The Treasury has said it acknowledges concerns raised about the recent changes to angel investor rules and will “work closely” with the startup community to find a solution.
Last week, Chancellor Jeremy Hunt received an open letter signed by more than 2,700 industry representatives calling for a reversal of a policy to raise the income threshold for the status of high-net-worth individuals.
The change, which came into effect on Wednesday, increased the qualifying income from £100,000 to £170,000, or net assets of at least £430,000, excluding a person’s home.
The Startup Coalition, the lobby group that organised the open letter, said this would damage the UK’s tech ecosystem by cutting off funding options for small businesses and disproportionately reduce the number of female and regional angel investors who fall under financial promotion exemptions.
In an update, the Startup Coalition said Economic Secretary to the Treasury Bim Afolami had met with industry representatives on Wednesday to hear their concerns and attempt to find a way forward.
The Treasury said in a statement that Afolami “listened carefully to concerns”, stating that the government “fully recognises the crucial role” of angel investors who have been removed from the financial promotion exemptions.
Dom Hallas, executive director of the Startup Coalition, said the “issue is now that we still need to fix it”.
It was confirmed last week that despite hearing industry concerns, there was not enough time to reverse the decision, as it would require new legislation.
Hallas said he is “engaging with Bim and the chancellor’s team on how to move the policy forward”.
“What we have made very clear is that every day this isn’t addressed is a mistake,” Hallas said.
“There’s a problem now – and we need a solution that fixes both the policy and the narrative that is being created around the changes that tells people that angel investing isn’t for them.”
A separate petition, which launched before the new thresholds took effect and specifically focuses on the impact the changes will have on female and minority angel investors, has so far attracted more than 1,300 signatures.
“It is clear that this legislation has a disproportionate effect on women and minority investors especially in the regions outside of London,” said Becky Lodge, director at Little Kanga and the organiser of the petition.
While the government has acknowledged industry concerns, there are calls to ensure clear action is taken and for a diverse range of voices to be involved in discussions.
“This is disappointing, there is no action plan,” said Roxane Sanguinetti, an investor at Alma Angels. “It was a meeting with no clear outcomes and we want to see actions quickly. We will continue to work on getting the voices of women and underrepresented communities heard so that the government is held accountable for the impact of their decision on the early stage ecosystem and the economy as a whole.”
Hailey Eustace, a deeptech angel investor and founder at Commplicated, added: “This was a closed-door meeting with many of the same people who consulted on the legislation in the first place. We need to make sure to get more diverse voices in the room making decisions or nothing will actually progress.”
This story was updated to include additional industry reactions.