The Chancellor should use his first Autumn Budget to remove tax barriers to entrepreneurship and investment rather than impose significant new taxes on wealth, according to accountancy firm BDO.

Ahead of John Healey’s Budget, BDO called for changes to income tax, capital gains tax and investment incentives that it said could encourage business creation, career progression and the financing of fast-growing companies.

Elsa Littlewood, private client services tax partner at BDO, said the government should address the effective tax penalty facing some people earning more than £100,000.

The standard personal allowance is currently £12,570 but is withdrawn by £1 for every £2 of adjusted net income above £100,000, disappearing entirely at £125,140. That can produce an effective 60 per cent marginal income tax rate across the band in England, Wales and Northern Ireland.

“This creates a perverse distortion whereby people entering or progressing into higher-salaried roles are penalised and can face an effective marginal tax rate of around 60 per cent,” Littlewood said.

BDO proposed extending the withdrawal of the allowance to £150,000, arguing that a smoother taper would reduce disincentives to increase earnings.

The firm also suggested temporary reductions in income tax or employee national insurance for young people entering employment for the first time, intended to encourage economically inactive young people into work.

On wealth, BDO said a broad wealth tax was unlikely because of the administrative complexity and potential impact on the UK’s attractiveness to wealthy individuals and entrepreneurs.

It instead identified capital gains tax as a potential target. The main CGT rates are currently 18 per cent for basic-rate taxpayers and 24 per cent for higher-rate taxpayers. BDO said any increase should be modest and accompanied by reinvestment relief encouraging entrepreneurs who sell businesses to put the proceeds into new ventures.

Littlewood also called for further expansion of the Enterprise Investment Scheme, which provides tax incentives for investment in qualifying growth companies.

The government has already increased several EIS limits from April 2026. Most qualifying companies can now raise up to £10mn annually, while knowledge-intensive companies can raise £20mn. Lifetime limits have also been increased.

But BDO wants ministers to increase the amount individuals can invest and create a separate scheme aimed at scale-ups.

“Entrepreneurship is critical to economic growth as it supports job creation, investment and innovation,” Littlewood said. “However, all too often the tax system is seen by entrepreneurs as a constraint rather than an enabler.”

BDO said further reform could help close the funding gap between the start-up and scale-up stages, when growing UK companies can struggle to secure the capital needed to expand.