Finance

Technology entrepreneurs and investors slammed the U.K. government’s decision to hike capital gains tax, National Insurance contributions and carried interest for VC fund managers.
U.K. Finance Minister Rachel Reeves announced a move to raise CGT as part of a far-reaching announcement on the Labour government’s fiscal spending and tax plans.
Haakon Overli, co-founder of venture capital firm Dawn Capital, said the tax increases could make it harder for the next Nvidia to be built in the U.K.

UK Finance Minister Rachel Reeves makes a speech during the Labour Party Conference that is held at the ACC Liverpool Convention Center in Liverpool, UK on September 23, 2024. 
Anadolu | Getty Images

LONDON — British tech bosses and venture capitalists are questioning whether the country can deliver on its bid to become a global artificial intelligence hub after the government set out plans to increase taxes on businesses.
On Wednesday, Finance Minister Rachel Reeves announced a move to hike capital gains tax (CGT) — a levy on the profit investors make from the sale of an investment — as part of a far-reaching announcement on the Labour government’s fiscal spending and tax plans.

The lower capital gains tax rate was increased to 18% from 10%, while the higher rate climbed to 24% from 20%. Reeves said the increases will help bring in £2.5 billion ($3.2 billion) of additional capital to the public purses.
It was also announced that the lifetime limit for business asset disposal relief (BADR) — which offers entrepreneurs a reduced rate on the level of tax paid on capital gains resulting from the sale of all or part of a company — would sit at £1 million.
She added that the rate of CGT applied to entrepreneurs using the BADR scheme will increase to 14% in 2025 and to 18% a year later. Still, Reeves said the U.K. would still have the lowest capital gains tax rate of any European G7 economy.

The hikes were less severe than previously feared — but the push toward a higher tax environment for corporates stoked the concern of several tech executives and investors, with many suggesting the move would lead to higher inflation and a slowdown in hiring.
On top of increases to CGT, the government also raised the rate of National Insurance (NI) contributions, a tax on earnings. Reeves forecasted the move would raise £25 billion per year — by far the largest revenue raising measure in a raft of pledges that were made Wednesday.

Paul Taylor, CEO and co-founder of fintech firm Thought Machine, said that hike to NI rates would lead to an additional £800,000 in payroll spending for his business.
“This is a significant amount for companies like us, which rely on investor capital and already face cost pressures and targets,” he noted.
“Nearly all emerging tech businesses run on investor capital, and this increase sets them back on their path to profitability,” added Taylor, who sits on the lobbying group Unicorn Council for U.K. FinTech. “The U.S. startup and entrepreneurial environment is a model of where the U.K. needs to be.”

Chances of building ‘the next Nvidia’ more slim

Another increase to taxation by way of a rise in the tax rate for carried interest — the level of tax applied to the share of profit a fund manager makes from a private equity investment.

Reeves announced that the rate of tax on carried interest, which is charged on capital gains, would rise to 32%, up from 28% currently.
Haakon Overli, co-founder of European venture capital firm Dawn Capital, said that increases to capital gains tax could make it harder for the next Nvidia to be built in the U.K.
“If we are to have the next NVIDIA built in the UK, it will come from a company born from venture capital investment,” Overli said by email.
“The tax returns from creating such a company, which is worth more than the FTSE 100 put together, would dwarf any gains from increasing the take from venture capital today.”
The government is carrying out further consultation with industry stakeholders on plans to up taxes on carried interest. Anne Glover, CEO of Amadeus Capital, an early investor in Arm, said this was a good thing.
 “The Chancellor has clearly listened to some of the concerns of investors and business leaders,” she said, adding that talks on carried interest reforms must be “equally as productive and engaged.”
Britain also committed to mobilizing £70 billion of investment through the recently formed National Wealth Fund — a state-backed investment platform modelled on sovereign wealth vehicles such as Norway’s Government Pension Fund Global and Saudi Arabia’s Public Investment Fund.

This, Glover added, “aligns with our belief that investment in technology will ultimately lead to long term growth.”
She nevertheless urged the government to look seriously at mandating that pension funds diversify their allocation to riskier assets like venture capital — a common ask from VCs to boost the U.K. tech sector.

