The number of UK private equity executives receiving carried interest fell for the first time in at least seven years, as changes to tax rules and a slowdown in dealmaking begin to reshape the industry landscape, according to a report by the Financial Times.

New HMRC data shows that 2,770 UK-based buyout professionals shared £3.3bn in carried interest during the 2023–2024 tax year, down from 2,860 executives splitting £3.7bn the year prior. The decline marks the first drop since records began in 2016–17 and precedes Labour’s election victory.

Private equity firms have been bracing for reform to the UK’s carried interest regime and the end of the non-dom tax exemption for foreign income, both of which had made London a hub for international fund managers. Labour’s original pledge to close the so-called “loophole” has since been softened following industry pushback.

Instead of the top 45% income tax rate, carried interest will now be taxed at an effective rate of 34.1%, up from the current 28% capital gains rate. Proposals requiring fund managers to contribute a minimum capital amount and wait a set period before qualifying for the favourable tax rate were dropped after consultations with the industry.

Executives at firms such as Blackstone, KKR, and EQT successfully lobbied against retroactive taxation on carry earned from UK-based work but paid after relocating abroad. Under draft legislation, carried interest will not be taxed in the UK if the recipient has lived abroad for over three years and spends fewer than 60 days per year working in the UK.

“We welcome the framing of rules for internationally mobile individuals and that it does not include unnecessary additional conditions,” said Michael Moore, CEO of the British Private Equity and Venture Capital Association.

Despite improvements, some legal experts still flagged practical challenges. Serena Lee, tax partner at Latham & Watkins, noted the rules remain “administratively burdensome,” particularly for professionals needing to track time spent travelling or working in the UK.

The HMRC data also highlighted persistent gender disparities. Although the number of female carried interest earners has grown faster than the total since 2017, just 490 women shared 6% of all carry in 2023–24. On average, each woman received nearly £400,000 compared to £1.4m for each of the 2,280 male recipients.

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