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UK Changes to HNW Rules Will Impede Access to Capital

Investing | Jan 25, 2024

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Recent changes to the UK's Financial Promotions Act, effective from January 31, 2024, include significant modifications to the definition of high net worth (HNW) and sophisticated investors that will adversely impact early stage funding.

These changes, primarily affecting the definition of High Net Worth Individuals (HNWIs) and sophisticated investors, could have profound implications on the ability of private startups to secure capital.

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Under the new framework, the criteria to qualify as an HNWI have been notably raised. Individuals are now required to have a minimum annual income of £170,000 and net assets worth at least £430,000. This represents a significant jump from the previous thresholds of £100,000 for income and £250,000 for net assets. The intention behind these amendments is to align the exemptions with current economic, social, and technological realities, a necessary update since their last revision in 2005.

UK changes to Financial Promotions Act qualifying income and assets - UK Changes to HNW Rules Will Impede Access to Capital

Image: Sifted, The impact of the new rules on qualifying as a High Net Worth Individual (HNWI). Research by Marla Shapiro (HERmesa) and Roxane Sanguinetti (Alma Angels) using data from the Survey of Personal Income 2020-2021.

Additionally, The Financial Conduct Authority (FCA) has introduced a new regime requiring authorized firms to obtain formal FCA approval to approve financial promotions. This change is designed to ensure that promotional material is clear, fair, and suitable for the type of investor targeted.

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The financial promotion restriction now also covers 'qualifying cryptoassets.' This means that financial promotions relating to these assets can only be communicated by an FCA authorized firm or an unauthorised firm where the communication is approved by an authorized firm.


All of these changes could lead to a narrower pool of eligible angel investors, potentially affecting the diversity and volume of investment in startups, especially in sectors reliant on early-stage funding.

The revised rules could disproportionately impact women and investors outside London, potentially widening gender and regional investment disparities.

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As highlighted in the Sifted article, to understand the implications of the new UK angel investing regulations, consider two hypothetical scenarios:

  1. Work: A young man, aged 21, just beginning his career in private equity with an annual income of £35,000. Despite his limited experience, he meets the current criteria and is eligible to invest a substantial amount, say £50,000, in a startup.
  2. Vs Experience:  Contrastingly, a 31-year-old woman with extensive experience in the startup sector, boasting a £200,000 savings account, an annual salary of £130,000, and a history of three successful investments, falls short of the new criteria. Surprisingly, under the revised rules, she is ineligible to invest even a smaller amount, like £5,000, in a startup.

These examples highlight potential disparities and unintended consequences arising from the new regulations, demonstrating how they might restrict experienced investors while allowing less experienced individuals to participate in startup investments.


In response to these changes, over 500 firms and investors have expressed opposition, underlining the potential adverse effects on the UK's vibrant startup ecosystem. There is an ongoing advocacy effort, including an open letter to the Chancellor, urging for immediate action before the new regulations take full effect and potentially transform the investment landscape.

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