Review of UK Tech Tax to Feature in Reeves Autumn Budget Amid US Pressure to Scrap Levy

The Chancellor, Rachel Reeves, is set to announce a review of Britain’s digital services tax (DST) as she prepares for her Autumn Budget. This decision comes at a time of mounting calls from the White House to abolish the levy, spurred by President Donald Trump’s ongoing criticism that the DST unfairly targets American technology giants. The tax currently imposes a 2 percent charge on the UK revenues of the largest social media platforms, search engines, and online marketplaces, many of which are US-based.

This forthcoming review will coincide with deepening technological collaboration between London and Washington. Earlier this week, Prime Minister Sir Keir Starmer sealed a £31 billion UK-US technology and prosperity agreement during President Trump’s state visit to Britain. Addressing the matter alongside the announcement, President Trump emphasised his desire to “refine” trade relations, alluding to the possibility that the removal of the DST could become part of broader negotiations between Britain and the United States. He has previously pledged to protect US firms from what he terms discriminatory digital taxes, warning of potential additional tariffs on imports from states perceived to undermine American technology interests.

The DST was conceived as a temporary measure in the absence of an international agreement on digital taxation, aiming to ensure multinational tech companies contribute fairly to the UK exchequer. Receipts from the DST have grown steadily, with official forecasts indicating a rise from £600 million in 2022-23 to £1.2 billion annually by the end of the decade. As the Treasury reviews whether the levy meets its objectives, its continued existence will be seen as a litmus test for the government’s economic priorities and its post-Brexit approach to international partnerships, particularly given strong American opposition.

Prominent voices from the finance and technology sectors have weighed in. Howard Lutnick, President Trump’s Commerce Secretary and former Cantor Fitzgerald executive, urged the UK to emulate America’s embrace of entrepreneurial success, describing current British attitudes as excessively influenced by European scepticism towards wealth and innovation. He encouraged a more business-friendly stance, especially as the UK seeks to attract global investment and foster technological development.

Matthew Sinclair, economist and member of the Computer & Communications Industry Association, argued that eliminating the DST would remove the threat of US retaliatory tariffs and clear the path for a new digital trade agreement with America. He suggested such a move might unlock significant new investment from major technology firms.

There is also speculation that the DST could be softened as part of the ongoing trade dialogue should sufficient benefits arise. Brent Hoberman, founder of Lastminute.com, highlighted the UK’s ability, now outside the EU, to move more quickly on artificial intelligence while taking a lighter regulatory approach than Brussels. He proposed that the government could seize this opportunity not only to accelerate growth in the tech sector but also to experiment with state-backed support for innovative start-ups unconstrained by EU state aid rules.

Officials maintain that the government is committed to ensuring all businesses, including digital multinationals, pay their fair share of tax. The stated aim remains to repeal the DST once a global solution for digital taxation is reached. The outcome of the current review will send a strong signal to investors and trade partners regarding the UK’s industrial strategy and priorities in the digital age.

|||