Budget could act as major disincentive to SME investment – Saltus

The Saltus Wealth Index has indicated that proposed increases to Capital Gains Tax (CGT), business asset disposal relief – formerly known as entrepreneurs’ relief – and employers’ national insurance (NI) could act as a major disincentive to small business investment.

The research found that 38% of high net worth individuals (HNWIs) already supported start-up businesses, while a further 47% planned to.

However, Saltus suggested that an increase in CGT could not only disincentivise entrepreneurs, but also deter potential investors.

Jordan Gillies, partner at Saltus, said: “It is clear why respondents are reporting disquiet.

“The threat of a CGT rise from 20% to as much as 45% would strip away the incentive for entrepreneurs to start businesses, as it directly impacts their ability to sell and realise the reward.

“And that is before you consider the impact it would have on potential investors being put off supporting these entrepreneurs building the high growth businesses that will drive UK economic growth in the future.

“If CGT were to increase, investors, especially those involved in SEIS/EIS, would see their potential gains eroded, making investing in startups significantly less attractive.” 

The Saltus Wealth Index also highlighted that 84% of HNWIs were actively mentoring younger entrepreneurs, while 82% were either part – or plan to become part of – an angel investing network, and 38% sat on at least one company board.