The new Chancellor has a long history of working in finance, so will he offer support to fintech?
Despite only being in the job for less than a month, Chancellor of the Exchequer Rishi Sunak will announce his first budget on Wednesday— something that his predecessor Sajid Javid was unable to do.
Javid became the second chancellor in British political history to not deliver a budget, the first being Iain Macleod who died less than a month after being appointed to the role.
Questions have already been raised as to what Sunak will include in his first budget, many have suggested that he will make significant changes to taxes, stamp duty and pensions.
Doubts have been cast by fintech leaders over whether or not the new Chancellor will do anything to support the industry, despite him having a strong background in finance.
Here’s our preview of what to expect.
Despite the Budget not yet being announced, Sunak caused a stir after it was announced he was planning to scrap the tax relief that entrepreneurs currently receive when they sell their businesses.
The tax break currently costs the UK economy £3bn and comes from halving capital gains tax paid when businesses are sold.
In the current system, those selling their companies only pay ten per cent on lifetime gains up to £10m, half the current rate of 20 per cent capital gains tax for everyone else.
The tax break, which was introduced by Gordon Brown’s Labour government in 2008, is meant to help those who want to set up new businesses, something very common within the fintech space.
This news shouldn’t come as a shock, however, as the Conservative Party originally announced the plan to scrap Entrepreneur Relief in their manifesto.
One of the other most likely changes put forward in the budget is a change to the current stamp duty system.
Stamp duty is the tax you have to pay when you buy property or an area of land that costs over £125,000 for residential properties and £150,000 for non-residential property.
The reason why stamp duty is important in the world of fintech is it is also used in the buying of stocks and shares, under the current system you pay 0.5 per cent per transaction.
“It would help include more people in this country into the growth of the companies traded in the stock markets.”
It’s likely that Sunak will increase the rate of stamp duty following the Conservative’s manifesto promise to raise the tax paid by overseas buyers.
The money raised through increasing stamp duty is likely to be used to help fund social care and other forms of state-funded aid.
Housing appears to be a focus for the new Chancellor, as it was announced last month that a new First Homes Scheme will give buyers up to a 30 per cent discount on the cost of buying a new-build home.
Before he was appointed his new role as Chancellor, Rishi Sunak was the MP for Richmond in Yorkshire since 2015 but before that, he worked for Goldman Sachs and The Children’s Investment Fund Management (TCI), one of the largest hedge funds in Europe, and also co-founded an investment firm, Theleme Partners.
The new Chancellor was also a director of investment at Catamaran Ventures, an investment firm owned by his father-in-law, N. R. Narayana Murthy, founder of Infosys.
Based on his experience, one might hope the chancellor will be fairly supportive of the fintech industry.
However, as it currently stands, it’s unlikely that the new Chancellor will place any real focus on fintech, particularly with the plan to scrap, or massively scale back, the Entrepreneur Relief scheme that many fintech startups will have benefitted from.
Given the current global health crisis, the new Chancellor is facing calls to immediately divert funds to the NHS to help it cope with and prevent the spread of the coronavirus.
According to The Telegraph, Sunak has already re-written sections of his budget to account for the global impact that the spread of the coronavirus currently poses on the economy.
The coronavirus has already had a big impact on the world economy, with the global stock market suffering a relentless and sustained drop that has caused the loss of millions of dollars.
So even if the new Chancellor were to make any major fintech announcements, it’s unlikely that’ll be what we’re talking about given the current climate.
The Budget will be announced at 12:30 pm (GMT) on 11 March.