How Budget capital gains tax changes boosted attractiveness of startups to investors
Changes to capital gains tax and entrepreneurs’ relief announced in the Budget have made startups and growing businesses more attractive investment prospects, a new survey of business leaders has found.
Eight in 10 of the 1,224 Institute of Directors members quizzed in April over the changes said they would draw investment to entrepreneurial companies.
Under the changes, announced by George Osborne in March, capital gains tax was cut from 28 per cent to 20 per cent for higher rate taxpayers, and from 18 per cent to 10 per cent for basic rate taxpayers.
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Entrepreneurs’ relief, meanwhile, is set to be extended to long-term shareholders in unlisted companies.
Some 24 per cent of those surveyed said these changes made entrepreneurial businesses significantly more attractive, while 55 per cent said it made them slightly more attractive. Two per cent said it made them slightly or significantly less attractive.
Stephen Herring, head of taxation at the IoD, said: “The chancellor rightly reformed taxes on capital gains at the Budget to encourage investment in the entrepreneurial firms that will create the innovative products of the future, and new jobs with them.”
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Members viewed a cut to the rate of corporation tax positively. Half said cutting corporation tax was the right priority, but three in ten would have liked to have seen greater reforms.
IoD members were less convinced by Osborne's personal tax changes. The Budget announced that, from April 2017, the higher tax threshold would be increased from £42,385 in 2015/16 to £43,000 in 2016/17 and then to £45,000 in 2017/18. The government's target is £50,000.
Some 44 per cent of members thought the rate of increase was too slow.