A sweeping hike in capital gains tax (CGT) risks “undermining the chancellor’s growth agenda” and could suck talent and investment away from Britain’s start-ups, top fintech bosses have warned.
Industry bodies and tech chiefs mounted a co-ordinated push to topple the suggestion of a blanket rise in CGT yesterday with a call for a carve-out of ‘earned capital gains’, which could shield the equity of start-up founders and staff from a rise in taxes.
Start-ups often make up for lower salaries by offering their staff equity in the company. Suggestions that the Treasury could hit those shares with a 45 per cent tax have triggered fears of an exodus away from the UK or into safer salary-paying jobs at big tech firms.
“They’re literally talking about going from one of the best capital gains regimes to the worst,” Paul Taylor, founder of $2.7bn banking technology firm, Thought Machine, told City A.M.
“It would be the highest rate in Europe. I don’t think anybody would start a company here – why would you?,” he added
Shachar Bialick, the founder of payments fintech Curve, added that “within a year or two, you’re going to see more companies failing” as they struggle to attract staff and try to ramp up salaries to compete with the likes of Google.
The warnings come after the Chancellor Rachel Reeves repeatedly refused to rule out a rise in CGT at her first budget.
Currently, the rate sits at 20 per cent on all chargeable assets other than residential property. In contrast, the highest rate of income tax is 45 per cent.
Treasury officials have reportedly been drawing up plans to equalise the two. A Treasury spokesperson said “the Chancellor has been clear that difficult decisions lie ahead”.
Innovate Finance, which represents more than 250 fintech companies, cautioned against the move and said the Treasury should recognise that “not all capital gains are equal”.
“Significant increases to CGT could risk undermining the Chancellor’s growth agenda,” Innovate Finance boss, Janine Hirt, told City A.M.