Summary of the Autumn Budget 2025 for Tech Startups

Many of the biggest ideas still sit behind consultations, and real growth will depend on delivery. If the UK is serious about competing globally, the fundamentals still matter most — energy security, AI infrastructure, and access to long-term capital. Let's do a deep dive.

1. Tech Startups & Scale-ups: The Real Story

This is where the Budget is most intentional, and most relevant for founders building venture-backed or growth-led businesses.

1.1 EMI: A Major Shift for Scaling Companies

The Enterprise Management Incentive (EMI) scheme has long been one of the UK’s strongest founder tools, but it stopped being useful just as companies began to scale.

That changes from April 2026.

What’s changing

• Employee limit: 250 → 500

• Gross assets test: £30m → £120m

• Company share option limit: £3m → £6m

• Maximum holding period: 10 → 15 years

• Notification requirement removed from April 2027

• Changes apply to existing EMI options, not just new grants

Why this matters

For the first time, EMI properly supports:

• Later-stage startups

• Scale-ups competing for senior talent

• Founders hiring internationally

• Longer build cycles before exit or liquidity

In practice, this means founders can:

• Use equity more aggressively without tax blowback

• Retain key leadership longer

• Align incentives over a realistic exit timeframe

This is one of the most founder-positive changes in the Budget.

1.2 EIS & VCT: More Capital, Better Targeted

From April 2026, EIS and VCT limits increase substantially.

EIS & VCT changes

• Annual investment limit: £5m → £10m

• Knowledge Intensive Companies: £10m → £20m

• Lifetime limit: £12m → £24m (or £40m for KICs)

• Gross assets threshold increased

At the same time:

• VCT income tax relief falls from 30% to 20%

What this signals

The government is trying to:

• Push more capital into genuine growth businesses

• Reduce yield-chasing behaviour

• Support companies raising multiple institutional rounds

For founders, this improves funding headroom, particularly for businesses raising beyond Seed and Series A.

1.3 Founder Tax

The Budget includes a formal call for evidence on founder-specific tax support.

This is easy to overlook. It shouldn’t be.

This is the first serious indication that the government is willing to:

• Re-examine how founders are taxed
• Look beyond investor and employee reliefs
• Consider the unique risk founders take

The deadline is 28 February 2026.

If this leads to a new form of “Founder Relief”, it could reshape:

• Exit planning
• Secondary liquidity
• Long-term ownership decisions

This is one of the most important medium-term developments for founders.

1.4 Liquidity, Listings & Secondary Markets

Several changes improve how founders and early employees access liquidity.

• UK IPOs receive a three-year exemption from stamp duty on share transfers
• Secondary trading platforms (PISCES) are formally supported
• EMI and CSOP options can be exercised during secondary liquidity events without losing tax advantages

These aren’t headline-grabbing changes, but they improve the plumbing of the startup ecosystem — especially for founders not exiting immediately.

1.5 R&D & Strategic Tech Investment

The Budget reinforces a “build it in the UK” approach.

Key areas of support:

• Advanced assurance for R&D tax credits from Spring 2026
• Increased investment in semiconductors, AI growth zones, and advanced manufacturing
• Continued backing for clean energy and nuclear-linked innovation

There were no headline rate changes to the R&D tax relief schemes.

The government is clearly in a “stability first” phase after:

• Merging SME + RDEC into the new Merged R&D Scheme

• Tightening compliance after abuse concerns

• Increasing scrutiny on advisers and claims

However, there are a couple of developments tech startups should pay attention to.

Advanced Assurance Pilot (Spring 2026)

The Budget confirms HMRC will roll out an Advanced Assurance pilot for R&D tax credits from Spring 2026, targeted at SMEs.

What this means in practice:

• Eligible companies can get pre-approval of their R&D approach

• Less risk of retrospective enquiry

• Faster, more predictable claims

Why this matters:

• Early-stage tech startups often avoid R&D claims due to fear of clawback

• This could materially reduce uncertainty for first-time claimants

• Particularly useful for venture-backed startups where diligence risk matters

This is a quiet but very positive change.

British Business Bank & R&D Grants

The expansion of the British Business Bank to £2.5bn per year indirectly supports R&D-heavy startups.

Why?

• BBB-backed funds disproportionately invest in companies with strong R&D pipelines

• Later-stage, R&D-intensive scale-ups benefit most

• This helps bridge the gap between R&D spend and commercial scale

For founders, this reinforces the need to:

• Align R&D milestones with funding narratives

• Treat R&D as an asset, not just a tax claim

The Budget doubles down on targeted R&D grant investment, not generic grants. Key beneficiaries will include

• AI and compute-heavy businesses
• Semiconductor and hardware-adjacent startups
• Defence, security, and dual-use technologies
• Clean energy, nuclear, and advanced materials

This suggests fewer “easy” grants and more competitive, sector-specific funding with stronger links between R&D activity and national priorities. For tech startups, especially in deep tech. This is very good news. If you wish to learn more about our accounting or R&D Tax Credit services please get in touch.

2. Founders as Individuals

2.1 Income Tax & Fiscal Drag

Headline tax rates stay the same.

But personal allowance thresholds are frozen until April 2031.

That means:

• More founders drift into higher tax bands
• Tax bills rise even if pay increases are modest
• Student loan thresholds are also frozen

2.2 Dividends, Savings & Property Income

From April 2026, tax rates on dividends, savings, and property income all rise by 2 percentage points.

Dividend tax rates

• Basic rate: 10.75%
• Higher rate: 35.75%
• Additional rate: 41.35%

What this means

• £10,000 of dividends now costs £200 more tax
• £40,000 costs £800 more

For founders relying on dividends, this materially changes extraction planning.

2.3 Pensions & Salary Sacrifice

From April 2029, salary-sacrifice pension contributions above £2,000 per year will attract National Insurance.

Previously, this was one of the cleanest tax efficiencies available.

Example:

• £10,000 sacrificed above the threshold
• Additional NIC cost: £2,300

This reduces the appeal of large salary-sacrifice strategies.

3. Businesses: Hiring, Costs & Compliance

3.1 Employment Costs

Costs stack up quickly:

• Employer NIC rises to 15%
• National Living Wage increases to £12.71/hour from April 2026

One positive offset:

• Under-25 SME apprenticeships fully funded, making early talent investment more attractive.

3.2 Corporation Tax & Capital Spend

• Corporation tax stays at 25%
• New 40% First Year Allowance from January 2026
• Writing-Down Allowances cut from 18% to 14%

This slows down tax relief on capital investment, impacting cash flow.

3.3 Compliance & Enforcement

• Mandatory e-invoicing for VAT from April 2029
• Higher late filing penalties
• Increased digital enforcement

Tolerance for mistakes continues to fall.

4. The Bigger Picture

By 2029–30:

• £26bn per year in additional tax raised
• Tax burden reaches ~38% of GDP, a historic high

Much of this comes from:

• Frozen thresholds
• Higher employment costs
• Reduced pension efficiencies
• Higher taxes on investment income

Final Thought for Tech Founders

This Budget didn’t solve the UK’s growth challenge. But it did send a clear message. The government expects founders to be more deliberate, more planned, and better advised.

There were some genuine wins, especially around EMI, EIS, liquidity, and scale-up finance. For everyone else though, established businesses, employers, and individuals, the message is tougher. It is now more expensive to employ people. It is now more expensive to pay yourself. If you would like to chat about the budget and it's implication for tech startups do contact us today.