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UK Finance Minister Rachel Reeves makes a speech during the Labour Party Conference that is held at the ACC Liverpool Convention Center in Liverpool, UK on September 23, 2024. 

Anadolu | Getty Images

LONDON — British tech bosses and venture capitalists are questioning whether the country can deliver on its bid to become a global artificial intelligence hub after the government set out plans to increase taxes on businesses.

On Wednesday, Finance Minister Rachel Reeves announced a move to hike capital gains tax (CGT) — a levy on the profit investors make from the sale of an investment — as part of a far-reaching announcement on the Labour government’s fiscal spending and tax plans.

The lower capital gains tax rate was increased to 18% from 10%, while the higher rate climbed to 24% from 20%. Reeves said the increases will help bring in £2.5 billion ($3.2 billion) of additional capital to the public purses.

It was also announced that the lifetime limit for business asset disposal relief (BADR) — which offers entrepreneurs a reduced rate on the level of tax paid on capital gains resulting from the sale of all or part of a company — would sit at £1 million.

She added that the rate of CGT applied to entrepreneurs using the BADR scheme will increase to 14% in 2025 and to 18% a year later. Still, Reeves said the U.K. would still have the lowest capital gains tax rate of any European G7 economy.

The hikes were less severe than previously feared — but the push toward a higher tax environment for corporates stoked the concern of several tech executives and investors, with many suggesting the move would lead to higher inflation and a slowdown in hiring.

On top of increases to CGT, the government also raised the rate of National Insurance (NI) contributions, a tax on earnings. Reeves forecasted the move would raise £25 billion per year — by far the largest revenue raising measure in a raft of pledges that were made Wednesday.

Paul Taylor, CEO and co-founder of fintech firm Thought Machine, said that hike to NI rates would lead to an additional £800,000 in payroll spending for his business.

“This is a significant amount for companies like us, which rely on investor capital and already face cost pressures and targets,” he noted.

“Nearly all emerging tech businesses run on investor capital, and this increase sets them back on their path to profitability,” added Taylor, who sits on the lobbying group Unicorn Council for U.K. FinTech. “The U.S. startup and entrepreneurial environment is a model of where the U.K. needs to be.”

Chances of building ‘the next Nvidia’ more slim

Another increase to taxation by way of a rise in the tax rate for carried interest — the level of tax applied to the share of profit a fund manager makes from a private equity investment.

iProov CEO discusses 'arms race' against deepfakes

Reeves announced that the rate of tax on carried interest, which is charged on capital gains, would rise to 32%, up from 28% currently.

Haakon Overli, co-founder of European venture capital firm Dawn Capital, said that increases to capital gains tax could make it harder for the next Nvidia to be built in the U.K.

“If we are to have the next NVIDIA built in the UK, it will come from a company born from venture capital investment,” Overli said by email.

“The tax returns from creating such a company, which is worth more than the FTSE 100 put together, would dwarf any gains from increasing the take from venture capital today.”

The government is carrying out further consultation with industry stakeholders on plans to up taxes on carried interest. Anne Glover, CEO of Amadeus Capital, an early investor in Arm, said this was a good thing.

 “The Chancellor has clearly listened to some of the concerns of investors and business leaders,” she said, adding that talks on carried interest reforms must be “equally as productive and engaged.”

Britain also committed to mobilizing £70 billion of investment through the recently formed National Wealth Fund — a state-backed investment platform modelled on sovereign wealth vehicles such as Norway’s Government Pension Fund Global and Saudi Arabia’s Public Investment Fund.

This, Glover added, “aligns with our belief that investment in technology will ultimately lead to long term growth.”

She nevertheless urged the government to look seriously at mandating that pension funds diversify their allocation to riskier assets like venture capital — a common ask from VCs to boost the U.K. tech sector.

Clarity welcomed

Steve Hare, CEO of accounting software firm Sage, said the budget would mean “significant challenges for UK businesses, especially SMBs, who will face the impact of rising employer National Insurance contributions and minimum wage increases in the months ahead.”

Even so, he added that many firms would still welcome the “longer-term certainty and clarity provided, allowing them to plan and adapt effectively.”

Meanwhile, Sean Reddington, founder and CEO of educational technology firm Thrive, said that higher CGT rates mean tech entrepreneurs will face “greater costs when selling assets,” while the rise in employer NI contributions “could impact hiring decisions.”

