Welcome to the latest instalment in our new series of interviews on GBI Magazine! This series focuses on the recent UK general election and the changes we can expect to tax-efficient investments with a Labour government.
Joining us this time is Kealan Doyle, the CEO & Co-Founder of Symvan Capital. Kealan outlines how the results of the general election will impact tax policies on investments and retirement savings.
1) How has the result of the general election affected your company?
The direct impact of Labour winning a supermajority in the July 2024 election has been negligible so far. On a positive note, I expect the new government to be very friendly towards entrepreneurs, and there will be a big push on helping the UK become a leader in areas such as biotech and AI. If there is one message to take away from the Chancellor in recent statements, it is that there is a huge hole in the public finances, and that economic growth is the long-term solution. This should lead to continued support for EIS and VCT investment schemes, which is good news for Symvan Capital and our investors!
However, the indirect impact promises to have a profound impact on any financial services firm that deals in tax-efficient investments, which encompasses a majority of the retail and HNW financial services sector in this country. As anyone who has been to a Symvan investment event since January can attest, we have been firmly of the view that Chancellor Reeves will sharply increase capital gains taxes, perhaps in line with income taxes which could lead to a near doubling in their value.
The target for the tax rise is largely due to property and conventional stock investing, as well as helping with the Private Equity ‘carried interest’ conundrum. However, this should have a dramatic impact on the balance of money raised between EIS versus VCT investments. A lot of EIS investments are already favoured over VCTs by wealthier clients and by those with more complicated tax affairs. But these recent developments will ensure that any investor with a capital gain will favour EIS investments, and there could be a rush ahead of the Autumn budget and afterwards.
2) Do you think the outcome of the UK election will impact tax policies on investments?
Yes. The aforementioned rise in CGT will have a negative impact on buy-to-let property investing and might damage conventional DFM investments at the margin. Yet, Labour will have a profound impact on the tax-efficient investment sector in particular. Expect a reduction in the amount of money that can be invested into ISA products each year, perhaps from £20,000 to £10,000 per annum. Also expect investor SIPP plans to be further taxed, and to no longer be used as a viable IHT planning vehicle.
Finally, there is a good chance the Chancellor will place new restrictions on Business Relief (BR) products, removing or restricting tax relief on investments that are not passing down intergenerational wealth within a family or do not have a sufficiently ‘risk-to-capital’ investment profile. This might not be targeted in the first budget, but a lot of conservative BR products do not have a long shelf life to look forward to judging by the noises coming from the Treasury.
Assuming that there are no further changes made to the existing EIS qualifying criteria, this will be very popular for EIS funds and individual EIS companies.
3) In what way(s) will the Labour government’s pension policy impact tax-efficient retirement savings?
It looks increasingly likely the new government will tax pensions in a variety of ways. First they are likely to change the percentage amount that investors can claim to make pension investments. The top rate of 45% tax relief will almost certainly be reduced for the purpose of future investments, perhaps to a flat rate of 20% for everyone irrespective of the income they generate, or perhaps to a higher rate such as 25-or- 30%.
The good news for HNW investors is the elimination of the lifetime allowance will probably not be reinstated, but this is surely offset by removing pensions as an IHT planning product. The Chancellor is adamant the wealthy will pay for the planned increases in government spending. Economic redistribution will be the name of the game.
However, if the Chancellor is serious about growing the technology sector in the UK, this should mean no substantive change to EIS and SEIS legislation, and these two asset classes could be the poster boys for the new investment climate for HNW investors in Britain.
4) How will the Labour government’s approach to wealth taxes influence high-net-worth individuals’ investment decisions?
It depends entirely on what specific policies the Labour government adopts. For instance, the anticipated elimination of non-Dom status for the international wealthy on UK soil, will lead to a certain number of departures from the UK towards other European countries with friendlier tax regimes, such as Italy, Portugal and Switzerland. Whether that is a trickle or a flood is yet to be seen.
Slightly down the food chain, the VAT tax imposition on private education will severely impact those parents on more modest incomes, leading to a greater squeeze on the state education sector (meaning higher taxes) and a reduction in the supply of independent classrooms. Like the restrictions on fox hunting during the Blair years, these policies offer wonderful solace to the ‘beard-and-sandals brigade’, but they make for horrible public policy.
Kealan is CEO and co-founder of Symvan Capital. He has worked with venture capital companies for 20 years, both as a fund manager as well as in a corporate finance advisory capacity. Symvan focuses on technology companies with a bias towards investing in B-to-B SAAS companies that increase enterprise and SME productivity.
Before his involvement in venture capital investing, Kealan previously lead a structured equity products team at HSBC, and has worked at Deutsche Bank, Merrill Lynch and UBS. Kealan holds degrees from the London School of Economics and the University of Toronto.
Check out the previous interview in this series with YFM Equity Partners here!
