After weeks of speculation, on Wednesday the Budget was finally delivered. You’ll have to come to one of our events for my lukewarm takes on its impact on farms, private schools, social care, or whatever comes next – but given weeks of campaigning, it would be remiss if I didn’t round it off with our thoughts on Capital Gains Tax (CGT) and Business Asset Disposal Relief (BADR).
It was a busy few weeks for us. Topping out at over 1,000 responses, the letter that many of you signed and shared made headlines across the media, while behind the scenes we were connecting concerned founders with journalists hungry for to hear from those at the coalface.
Having spoken with lots of entrepreneurs following post-Budget, the general sentiment seems to be: could have been worse, should have been better. Whether you think it was necessary or not, given that the burden of taxation has increased for pretty much everyone across Britain, a collective “phew!” is understandable. It wasn’t just entrepreneurs though. According to Patrick Maguire (Paywall – The Times), in the focus groups of Tory-Labour switchers Downing Street conducted on Wednesday night the word that recurred was ‘relief’.
As I wrote in reaction: “Entrepreneurs will be somewhat relieved that the Capital Gains Tax (CGT) rate wasn’t hiked as high as many feared. Similarly, there were rumours that Business Asset Disposal Relief (BADR) would be scrapped, so the worst-case scenario was avoided. Nevertheless, BADR will still be ratcheted up over the coming years, meaning Britain will become an increasingly unattractive place to both start and exit a company.
We know that many entrepreneurs are already looking to move their business from the UK – and this only makes that move more compelling. This is why 1,250 of the UK’s most ambitious entrepreneurs signed our letter against such changes.
It’s not just entrepreneurs who will be impacted. Many fledgling startups give employees stock options or shares as part of their compensation package as they cannot compete with the higher salaries offered by established big corporates. Today’s changes will reduce this incentive, making it even harder for startups to attract the talent they need to scale, while denying workers the chance to own a piece of Britain’s growing companies.
Instead of hiking BADR, the Treasury should have retargeted the relief at founders who are scaling businesses, and have made it unlimited to incentivise the world’s best entrepreneurs to start, scale and sell multiple businesses in Britain.”
Our letter – alongside others, of course – may have spooked the Government from going further on changes to BADR and CGT. I write ‘may’ because the scrapping of BADR and hikes to CGT were in part trailed in order to manage expectations. However, as has been the case for decades now, worst-case scenarios are also floated to test the public reaction. Politicians only know the limits if we’re vocal enough. This is clearly a suboptimal way to make policy – after all, there are plenty of vocal groups that the government shouldn’t listen to – but that only makes it more critical for us to play the game of politics when there is so much at stake.
In her speech, the Chancellor specifically said she was committed to creating a positive environment for entrepreneurship and wants to work with entrepreneurs to do this. This was a direct nod to all of you who’ve made so much noise over the last few weeks.
The hard work starts now. We need to build out the evidence base so we can make a proactive case to the Government, the opposition and civil servants on tax and growth. When it comes down to it, we all want the same thing: entrepreneurs making us all richer – both through the stuff they build and people they employ, but also through the taxes they pay as they scale and exit.
And while the Office for Budget Responsibility’s growth forecasts are depressing – remember, they don’t take into account important forthcoming policy changes such as planning reform and other areas we have been working on for over the last decade. As Rodolfo Rosini, entrepreneur and Adviser to The Entrepreneurs Network, argues: “Britain is a $2.3 trillion opportunity.”
If you want to help us make the world a better place, drop me an email now with details of how you want to lend a hand. We’re a small organisation, but as the last few weeks have shown, when we unite we can make ourselves heard when it really matters.
It’s not just CGT, of course. My colleagues Eamonn Ives and Anastasia Bektimirova responded on Employers’ National Insurance Contributions, Business Rates reform and R&D spending, and there will be plenty more to unpack over the coming weeks. If you want to join me for more Budget chat. I’ll be chairing an event at Home Grown on Tuesday morning (request a place here), or you can scroll down for a smaller roundtable we’re hosting with Evelyn Partners.
Paper Cut
Anastasia has teamed up with Alex Chalmers of Air Street Capital to write a cutting article on how to (not) do policy. Death by a thousand roundtables is a must-read taxonomy for anyone involved in trying to change policy. Anastasia would love to hear any feedback you have – as long as you don’t want to convene a conversation with stakeholders.
Invest in Women
We’re partnering with the Invest in Women taskforce on a report focusing on angel investment. While we tried to get to as many parts of the UK as possible in our recent roundtables, we appreciate that we couldn’t hit every postcode. That’s why we’re opening up the opportunity for you to feed into the report. You’ll have to be quick though – the Call for Evidence will close on Saturday 9 November. Please feel free to share among your networks or on social media. Everything you need to know is here.
Be Our Host
We’re busy planning a lot more breakfasts and dinners with Britain’s leading entrepreneurs – often featuring a senior politician. We have a number of organisations who regularly host us, but we’re looking for three more to join us as hosts for 2025. Get in touch if you would like to discuss how this works.