UK Budget cuts VCT relief to 20% as founders seek risk incentives

Key facts

• Chancellor John Healey presented his first Budget alongside Prime Minister Andy Burnham, BusinessCloud reported.
• The Budget cut upfront VCT income-tax relief to 20% from 30%, per BusinessCloud.
• Lateral co-founders Steven Mendel and Laura Ashforth said the cut changes the risk-and-return calculation for investors.
• The founders said VCTs raised £918 million in the final year of the 30% rate.
• The founders called for the 30% VCT rate to be restored and for stable rules across VCT, EIS and SEIS.
• The founders said the £100,000 childcare threshold penalizes founders who earn more.

The UK Budget cut upfront income-tax relief on venture capital trusts to 20% from 30%, BusinessCloud reported, as startup founders pressed the government to do more to reward risk-taking.

Chancellor John Healey presented his first Budget alongside Prime Minister Andy Burnham. Healey pledged "breathing space" to businesses and households and said he would deliver long-term measures to "get energy costs down for good" and to "strengthen national security and our defences", while sticking within tight fiscal rules.

Steven Mendel and Laura Ashforth, co-founders of Lateral, a private health insurance startup for people over 60, said the Budget had not done enough. "The Chancellor talks about backing entrepreneurs, but I'd like to know whether this Budget has done anything meaningful to change Britain's ambition and appetite for risk," they said.

On venture capital trusts, the founders said the cut to 20% "changes the risk-and-return calculation precisely when promising companies already face a shortage of growth capital". They said VCTs raised £918 million in the final year of the 30% rate and called on the government to restore it and commit to long-term stability across VCT, EIS and SEIS, the UK schemes that give tax relief to investors in young companies.

Ashforth also cited the £100,000 childcare threshold as an example of a system that can penalize people for earning more. Mendel is the former CEO and co-founder of ManyPets and chairs Bikmo.