Clarity welcomed

Steve Hare, CEO of accounting software firm Sage, said the budget would mean “significant challenges for UK businesses, especially SMBs, who will face the impact of rising employer National Insurance contributions and minimum wage increases in the months ahead.”
Even so, he added that many firms would still welcome the “longer-term certainty and clarity provided, allowing them to plan and adapt effectively.”
Meanwhile, Sean Reddington, founder and CEO of educational technology firm Thrive, said that higher CGT rates mean tech entrepreneurs will face “greater costs when selling assets,” while the rise in employer NI contributions “could impact hiring decisions.”
“For a sustainable business environment, government support must go beyond these fiscal changes,” Reddington said. “While clearer tax communication is positive, it’s unlikely to offset the pressures of heightened taxation and rising debt on small businesses and the self-employed.”
He added, “The crucial question is how businesses can maintain profitability with increased costs. Government support is essential to offset these new burdens and ensure the UK’s entrepreneurial spirit continues to thrive.” More

 BlackRock’s iShares is trying to appeal to investors who want to diversify beyond from the so-called Magnificent Seven.
The firm launched the iShares Top 20 U.S. Stocks ETF (TOPT) this month. It doesn’t just hold the Magnificent Seven — Apple, Amazon, Meta, Alphabet, Microsoft, Nvidia and Tesla. It’s made up of the 20 largest U.S. stocks by market capitalization.

“What the iShares build ETFs are designed to do is to deliver a tool kit of simple solutions for investors to be able to capture the growth of some of the largest companies within the U.S. equity market today, but to do so in a broader and more diversified manner,” BlackRock’s Rachel Aguirre told CNBC’s “ETF Edge” on Monday.
Aguirre, the firm’s head of U.S. iShares product, noted the ETF’s mission is to deliver an easy and accessible way to tap into the innovation of megacaps – “whether that be in the tech-heavy Nasdaq space or, more broadly, within the S&P [500].”

Arrows pointing outwards

The ETF, according to Aguirre, provides a way for investors worried about the concentration of the Magnificent Seven stocks in the S&P 500.
On Thursday, the Magnificent Seven slid more than 3.5% as a group — losing around $615 billion in market cap. That’s equivalent to the size of JPMorgan Chase.
However, the Magnificent Seven is still up about 43% so far year while the S&P 500 is up around 20%

“It’s important for clients and investors to remember that there are split views on this topic. There are many investors who believe that the big will get bigger [and] that the winners will continue to win,” Aguirre said. “There’s also another side to this argument. There are many investors who believe that it’s actually a very worrisome time to continue investing in… mega-cap companies because of just their high valuations.”
The iShares Top 20 U.S. Stocks ETF is down 2% since its Oct. 23 launch.

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Block’s business-focused payments arm, Square, told CNBC it has rolled out it’s Square Card product in Britain.
It marks the first time Block has expanded its business card offering outside North America, where it first launched in 2019.
The firm will come up against local banking giants like Lloyds and NatWest, as well as fintech players including Pleo, Payhawk and Spendesk.

Marco Bello | AFP | Getty Images

LONDON — Block, the payments company owned by tech billionaire Jack Dorsey has launched its corporate card service in the U.K. in a bid to deepen its expansion into the country and take on big incumbents like American Express.
The firm’s business-focused payments arm, Square, told CNBC that it opened registrations for its Square Card product in Britain late Wednesday, marking the first time Block has expanded its business card offering outside North America, where it first launched in 2019.

Currently available in the U.S. and Canada, Square Card is a free business spending card that reduces the time between merchants making a sale and having funds available to spend. It competes with offerings from the likes of American Express and Citigroup.
Samina Hussain-Letch, executive director of Square U.K., said the launch of the firm’s corporate card product in the U.K. would give merchants speedier access to funds and help them more easily manage their daily expenses.
“When designing this product we went back to our mission of making commerce easy,” Hussain-Letch told CNBC. Based on internal research Square found that small and micro businesses “prefer their funds to be consolidated in one place,” she said, adding that real-time access to funds was also an important factor.
In the U.K., Square Card will come up against local banking giants like Lloyds and NatWest. It will also heighten competition for some well-funded European fintech players, including Pleo, Payhawk and Spendesk.
Hussain-Letch highlighted The Vinyl Guys as an example of an early adopter of its corporate card offering. The vehicle branding and signage printing shop based in Stafford used the corporate card as part of a testing phase with domestic U.K. customers.

“We’ve had some great feedback about the benefits of having instant access to funds which really helps our small business sellers to run and grow, as we know that the number one reason small businesses fail in the UK is due to problems with cash flow,” she added.
Merchants can personalize employee spending cards with signatures and business branding.
Once an employee is onboarded onto the Square Card program, they can begin using within their own digital wallet apps. The service doesn’t charge monthly fees, maintenance fees, or foreign exchange fees.
Square is deepening its investment in the U.K. at a time when the country is seeking to be viewed as a destination for global technology businesses.
Entrepreneurs have been warning of a possible exodus of talent from the U.K. in response to the government’s controversial taxation changes.
On Wednesday, Finance Minister Rachel Reeves hiked Capital Gains Tax (CGT) — a levy on investment profits. But the news offered some relief for technology entrepreneurs who feared a more intense tax raid on the wealthy. The lower capital gains tax rate will be increased to 18% from 10%, while the higher rate will climb to 24% from 20%, Reeves said. The tax hikes are expected to bring in £2.5 billion. More