UK Increases Capital Gains Tax to 24%, Sparking Concerns in Crypto Sector Over Competitive Disadvantage

The UK’s finance minister has raised the top capital gains tax to 24%. This change is less drastic than what many in the tech sector feared, but it still doesn’t do enough to support the crypto industry, according to CryptoUK.

Industry representatives are concerned. They believe that Labour’s decision to hike the top capital gains tax will put more pressure on small businesses and investors. A spokesperson for CryptoUK expressed disappointment, stating, “We’re disappointed that the Chancellor did not take this opportunity to align digital-asset taxation with traditional transactions. Many startups and investors are left in limbo.”

This increase in capital gains tax, which is a tax on profits from investments, was announced as part of the Labour government’s first budget. Chancellor Rachel Reeves aims to fill a £22 billion hole in public spending left by the previous Conservative government.

Reeves’s budget also raises the lower capital gains tax rate from 10% to 18% and the top rate from 20% to 24%. She pointed out that the UK still has a lower tax rate than any other European G7 country. So, while the increase is significant, it’s not as steep as some in the business community had feared.

The tech industry had warned that a bigger increase might drive small businesses away. Many startups compensate their employees with shares, which are taxed as capital gains when sold.

Jack Land, who heads UK growth at startup MetaWealth, shared his concerns. He told DL News that even this increase to 24% could lead to a talent drain. Entrepreneurs are now facing “diminished rewards,” making the UK less competitive compared to other global hubs that are more tax-friendly.

CryptoUK had warned Reeves that this negative impact also extends to the UK’s digital asset businesses. In the UK, cryptocurrencies are primarily taxed under the capital gains regime. CryptoUK argues for a tax policy that aligns digital assets more closely with traditional ones.

For instance, UK crypto investors can’t place their assets into tax-friendly wrappers like ISA accounts, unlike stock and bond investors. Some decentralized lending transactions are taxed, while similar transactions in traditional finance aren’t.

Aligning the taxation of digital assets with traditional assets would ensure fairness and reduce the administrative burden on businesses. It would also encourage more participation in the digital economy, according to CryptoUK.

They emphasize that the digital assets industry has a vital role in supporting economic growth and job creation in the UK. However, this needs to happen on a level playing field.

Land agrees that this change represents a missed opportunity for the UK to promote its blockchain sector. He believes the UK should view blockchain technology—like stablecoins and tokenized real-world assets—as essential tools for modernizing the economy, not as barriers to growth.