“For a sustainable business environment, government support must go beyond these fiscal changes,” Reddington said. “While clearer tax communication is positive, it’s unlikely to offset the pressures of heightened taxation and rising debt on small businesses and the self-employed.”

He added, “The crucial question is how businesses can maintain profitability with increased costs. Government support is essential to offset these new burdens and ensure the UK’s entrepreneurial spirit continues to thrive.”

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How Elon Musk’s plan to slash government agencies and regulation may benefit his empire

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How Elon Musk’s plan to slash government agencies and regulation may benefit his empire

Elon Musk’s business empire is sprawling. It includes electric vehicle maker Tesla, social media company X, artificial intelligence startup xAI, computer interface company Neuralink, tunneling venture Boring Company and aerospace firm SpaceX. 

Some of his ventures already benefit tremendously from federal contracts. SpaceX has received more than $19 billion from contracts with the federal government, according to research from FedScout. Under a second Trump presidency, more lucrative contracts could come its way. SpaceX is on track to take in billions of dollars annually from prime contracts with the federal government for years to come, according to FedScout CEO Geoff Orazem.

Musk, who has frequently blamed the government for stifling innovation, could also push for less regulation of his businesses. Earlier this month, Musk and former Republican presidential candidate Vivek Ramaswamy were tapped by Trump to lead a government efficiency group called the Department of Government Efficiency, or DOGE.

In a recent commentary piece in the Wall Street Journal, Musk and Ramaswamy wrote that DOGE will “pursue three major kinds of reform: regulatory rescissions, administrative reductions and cost savings.” They went on to say that many existing federal regulations were never passed by Congress and should therefore be nullified, which President-elect Trump could accomplish through executive action. Musk and Ramaswamy also championed the large-scale auditing of agencies, calling out the Pentagon for failing its seventh consecutive audit. 

“The number one way Elon Musk and his companies would benefit from a Trump administration is through deregulation and defanging, you know, giving fewer resources to federal agencies tasked with oversight of him and his businesses,” says CNBC technology reporter Lora Kolodny.

To learn how else Elon Musk and his companies may benefit from having the ear of the president-elect watch the video.

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Why X’s new terms of service are driving some users to leave Elon Musk’s platform

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Why X's new terms of service are driving some users to leave Elon Musk's platform

Elon Musk attends the America First Policy Institute gala at Mar-A-Lago in Palm Beach, Florida, Nov. 14, 2024.

Carlos Barria | Reuters

X’s new terms of service, which took effect Nov. 15, are driving some users off Elon Musk’s microblogging platform. 

The new terms include expansive permissions requiring users to allow the company to use their data to train X’s artificial intelligence models while also making users liable for as much as $15,000 in damages if they use the platform too much. 

The terms are prompting some longtime users of the service, both celebrities and everyday people, to post that they are taking their content to other platforms. 

“With the recent and upcoming changes to the terms of service — and the return of volatile figures — I find myself at a crossroads, facing a direction I can no longer fully support,” actress Gabrielle Union posted on X the same day the new terms took effect, while announcing she would be leaving the platform.

“I’m going to start winding down my Twitter account,” a user with the handle @mplsFietser said in a post. “The changes to the terms of service are the final nail in the coffin for me.”

It’s unclear just how many users have left X due specifically to the company’s new terms of service, but since the start of November, many social media users have flocked to Bluesky, a microblogging startup whose origins stem from Twitter, the former name for X. Some users with new Bluesky accounts have posted that they moved to the service due to Musk and his support for President-elect Donald Trump.

Bluesky’s U.S. mobile app downloads have skyrocketed 651% since the start of November, according to estimates from Sensor Tower. In the same period, X and Meta’s Threads are up 20% and 42%, respectively. 

X and Threads have much larger monthly user bases. Although Musk said in May that X has 600 million monthly users, market intelligence firm Sensor Tower estimates X had 318 million monthly users as of October. That same month, Meta said Threads had nearly 275 million monthly users. Bluesky told CNBC on Thursday it had reached 21 million total users this week.

Here are some of the noteworthy changes in X’s new service terms and how they compare with those of rivals Bluesky and Threads.

