Last week, Sir Keir Starmer announced his resignation as Labour Leader and Prime Minister. Andy Burnham is now the clear frontrunner to replace Starmer, but what could that mean for tax-efficient investments?
With the news last week of Keir Starmer’s resignation and the likelihood of Andy Burnham becoming the next Labour Leader and Prime Minister, we reached out to a host of tax-efficient investment experts to find out how this change in leadership might affect the sector.
“Two weeks ago we knew exactly where we stood. Now there’s a by-election win, a resignation on the steps of Number 10, and a leadership contest that won’t conclude until mid-July. So let’s be honest about what we don’t have: Burnham hasn’t published a manifesto, let alone a tax plan. Everything we’re reading is signal, not pledge.
“The signal that matters? Tax wealth and assets a little harder, tax work a little less. For tax-efficient investing that’s genuinely double-edged. If headline CGT rises, the CGT-free wrapper around (S)EIS and VCTs gets more valuable, not less. And these schemes back exactly what Burnham talks about most: small businesses, regional growth, British scale-ups. Cheap for the Treasury, politically attractive, pro-growth. That’s a relief regime a government like his tends to protect, not pick apart.
“The one to watch is IHT. Any move to reform how wealth is taxed on death would land on BR and AIM portfolios already bruised by April’s cap.”
Jonathan Keeling, Partner at Haatch
The success of any new government will be determined by the economic growth it can enable. Unlocking investment is central to that, and SEIS and EIS have proved time and again that they are powerful drivers of investment, productivity, jobs and growth.
As Britain competes in the next industrial revolution – one that will define the next decade of wealth creation – their importance as growth engines is elevated further still. They are essential to directing private capital into ambitious, high-growth companies, particularly in sectors such as AI, life sciences, climate technology, advanced manufacturing and software.
My expectation is that they will continue to be supported, and hopefully strengthened. More broadly, I hope the principles that have made them so successful – enabling market actors by setting the right conditions for investment and innovation – can be replicated in other areas of government too.
Ed Prior, Head of Investor Services at SFC Capital
“Financial professionals I’m speaking to say they’re having to revisit and rework carefully constructed client plans at pace, driven by changes that can feel insufficiently explained.
“There’s growing frustration that pension IHT reforms are being pushed through on a challenging timeline which is unlikely to change under a new leader, forcing advisers into reactive planning and creating unintended consequences – particularly for clients building pension savings they won’t access for years.
“One financial professional put it to me very starkly – when you layer together changes to CGT, pensions and ISAs, you’re not just adding complexity, you risk starting to undermine client confidence in the very wrappers we’ve spent decades encouraging them to trust.”
Steve Owen, Head of Proposition EMEA at Morningstar Wealth
“Leadership changes inevitably bring renewed debate around tax policy, but the economic rationale for schemes such as EIS, SEIS and VCTs will remain compelling. These schemes play an important role in directing private capital towards innovative, high-growth businesses, so it is unlikely their strategic case will change materially.
“The UK continues to rely on private capital to fund innovative businesses that drive productivity, create skilled jobs and support long-term economic growth. Regardless of who leads the government, our country’s growth ambitions critically depend on mobilising more private investment. Tax-efficient investment schemes will remain an effective way of encouraging long-term capital into areas where funding gaps still exist.
“While governments may refine the detail of tax policy over time, introducing significant disincentives for patient growth capital would be difficult to reconcile with those wider economic objectives. Investors should therefore avoid making long-term decisions based solely on political leadership changes. They should focus less on political personalities and more on the long-term policy imperative of supporting entrepreneurship. The question is less about who occupies number 10, and more about whether the UK will champion the next generation of globally competitive businesses through private capital.
“As competition to lead in AI and other high-growth sectors intensifies, encouraging investment into early-stage and scaling companies becomes even more important. We must maintain these incentives, and the need to finance entrepreneurship and innovation will likely outlast any individual administration. For example, the UK’s recent £1.1bn hardware plan is encouraging, and if the UK wants to continue to support building the next generation of AI and scale-up success stories, private capital must remain part of the solution.”
Mei Lim, Group CFO and Managing Partner at Anthemis
“Once again, we must prepare for a period of uncertainty and speculation around change to various impactful policies, such is the consequence of what has become an ever-revolving door at No. 10. There are some early indications of changes to the treatment of Capital Gains Tax to align more closely with the income tax structure, a famously easy to understand methodology!
“These changes could see additional rate taxpayers subjected to a 45% CGT rate outside of their annual allowance. Under such circumstances, tax efficient investment products like the EIS and VCT schemes which offer CGT free growth will become even more compelling.
“Such punitive rates will also put the spotlight on the CGT deferral relief available through EIS investing. The bipartisan support and stability of the EIS and VCT schemes provide a dependable respite in what is an ever-increasing tax burden.”
Matthew Moynes, Director at Calculus Capital
“A change of Labour leadership naturally invites speculation about future policy direction, but speculation is all it can be at this stage. Financial advisers rightly plan around legislation that is current or formally announced, not conjecture – and there is no confirmed proposal to materially reform tax-efficient investments, which have retained cross-party support through numerous changes of government.
“What we do know is that throughout his time as Mayor of Greater Manchester, Andy Burnham built a reputation for championing economic growth, attracting investment and backing the businesses that create jobs across the region. Greater Manchester became the UK’s fastest-growing city region under his leadership: a record built on supporting enterprise rather than constraining it.
“Tax-efficient investments are precisely the tools that channel private capital into UK start-ups and growing companies. Any leader serious about growth has good reason to value the role they play. Our advice to advisers is to keep planning on the basis of today’s rules. What we would hope to see from a Burnham-led government is consistency: a stable policy environment gives advisers the confidence to plan and clients the certainty to act.”
Rebecca Ward-Howes, Head of Product at Downing
