Despite recent claims in the media by a few wealthy individuals, the think tank has consulted with several millionaire entrepreneurs who assert that aligning CGT with income tax would not deter them from making future investments, nor would it make them leave the country.

Evidence shows that CGT is not a primary driver of investment decisions. Entrepreneurs and investors alike focus much more on issues such as access to financing, market opportunities, and broader economic conditions.

Capital gains mainly becomes relevant at the point of exit, when a business is sold or an asset is liquidated, long after the crucial early stages of business growth have taken place. Only a minority of entrepreneurs are swayed by CGT when they think about starting out, most are focused on successfully running their business.

Additionally, the majority of capital investment in the UK comes from institutional investors – who are largely exempt from CGT – rather than individual entrepreneurs.

The paper also highlights that low CGT is poor value for money – it applies equally to genuine entrepreneurs, and passive investors who benefit from simply owning assets. At least half of all capital gains come from passive asset ownership rather than entrepreneurship – offering a tax break on these gains does nothing to generate investment or growth. Reforms to CGT will mainly affect passive asset owners rather than entrepreneurs.

IPPR says there are at least 32 other more targeted policies that are far more effective at directly supporting entrepreneurship, innovation, and business investment. Rather than maintaining low CGT rates, the government should focus on expanding and refining these existing initiatives.

Crucially, entrepreneurs do not operate in a vacuum. The millionaires IPPR spoke to raised the importance of the government’s contribution to their business success through providing a healthy and well-educated workforce. A better funded and better functioning public sector, that invests in modern technology and infrastructure, will unlock opportunities for entrepreneurship.

IPPR is calling on the government to equalise CGT with income tax, which would raise around £14 billion a year. CGT is only paid by around 0.65 per cent of the adult population (350,000 people), however most CGT revenue only comes from the 0.02 per cent of the population who make gains of over £1 million.

Pranesh Narayanan, research fellow at IPPR and author of the paper, said: “The recent fearmongering from some that increasing capital gains tax will take the economy back to the stone ages is pure hyperbole. It was famously pro-growth Conservative chancellor Nigel Lawson who equalised capital gains tax with income tax rates in the first place.

“We have spoken to multiple millionaires in the last few weeks who have made it clear that equalising capital gains tax with income tax would make absolutely no difference to their investment or entrepreneurial pursuits.”

IPPR has been working with Patriotic Millionaires UK to speak to business leaders, investors and entrepreneurs to understand the impact raising capital gains tax would have on them.

Mark Campbell, millionaire co-founder of Higgidy pies, said: “Entrepreneurs don’t think about capital gains tax when they create businesses. Increased capital gains tax would not have stopped us investing in Higgidy.

“My experience is that what drives entrepreneurs and investment is not the tax rate but the opportunity to create impact and return.

“Equalising capital gains tax with income tax won’t scare away real investors. The UK needs a fairer tax system to invest in its future, and those of us who’ve benefited the most should contribute more so that we have a healthy society and economy for future entrepreneurs to operate within.”

Graham Hobson, millionaire co-founder of Photobox, said: “The idea that raising capital gains tax would discourage entrepreneurship is simply a myth. Entrepreneurs are driven by passion, problem-solving, and creating value – not by low taxes.

“A balanced tax policy that supports both innovation and fairness can only strengthen the UK economy by ensuring that everyone, including successful investors, contribute their share.

“Capital gains tax was equal to income tax when I set up Photobox. It didn’t stop me from starting and growing a successful business.”

Julia Davies, millionaire impact investor, said: “As an entrepreneur and investor, I’ve never let tax rates dictate my decisions to fund innovation or pursue opportunities.

“Increasing capital gains tax won’t stop anyone serious about growing their business or supporting the next generation of entrepreneurs. What matters most is the opportunity for growth and so well funded public infrastructure and services, not a marginal change in tax.”