For many UK investors, the upcoming Budget presents a real opportunity — not just to tinker around the edges of tax reliefs, but to reset the investment ecosystem in a way that encourages growth rather than stifles it. But before reaching for the positive outcome, it’s worth taking a clear look at the problems confronting UK investors today.
The problem-set
1. A dearth of new public companies listing in the UK
One of the most striking difficulties for investors in the UK is the thin pipeline of new listings on the London Stock Exchange (LSE).
This matters because a vibrant IPO market is a key part of the investment ecosystem: it gives investors domestic opportunities, it supports growth companies, and it helps maintain depth and liquidity in UK equities.
London has slipped down the global league table of IPO markets, ranking outside the top-20.
For UK investors this means fewer home-grown companies to invest in, fewer opportunities for meaningful growth domestically, and a reliance instead on overseas markets. That in turn means less choice, less diversification in the UK context, and a weaker overall capital markets ecosystem.
2. Stamp duty on buying UK shares remains a drag
Investing in UK equities comes with a cost: when you buy shares in a UK-incorporated company (settled electronically) you pay the 0.5 % Stamp Duty Reserve Tax (SDRT).
Even where the purchase is valued under £1,000 and paperless the tax may still apply depending on how the trade is done. The effect is that UK-share purchases carry an additional friction relative to many other jurisdictions (for example some foreign-shares may not incur that tax).
More recently it has been pointed out that many ISA-investors still pay the tax when buying UK shares despite being in a tax-favoured wrapper.
The effect: Investors are less inclined to tilt into UK-equities, preferring non-UK equities or funds that avoid the stamp tax. That weakens the domestic market, and reduces the attractiveness of UK equities to domestic investors.
3. Capital Gains Tax allowance and rates: low tolerance for gains
The modern tax environment for UK investors is characterised by relatively high friction on gains.
The annual exempt amount (the gain you can realise before CGT) has been cut (it is just £3,000 for the 2025/26 tax year). Once you exceed that allowance, the rates are 18 % for basic rate taxpayers and 24 % for higher rate taxpayers.
For long-term investors especially, this is a disincentive. Given the risk of investing, the cost of realising gains is higher than in many other comparable jurisdictions, and that acts as a drag on active investing and willingness to hold growth assets or back new companies.
4. ISA allowances have been frozen and remain modest
ISAs are one of the most potent tools for tax-efficient investing in the UK. However the annual allowance has been frozen at £20,000 for several years.
From the investor’s perspective this means the wrapper is constrained in size — those with larger portfolios either have to use other, less-efficient wrappers, or accept that only a portion of their capital benefits from tax-free growth and gains.
A higher or indexed ISA allowance would support more investment into equities, encourage long-term capital allocation, and reduce the drag of taxes.
But as things stand the allowance remains static — which in a period of inflation and rising asset values effectively erodes the benefit.
5. Pensions: too much change, too much uncertainty
Finally, pensions. Over recent years UK pension rules have undergone frequent significant change: from lifetime allowance freezes, to changes in death tax treatment, to shifts in tax relief. For investors who rely on pensions as a long-term vehicle, this creates uncertainty.
When the rules keep changing, it becomes harder to plan with confidence, to commit to long-term assets, or to allocate capital aggressively. The net result is a more cautious investment approach, and possibly under-investment relative to what might otherwise take place.
For an economy seeking growth and deep capital markets, that is not an ideal backdrop.
What a better Budget could deliver — reversing the drag and fostering investment
So, if the Government is prepared to deliver a genuinely investor-friendly Budget, what might that look like? Here are the key pillars.
Re-energise the public markets
One of the most effective signals would be a broad review of the UK IPO and listing regime: reducing regulatory and cost burdens on companies listing in the UK, offering tax incentives for growth-company listings on the London market, and perhaps a “fast track” regime for high-growth companies. That would restore investor confidence, and open up a pipeline of new companies for UK investors to back. For instance, a policy that lowers the cost of going public (or lists on a new growth market with lighter rules) would help.
With more new listings, domestic investors gain more choice, and the UK stock market regains dynamism.
Eliminate or reduce Stamp Duty on UK shares
Scrapping stamp duty (or at least exempting UK-shares held in tax wrappers) would reduce friction for UK investors. A growing chorus of commentators already argues that removing the 0.5 % tax for ISA-investors in UK equities would boost liquidity and make UK equities more attractive.
By lowering transaction cost, more retail investors are likely to allocate to UK equities, boosting depth, valuations and market vibrancy.
Raise the CGT allowance and review rates
Increasing the annual exempt amount (for example back to £12,300 as it once was) and/or reducing the effective rates would stimulate investor risk-taking and realisation of gains — which in turn fosters reinvestment.
With a higher CGT allowance, long-term investors would have more flexibility, less tax drag, and more incentive to look for growth assets rather than just sticking to safe, low-growth holdings.
Expand (and index) ISA allowances
As inflation and asset values rise, the value of a frozen £20,000 allowance declines in real terms. Indexing the allowance (to inflation or earnings growth) or increasing it to say £30,000 or £40,000 would send a strong pro-investment signal.
A higher allowance means more capital can go into tax-efficient investments — growing pensions, ISAs and equities — and hence supports long-term growth of household investment portfolios and domestic capital markets.
Provide certainty for pensions
Stability and predictability matter more than frequent tinkering. The Budget) should include a clear long-term statement of pension tax rules, perhaps a multi-year roadmap for key elements like death benefits, annual allowances, and tax relief.
By removing the fear of last-minute adverse changes, investors can plan more confidently, allocate capital more aggressively and hold longer-term growth positions, which benefits their portfolios and the wider economy.
In short
UK investors are facing a cocktail of structural headwinds: fewer new domestic listings, extra transaction tax drag, a small CGT allowance and high effective rates, capped tax-efficient wrappers, and frequent pension-rule changes that undermine confidence.
The next Budget offers an opportunity to reverse that drag — by re-energising the UK listing pipeline, removing stamp duty, improving CGT rules, expanding ISA allowances and stabilising pension tax policy. The pay-off could be substantial: deeper domestic capital markets, more growth companies to invest in, better returns for investors, and a stronger UK economy overall.
In a world where capital allocation matters more than ever, the UK should send a clear signal: we want investors, we reward long-term capital, we welcome growth. The next Budget is the moment to do just that.
Carl Roberts, Director
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Risk warnings
The value of investments and the income derived from them may fall as well as rise. You may not get back what you invest. This communication is for general information only and is not intended to be individual advice. You are recommended to seek competent professional advice before taking any action. All statements concerning the tax treatment of products and their benefits are based on our understanding of current tax law and HM Revenue and Customs practice. Levels and bases of tax relief are subject to change. This blog is based on my own observations and opinions.
