The PE incentive model remains intact…for now

Determining how profit sharing will qualify for carried interest tax treatment in the UK from 2026 will be a complex matter.

By Adam Le

“Change must be felt” was how UK chancellor Rachel Reeves opened her address to parliament this week, presenting a budget that was widely expected to deliver on election promises of change and growth. That change will soon be felt by private equity executives in Britain – though to a lesser extent than initially feared.

To recap, carried interest for UK taxpayers will be levied at 32 percent from April next year – a 4 percentage-point jump on the current 28 percent rate. From April 2026 it will fall within the income tax framework with a likely effective rate of around 34 percent.

The industry has largely welcomed the announcement, as we detailed this week. “Milan property market crashes!” joked one London-based lawyer, commenting on the fact that PE execs will no longer be fleeing en masse to the tax-friendly northern Italian city. (As a side note, this discussion thread on an anonymous industry online forum about the pros and cons of...

Read the full commentary piece here.