Philip Green is not paying himself a dividend for a second year

When the relief ends in April 2008, entrepreneurs will have to pay 18% tax, instead of the current 10% when they sell all or part of their company.

Mr Green said the government should instead have introduced a tax-free ceiling of up to £1m for new firms.

His comments came as his Arcadia Group reported a 2% dip in annual profits.

'Better way'

"I think there is probably a better way to get there [on CGT]," Mr Green told the BBC's Wake Up To Money programme.

After the pretty unseasonable weather, I think we came out of it rather well Philip Green

"There should be a ceiling for people starting up companies, of, say, £500,000 to £1m.

"You need to give people an incentive to bet their own house or use their own money [to set up a company]."

Arcadia, the UK's largest clothing retailer, made a pre-tax profit of £199m in the 12 months to 1 September, down from £202m a year earlier.

The company's fashion chains include Topshop, Burton, Miss Selfridge, and Dorothy Perkins.

Same-store sales were up 2.1%.

No dividend

Despite the slight dip in profits, Mr Green said he was pleased with the results following the "washout" summer.

"After the pretty unseasonable weather, I think we came out of it rather well," he told the BBC's Today programme.

Yet Mr Green added that for the second year running, he would not be paying himself a dividend.