Artificial intelligence training

X has come under heightened scrutiny because of its new terms, which say that any content on the service can be used royalty-free to train the company’s artificial intelligence large language models, including its Grok chatbot.

“You agree that this license includes the right for us to (i) provide, promote, and improve the Services, including, for example, for use with and training of our machine learning and artificial intelligence models, whether generative or another type,” X’s terms say.

Additionally, any “user interactions, inputs and results” shared with Grok can be used for what it calls “training and fine-tuning purposes,” according to the Grok section of the X app and website. This specific function, though, can be turned off manually. 

X’s terms do not specify whether users’ private messages can be used to train its AI models, and the company did not respond to a request for comment.

“You should only provide Content that you are comfortable sharing with others,” read a portion of X’s terms of service agreement.

Though X’s new terms may be expansive, Meta’s policies aren’t that different. 

The maker of Threads uses “information shared on Meta’s Products and services” to get its training data, according to the company’s Privacy Center. This includes “posts or photos and their captions.” There is also no direct way for users outside of the European Union to opt out of Meta’s AI training. Meta keeps training data “for as long as we need it on a case-by-case basis to ensure an AI model is operating appropriately, safely and efficiently,” according to its Privacy Center. 

Under Meta’s policy, private messages with friends or family aren’t used to train AI unless one of the users in a chat chooses to share it with the models, which can include Meta AI and AI Studio.

Bluesky, which has seen a user growth surge since Election Day, doesn’t do any generative AI training. 

“We do not use any of your content to train generative AI, and have no intention of doing so,” Bluesky said in a post on its platform Friday, confirming the same to CNBC as well.

Liquidated damages

Bluesky CEO: Our platform is 'radically different' from anything else in social media

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The Pentagon’s battle inside the U.S. for control of a new Cyber Force

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The Pentagon's battle inside the U.S. for control of a new Cyber Force

A recent Chinese cyber-espionage attack inside the nation’s major telecom networks that may have reached as high as the communications of President-elect Donald Trump and Vice President-elect J.D. Vance was designated this week by one U.S. senator as “far and away the most serious telecom hack in our history.”

The U.S. has yet to figure out the full scope of what China accomplished, and whether or not its spies are still inside U.S. communication networks.

“The barn door is still wide open, or mostly open,” Senator Mark Warner of Virginia and chairman of the Senate Intelligence Committee told the New York Times on Thursday.

The revelations highlight the rising cyberthreats tied to geopolitics and nation-state actor rivals of the U.S., but inside the federal government, there’s disagreement on how to fight back, with some advocates calling for the creation of an independent federal U.S. Cyber Force. In September, the Department of Defense formally appealed to Congress, urging lawmakers to reject that approach.

Among one of the most prominent voices advocating for the new branch is the Foundation for Defense of Democracies, a national security think tank, but the issue extends far beyond any single group. In June, defense committees in both the House and Senate approved measures calling for independent evaluations of the feasibility to create a separate cyber branch, as part of the annual defense policy deliberations.

Drawing on insights from more than 75 active-duty and retired military officers experienced in cyber operations, the FDD’s 40-page report highlights what it says are chronic structural issues within the U.S. Cyber Command (CYBERCOM), including fragmented recruitment and training practices across the Army, Navy, Air Force, and Marines.

“America’s cyber force generation system is clearly broken,” the FDD wrote, citing comments made in 2023 by then-leader of U.S. Cyber Command, Army General Paul Nakasone, who took over the role in 2018 and described current U.S. military cyber organization as unsustainable: “All options are on the table, except the status quo,” Nakasone had said.

Concern with Congress and a changing White House

The FDD analysis points to “deep concerns” that have existed within Congress for a decade — among members of both parties — about the military being able to staff up to successfully defend cyberspace. Talent shortages, inconsistent training, and misaligned missions, are undermining CYBERCOM’s capacity to respond effectively to complex cyber threats, it says. Creating a dedicated branch, proponents argue, would better position the U.S. in cyberspace. The Pentagon, however, warns that such a move could disrupt coordination, increase fragmentation, and ultimately weaken U.S. cyber readiness.

As the Pentagon doubles down on its resistance to establishment of a separate U.S. Cyber Force, the incoming Trump administration could play a significant role in shaping whether America leans toward a centralized cyber strategy or reinforces the current integrated framework that emphasizes cross-branch coordination.

