Fintech investors warn higher taxes could cripple UK startup funding ahead of budget

Venture-capital investors warned that the government’s plan to increase taxes on banks and capital gains will have indirect, “clip-the-wings” effects on Britain’s fintech industry, which is already struggling to secure funding. Outward VC principal Sanchit Dhote said higher levies could cause banks to retreat from roles as fintech partners and venture-debt lenders, lowering morale across the sector. Leading challenger banks, including Revolut UK, Monzo and Oaknorth, have petitioned Chancellor John Healey to raise the banking surcharge threshold from £100 million to £500 million, but fintech investors doubt any relief would improve valuations.

Total fintech investment dropped to £1.8 billion in the first half of the year, a two-thirds decline and the lowest in a decade, while deal numbers also hit a ten-year low. KPMG’s Hannah Dobson warned that even without direct balance-sheet hits, the cumulative tax burden would dampen investor appetite and hurt the UK’s competitiveness. The Treasury declined to comment, noting tax decisions are for the Chancellor to set at fiscal events.