In today’s Budget, Chancellor of the Exchequer, Rachel Reeves MP, set out the government's tax and spending plans and the Office for Budget Responsibility’s (OBR) economic and fiscal forecasts. This was the first Budget delivered by a Labour Chancellor since March 2010 - and therefore the first Labour Budget that really impacts our world-leading FinTech ecosystem.
Our Innovate Finance Autumn Budget 2024 analysis below sets out the key points for FinTech and the Budget in numbers.
Analysis
This was always going to be a difficult balancing act: supporting the government's top priority of growing the economy and investment whilst also fixing the hole in public finances. Arguably, it achieves the latter - with a record £40 billion in tax rises (£25 billion of which is in employers’ National Insurance). But the OBR forecast suggests it will make little impact on economic growth over the next five years.
The tax rises have been well trailed and are broadly as expected. At Innovate Finance, we have been making the case to Ministers to maintain the UK’s competitive environment for entrepreneurs, investors and attracting talent - and particularly highlighting the risks to growth of a significant hike in capital gains tax (CGT). Overall, employers take the biggest tax hit today with a rise of 1.2 pence in the £ on employer National Insurance. For all but the smallest firms that will increase costs. The changes to capital gains have been kept relatively limited (pegging with CGT rates to those for property). A five-year Corporate Tax Roadmap provides some certainty and stability for corporation tax and a welcome consultation on pre-approval of research and development (R&D) tax credits, but there is no similar commitment on tax measures like CGT, Enterprise Management Incentives (EMIs) and Business Asset Disposal Relief (BADR).
The OBR forecasts that the Budget increases growth by around 0.3% this year and the next before reducing the growth forecast in subsequent years. We will need to assess and monitor the specific impact in FinTech.
Whilst today is about tax and spending, the other lever the government has for growth is regulation - removing regulatory barriers and using regulation to enable innovation and competition. To date the new government has advanced regulatory reform in a number of areas (see our summary further down). We will be encouraging them to turbocharge this, to offset the tax changes and position the UK as the leading jurisdiction for financial innovation.
We will be maintaining the pressure for further action on this as well as highlighting the impact of the tax changes in our lobbying on behalf of UK FinTech.
You can read our media response to the Budget here.
Key points for FinTech
Business and personal tax
The key changes to tax rates are as follows:
| Capital Gains Tax (CGT) on shares | With immediate effect, a 4% rise to 24% (but see BADR below). |
| Enterprise Investment Scheme (EIS) / Seed Enterprise Investment Scheme (SEIS) | No changes (an extension to 2035 of these schemes was announced in Autumn 2023). |
| R&D tax relief | HMRC will proceed with establishing the R&D expert advisory panel previously announced.
HMRC will launch a consultation in Spring 2025 on widening the use of advance clearances in R&D reliefs. |
| Business Asset Disposal Rate (BADR - formerly entrepreneurs relief) | No change to the £1 million BADR relief amount.
CGT rate on BADR disposals to increase to 14% for 2025/26 and 18% for 2026/27. |
| Enterprise Management Incentives (EMI) | No direct changes but see BADR above. |
| Employer National Insurance | With effect from April 2025:
|
| Carried interest | Currently 28% capital gain rate. Increased to 32%. |
| Inheritance tax (IHT) on Alternative Investment Market (AIM) shares | From 6 April 2026, the rate of business property relief (IHT) will be reduced to 50% from 100% for shares designated as "not listed" on the markets of recognised stock exchanges, such as the Alternative Investment Market (AIM). |
Longer term corporate tax roadmap: This sets out the direction of travel and longer term commitments on corporate tax for the rest of this Parliament (i.e. up to five years). It confirms that the headline rates of corporation tax will not rise and that capital allowances will be maintained at their current rate. It also commits to a consultation on pre-approval by HMRC of R&D tax claims - something Innovate Finance has called for.
Investment policies
Business Asset Disposal Relief (BADR): We have argued to the Government that BADR should be expanded and improved if it is to be effective in attracting founders to establish new businesses in the UK. We also highlighted the risks of reducing the value of BADR in the context of EMI share options schemes for hiring skilled staff. Today, the government instead announced no change to the relief limit of £1 million. However, the capital gains tax rate applicable to BADR gains will increase from 10% to 14% in 2025/26 and 18% in 2026/27. The changes appear to be entirely focused on business owners (described as a phased increase to allow time for business owners to adjust to the changes) with no acknowledgement of the important interaction between BADR and EMI schemes for staff. However, the government states that it “is committed to creating a positive environment for entrepreneurship and will work with leading entrepreneurs and venture capital firms on how policy supports that, including the role of the existing tax schemes.”
