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Budget Bytes: Entrepreneurship

5 November 20263 min read
News
Budget Bytes: Entrepreneurship

What was announced  

Founders and investors in the UK have access to a range of tax-advantaged schemes intended to incentivise investment into early-stage start-ups and scale-ups. Autumn Budget 2026 made several changes to a number of these schemes; 

  • Founders’ Relief (new): A 10% rate of Capital Gains Tax (reduced from the standard rates of 18%/24%) for eligible founders and early investors in innovative high-growth companies, with up to £10m of lifetime gains from April 2027, now out to consultation until 30 November. 

  • Venture Capital Trusts (VCTS): The relief rate is unchanged at 20%, but administration will be simplified and investor fees made more transparent.  

  • Enterprise Investment Scheme (EIS): Both the EIS and equivalent seed (SEIS) schemes will be simplified, Advance Assurance improved and excessive investor fees tackled.  

  • Enterprise Management Incentives (EMI): EMI enables smaller companies to give staff the option to buy shares later at current market value, allowing employees to share in the company’s growth. Employees can hold up to £250,000 of options and usually pay no income tax on them. From April 2027, the Budget gives employees 180 days instead of 90 to exercise their options after a “disqualifying event”, such as the company outgrowing the scheme. Companies will also no longer need to notify HMRC of each grant separately, and options under EMI2 (formerly CSOP) will no longer count towards the EMI limit, so staff can hold up to £370,000 across both schemes 

  • Company Share Option Plan (CSOP): Renamed EMI2, the per-employee limit doubles to £120k and the exercise period extends to 15 years, from April 2027.  

  • Business Assets Disposal Relief (BADR): The lifetime limit halves from £1m to £500k.  

  • Trading Allowance: The Trading Allowance, the amount someone can earn from a new venture tax-free, will be tripled from £1,000 to £3,000 from April 2027. 

 Chancellor John Healey was keen to stress his support for entrepreneurs, innovators, and wealth-creators, noting "from the start-ups of today, to the scale-ups of tomorrow, to the billion-pound companies of the 2030s, I want to see them succeed and stay in Britain". Alongside the changes above, he also announced; 

  • Female founders: The Chancellor announced a new scale-up programme for female founders, as recommended by the Women in Tech taskforce (which techUK sits upon). The British Business Bank will also double its commitments to women-led businesses and funds to £200m. 

  • British Business Bank and National Wealth Fund: The Chancellor said investment in Britain is the biggest barrier facing the UK’s fast-growth firms. To address it, he announced a further £20.4bn for the two institutions over the coming years, which he said will support 140,000 jobs. Of that, £5bn goes to the British Business Bank and £15.4bn to the National Wealth Fund. 

  • Visa routes: Reforms to skilled worker visas to get the best talent into fast-growth firms. From spring 2027, minimum salary thresholds fall from the median to the 25th percentile of wages for each occupation. The most highly skilled workers get up to six months to find a new job if they lose theirs. The High Potential Individual and Global Talent routes are expanded, and the Graduate visa stays at two years for eligible graduates. 

  • Non-competes: The Chancellor framed pre-announced changes to non-compete clauses as ensuring that people who helped to build a successful company could move easily on to the next. The government will legislate to restrict non-competes across the whole economy and will consult shortly on wider restrictive practices, such as gardening leave and non-solicits, and set out its full position in early 2027.  

Much of the wider ecosystem welcomed the package. Startup Coalition called it "the boldest action backing startups and scaleups of any government in years", and Enterprise Britain also welcomed it and noted that the CGT rate was left alone and no exit tax introduced.  techUK's view The direction is right. Several asks from techUK’s Budget submission were taken forward: 

  • Skilled Worker visa reforms: these respond directly to concerns that techUK has consistently raised over the high costs, a clear win for the sector.  

  • Selling to government: we identified contract design as the persistent barrier for scale-ups and called for demand-side mechanisms. £80m of new Sovereign AI funding for R&D procurement, which pays British firms to develop solutions to government challenges, is a step in that direction. 

  • Stability: sticking to the Corporate Tax Roadmap, alongside the £5bn for the British Business Bank, will give firms confidence to invest.  

But the detail matters. The criteria for the new Founders’ Relief appear quite narrow. As proposed, it requires:  

  • a founder stake of at least 25% from the start 

  • a company with £10m turnover and 15 full-time staff 

  • passing two of three tests on growth and R&D spend.  

Meanwhile, Business Asset Disposal Relief was halved to £500,000, cutting the maximum saving from £60,000 to £30,000. Taken together, these measures mean that the impact of the new Founders' Relief may well be less than first appears, with the overall amount of inward capital flowing as a result of these schemes might remain relatively static. Government will likely face criticism of giving with one hand whilst taking with the other.  Some of our asks went unanswered. We called for restoring VCT up-front relief to 30% and raising the company age limits for EIS and VCT. The Budget offered administrative simplification of these schemes instead. Where next The Budget sets the intent; the coming months decide the detail. Key external moments: 

  • 30 November: the Founders’ Relief technical consultation closes, as does the Modernising Corporate Reporting consultation, which proposes extending the audit exemption to medium-sized companies. 

  • Early 2027: the government sets out its full position on non-competes and wider restrictive practices. 

  • January to spring 2027: a new “UK supplier” definition is due by January, and an Innovation Marketplace launches in spring. 

  • Later in 2027: the 2027 Spending Review, where major economic decisions have been deferred.  

There are several ways for members to get involved: 

  • Founders’ Relief response: techUK will respond to the consultation (deadline 30 November), and we want to hear from founders and investors about how the criteria would apply to their businesses.  

  • Scale-up Council: techUK’s Scale-up Council of scale-ups, ambitious SMEs and support organisations guides our scale-up work. 

  • Meet the Investors: This ongoing series connects SMEs and scale-ups seeking finance with expert advisers and investors.  

If you have any questions, feel free to get in touch with the team.