Known for his assertive national security measures, Trump’s 2018 National Cyber Strategy emphasized embedding cyber capabilities across all elements of national power and focusing on cross-departmental coordination and public-private partnerships rather than creating a standalone cyber entity. At that time, the Trump’s administration emphasized centralizing civilian cybersecurity efforts under the Department of Homeland Security while tasking the Department of Defense with addressing more complex, defense-specific cyber threats. Trump’s pick for Secretary of Homeland Security, South Dakota Governor Kristi Noem, has talked up her, and her state’s, focus on cybersecurity.

Former Trump officials believe that a second Trump administration will take an aggressive stance on national security, fill gaps at the Energy Department, and reduce regulatory burdens on the private sector. They anticipate a stronger focus on offensive cyber operations, tailored threat vulnerability protection, and greater coordination between state and local governments. Changes will be coming at the top of the Cybersecurity and Infrastructure Security Agency, which was created during Trump’s first term and where current director Jen Easterly has announced she will leave once Trump is inaugurated.

Cyber Command 2.0 and the U.S. military

John Cohen, executive director of the Program for Countering Hybrid Threats at the Center for Internet Security, is among those who share the Pentagon’s concerns. “We can no longer afford to operate in stovepipes,” Cohen said, warning that a separate cyber branch could worsen existing silos and further isolate cyber operations from other critical military efforts.

Cohen emphasized that adversaries like China and Russia employ cyber tactics as part of broader, integrated strategies that include economic, physical, and psychological components. To counter such threats, he argued, the U.S. needs a cohesive approach across its military branches. “Confronting that requires our military to adapt to the changing battlespace in a consistent way,” he said.

In 2018, CYBERCOM certified its Cyber Mission Force teams as fully staffed, but concerns have been expressed by the FDD and others that personnel were shifted between teams to meet staffing goals — a move they say masked deeper structural problems. Nakasone has called for a CYBERCOM 2.0, saying in comments early this year “How do we think about training differently? How do we think about personnel differently?” and adding that a major issue has been the approach to military staffing within the command.

Austin Berglas, a former head of the FBI’s cyber program in New York who worked on consolidation efforts inside the Bureau, believes a separate cyber force could enhance U.S. capabilities by centralizing resources and priorities. “When I first took over the [FBI] cyber program … the assets were scattered,” said Berglas, who is now the global head of professional services at supply chain cyber defense company BlueVoyant. Centralization brought focus and efficiency to the FBI’s cyber efforts, he said, and it’s a model he believes would benefit the military’s cyber efforts as well. “Cyber is a different beast,” Berglas said, emphasizing the need for specialized training, advancement, and resource allocation that isn’t diluted by competing military priorities.

Berglas also pointed to the ongoing “cyber arms race” with adversaries like China, Russia, Iran, and North Korea. He warned that without a dedicated force, the U.S. risks falling behind as these nations expand their offensive cyber capabilities and exploit vulnerabilities across critical infrastructure.

Nakasone said in his comments earlier this year that a lot has changed since 2013 when U.S. Cyber Command began building out its Cyber Mission Force to combat issues like counterterrorism and financial cybercrime coming from Iran. “Completely different world in which we live in today,” he said, citing the threats from China and Russia.

Brandon Wales, a former executive director of the CISA, said there is the need to bolster U.S. cyber capabilities, but he cautions against major structural changes during a period of heightened global threats.

“A reorganization of this scale is obviously going to be disruptive and will take time,” said Wales, who is now vice president of cybersecurity strategy at SentinelOne.

He cited China’s preparations for a potential conflict over Taiwan as a reason the U.S. military needs to maintain readiness. Rather than creating a new branch, Wales supports initiatives like Cyber Command 2.0 and its aim to enhance coordination and capabilities within the existing structure. “Large reorganizations should always be the last resort because of how disruptive they are,” he said.

Wales says it’s important to ensure any structural changes do not undermine integration across military branches and recognize that coordination across existing branches is critical to addressing the complex, multidomain threats posed by U.S. adversaries. “You should not always assume that centralization solves all of your problems,” he said. “We need to enhance our capabilities, both defensively and offensively. This isn’t about one solution; it’s about ensuring we can quickly see, stop, disrupt, and prevent threats from hitting our critical infrastructure and systems,” he added.

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