Capital Gains Tax (CGT): The upper rate of capital gains tax will increase from 20% to 24%.
R&D relief: It has become increasingly difficult for FinTechs to access R&D tax relief in recent years. We recommended to the government that an advance assurance process be introduced, and today the government has announced a proposed consultation on this, to be launched in Spring 2025.
Business Property Relief (BPR): Shares traded on the Alternative Investment Market (AIM) and Aquis currently qualify for BPR, which is a 100% exemption from inheritance tax. Today, the government announced that from April 2026, this relief will be reduced to 50%.
Investors’ Relief: There are also changes to Investors’ Relief (IR), which provides for a lower rate of CGT to be paid on the disposal of ordinary shares in an unlisted trading company. The lifetime limit is reduced from £10 million to £1 million and the CGT rate that applies to IR is increasing from 10% to 14% for disposals made on or after 6 April 2025, and to 18% for disposals made on or after 6 April 2026.
Stamp Duty: Financial Market Infrastructures (FMI) sandbox and Private Intermittent Securities and Capital Exchange System (PISCES) exemption. The Budget announced a new power enabling HM Treasury to make Stamp Duty and Stamp Duty Reserve Tax (SDRT) changes in relation to FMI sandboxes and will be used to provide an exemption for PISCES related transfers (a new type of trading platform that will allow private companies to have their shares traded intermittently).
Future consultations on SME lending announced
The Budget document states the government intends to consult on enhancements to the Bank Referral Scheme, whereby customers who are turned down for finance are passed onto alternative lenders, and the Commercial Credit Data Sharing Scheme which aims to actively stimulate competition and new entrants in SME lending markets.
Both the post-implementation review document for the referral scheme and the post implementation review document for the Commercial Credit Data Sharing Scheme, published today alongside the Budget, references the Centre for Finance, Innovation and Technology’s (CFIT) work on SME finance and the role Smart Data can play.
These consultations will explore if existing legislation needs to be amended or if improvements can be made through guidance.
Spending plans
The Budget also announced a ‘mini spending review’ - government spending plans for 2024/25.
Spending Reviews set limits on how much government departments can spend, and are usually informed by forecasts of the state of the economy.
This confirms over £1 billion across 2024-25 and 2025-26 for the British Business Bank to enhance access to finance for small businesses, including over £250 million each year for small business loans programmes, such as Start Up Loans and the Growth Guarantee Scheme.
Over £200 million has also been allocated for wider small business support including continued funding for practical support through Growth Hubs and Help to Grow Management. Funding for the Made Smarter Adoption programme will double to £16 million in 2025-26, supporting more small manufacturing businesses to adopt advanced digital technologies and enabling the programme to be expanded to all nine regions of England.
A more comprehensive spending review will follow in the spring, covering 3-5 year spending across Government.
The macro-economic headlines
The OBR has published its updated economic and fiscal outlook, which reveals:
- Headline inflation will increase very slightly by 0.1% in 2025 before falling continually to a low of 2.0% in 2029.
- Underlying debt will rise as a share of GDP in every year of the forecast through to 2029.
- Growth forecast has improved from the previous forecast in the Spring and will rise to 2.0% in 2025 before falling to a low of 1.5% by 2027.
