishing a minimum number of days spent in the UK before triggering tax liability.
The UK private equity industry has long warned that overhauling the carried interest regime could damage London’s competitiveness as a financial hub. In 2021, industry figures launched a lobbying campaign after the government branded the capital gains treatment of carried interest a “loophole.” While a compromise was reached in the October 2023 Budget – raising the carried interest tax rate from 28% to 32% while retaining capital gains treatment – the forthcoming transition to an income-based approach has reignited concerns.
Blackstone, which is expanding its London presence with new offices in Mayfair, has a vested interest in the outcome of these reforms. The firm, which currently employs approximately 600 people in London, could accommodate more than 1,800 in its new space.
Michael Moore, CEO of the British Private Equity and Venture Capital Association (BVCA), emphasised the need for continued dialogue between the industry and policymakers: “Engagement with the government is critical to ensure the reforms do not undermine the UK’s position as a leading investment hub.”
A Treasury spokesperson defended the reforms, stating: “The revised regime for carried interest will put its tax treatment on a fairer and more stable footing for the long term while preserving the UK’s competitive position. We continue to work with stakeholders to ensure our reforms are robust and effective.”
