The UK’s crypto sector has voiced concerns over Labour’s recent decision to increase the top capital gains tax rate to 24%, arguing that the move could place an extra financial burden on investors and small businesses, according to industry representatives.
A spokesperson for CryptoUK, a leading digital asset industry body, expressed disappointment over the budget announcement, emphasising the missed opportunity for tax parity between digital assets and traditional investments.
“The Chancellor’s decision not to align digital asset taxation with traditional financial transactions has left many in the sector, including startups and scale-ups, without clear guidance on the tax regime, creating uncertainty for investors and innovators,” the spokesperson told DL News.
Chancellor of the Exchequer Rachel Reeves unveiled the capital gains tax increase on Wednesday as part of Labour’s first budget, aimed at addressing what she described as a £22 billion funding gap in public finances inherited from the previous Conservative government.
As part of the new tax framework, the lower rate of capital gains tax will increase from 10% to 18%, while the top rate will rise from 20% to 24%.
While Reeves highlighted that the UK’s tax rates remain lower than those in any G7 economy in Europe, the modest increase has still drawn criticism from the tech sector.
Many in the country’s startup scene had warned that a significant hike could deter small businesses from choosing the UK as a base. In many startups, employees are compensated in company shares, which are taxed under capital gains.
Jack Land, head of UK growth at MetaWealth, told DL News that even the relatively moderate increase could threaten the UK’s appeal as a tech and business hub.
“The rise to 24% could result in a brain drain, with diminished incentives making the UK less competitive compared to more innovation-friendly hubs,” he noted, adding that this tax shift may also lead to a risk of “talent and capital flight.”
CryptoUK had previously cautioned Reeves about the potential adverse effects of such a tax increase on the country’s burgeoning digital assets sector, which is predominantly taxed under capital gains. The group advocates for a tax approach that treats digital assets similarly to other types of investments.
For instance, while stocks and bonds can be held in tax-efficient wrappers such as ISAs, crypto assets are currently excluded from this option.