October 2024 Budget - Table of OBR UK economic forecasts (%):
The OBR’s March 2024 forecast is in brackets - to show the changes resulting from the Budget and wider economic circumstances
| 2024 (October forecast) | 2025 | 2026 | 2027 | 2028 | 2029 | |
| GDP growth | (0.8) 1.1 | (1.9) 2.0 | (2.2) 1.8 | (1.8) 1.5 | (1.7) 1.5 | 1.6 |
| CPI inflation | (2.2) 2.5 | (1.5) 2.6 | (1.6) 2.3 | (1.9) 2.1 | (2.0) 2.1 | 2.0 |
| Unemployment rate | (4.2) 4.3 | (4.4) 4.1 | (4.2) 4.0 | (4.2) 4.1 | (4.1) 4.1 | 4.1 |
Pro-innovation regulation
Since the election, Innovate Finance has been engaging with Ministers, government officials, MPs, Lords and regulators on our FinTech Plan for Government, which sets out a number of recommendations for a pro-innovation regulatory agenda. Seven out of ten of our regulatory and policy recommendations have been adopted within the first 110 days of the new government:
| Role of FinTech in Govt missions | ✓ | FinTech and Smart Data referenced in Industrial Strategy. |
| Safest place for digital transactions | ✓ | Maximum reimbursement for payments fraud reduced from £415,000 to £85,000 - proportionate and clear for consumers. |
| Tech Positive Regulator | ✓ | FCA Review to streamline consumer rule book launched. |
| ✓ | Proposals for proportionate Buy-Now Pay-Later (BNPL) regulation, based on Innovate Finance blueprint. | |
| Investment for growth | ✓ | Pensions Review and Bill to support pension investment in UK growth firms. |
| ✓ | Expanded remit for British Business Bank, to reinvest returns and create investment vehicle for pension funds. | |
| Build Smart Data Economy and transform UK financial infrastructure | ✓ | Smart Data Bill introduced. |
| ✘ | Waiting for the government’s plan for Open Banking and Open Finance. | |
| ✘ | National Payments Vision expected c. 14 November. | |
| ✘ | No progress yet on secondary legislation for stablecoin regulation and staking. |
We are now encouraging the Government to set out an ambitious vision and roadmap for UK payments, including Open Banking Account to Account Payments, and secondary legislation to enable a regulatory framework for Stablecoins and digital assets - which can significantly drive growth and productivity.
Other Budget announcements
Climate risk and green finance: Coinciding with the Budget, Rachel Reeves has written to the Bank of England calling on it to reinstate climate change as a key priority for its work on financial policy and stability.
Cross-government Review of Technology Adoption for Growth, Innovation and Productivity: A cross-government review on the barriers to the adoption of transformative technologies that could enhance innovation and productivity. This review will focus solely on the “growth-driving” sectors identified in the Government’s recent Modern Industrial Strategy, one of which is financial services.
Cryptoassets: tax reporting rules: The Government has published a summary of responses to its consultation on the implementation of the Cryptoasset Reporting Framework (CARF) and amendments to Common Reporting Standard (CRS), requiring Reporting Cryptoasset Service Providers (RCASPs) to report details of their users and transactions to tax authorities, who can use the information to detect and tackle tax non-compliance. The Government has affirmed its commitment to implementing the OECD CARF and the amendments to the CRS. The Government has published the draft regulations implementing the new rules and will also prepare draft guidance.
Artificial Intelligence (AI): The Government will be publishing an Artificial Intelligence Opportunities Action Plan setting out a roadmap to capture the opportunities of AI to enhance growth and productivity and better deliver services for the public. A National Data Library will also be created to unlock the full value of the full value of public data assets.
Open Data: While there was no direct mention of Open Banking, Open Finance and Smart Data today, there was a mention of Open Data. The Government is looking to statutory Open Data schemes for fuel prices to facilitate competition in the roads fuels market where all UK retail petrol-filling stations are to report prices and the unavailability of fuel within 30 minutes of a change. A market monitoring function will also be introduced. The Government intends to launch the scheme by the end of 2025, subject to parliamentary timings and the passage of required legislation.
Look ahead to…
The Chancellor will make her next major speech and announcements for financial services and FinTech on 14 November at the Mansion House. The Budget document states she will set out her vision for the financial services sector, including forthcoming ‘Remit Letters’ for the regulators. The document goes on to say the Chancellor will use the speech to ensure the sector makes the most of the talent in the sector through the Women in Finance Charter.
We also have some indications that announcements on the National Payments Vision and Open Banking, as well as regulation more widely, may take place at or around this time.
Further ahead, the Government will publish its detailed Industrial Strategy in spring 2025, setting out plans and policies for individual sub sectors, which we anticipate will include FinTech. We continue to engage with the Government on this. Also in the spring, long term spending plans will be published with the 3-5 year Comprehensive Spending Review.
Got views? Get in touch
If you have views or questions, please feel free to email us at policy@innovatefinance.com and sign up to our policy newsletter here.
Innovate Finance policy team
Adam Jackson - Chief Strategy Officer
Andy Thornley- Head of Regulatory Affairs
Mike Carter - Senior Policy Advisor
Megan Jenkins - Policy and Public Affairs Manager
Christopher Foo - International Policy Associate
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