Autumn Budget 2026: Mixed messages for founders and their teams

The UK’s scaleup economy needed a strong Budget. The number of scaleups has been falling since a peak of 129,080 in 2023, and founders and their teams have been waiting for a clear signal that building big businesses in Britain is worth the effort.

Chancellor John Healey's much-awaited first Autumn Budget turned out to be a mixed bag. There is real progress on equity and founder incentives - but it sits next to a cut to Business Asset Disposal Relief (BADR) that risks undermining it.

Most key changes take effect on 6 April 2027, and they'll remain proposals until Finance Bill 2026-27 passes.

Founders’ Relief: welcome, but not yet defined

The headline measure is a new Founders’ Relief. It will charge a 10% Capital Gains Tax (CGT) rate on up to £10 million of lifetime gains for qualifying founders of high-growth, innovative companies.

That is a good incentive. A low, predictable rate on an eventual exit changes the calculation for founders weighing up years of risk and long hours.

The details are still to come, though. The Budget confirms the rate and the lifetime limit, but a technical consultation on the design is running until 30 November. Ownership thresholds, holding periods, and the definition of a qualifying company remain undecided, so founders should avoid assuming they will qualify.

EMI2 and the case for employee ownership

The Budget also expands the Company Share Option Plan (CSOP) and renames it EMI2, for growing companies that have moved beyond Enterprise Management Incentives (EMI) or are not eligible for it. The individual limit for tax-advantaged options doubles from £60,000 to £120,000.

CSOP and EMI limits no longer interact, so eligible employees can use the full £250,000 EMI limit and the £120,000 EMI2 limit together, holding up to £370,000 in tax-advantaged options. The exercise period extends from 10 to 15 years, matching EMI.

EMI itself is also being improved, for the second year running:

• The exercise window after a disqualifying event extends from 90 to 180 days.

• Companies moving to an Employee Ownership Trust (EOT) keep access to EMI.

• Shares and options set aside for employees can be held for 15 years without triggering disguised remuneration rules.

• The separate notification for EMI option grants is removed, and grants will be reported through the existing end-of-year return.

Taken together, these show that the Treasury understands what share schemes do for productivity and the wider economy. EMI is the UK’s most popular share scheme, and the government is investing in it.

BADR: where the messages diverge

Against that, the lifetime limit on BADR will fall from £1 million to £500,000 for disposals from 6 April 2027. The reduced rate on qualifying disposals stays at 18%. In effect, the relief on potential payouts is halved.

The Chancellor has stressed that three in four claimants will see no change. That may well be true, but the quarter who are affected matter a great deal.

They are the people with larger gains - which often means senior hires and early employees at companies that achieve big exits. They are the high-calibre talent the government says it wants to keep in Britain.

This is not a tax on idle wealth. It lands on people who joined early, took a risk, and helped build something valuable. An exit that would have been taxed at 10% two years ago now faces a much heavier bill, and for gains above the new limit the difference is larger still.

When the reward for the biggest successes shrinks, the incentive to back and build those businesses shrinks with it.

Ifty Nasir OBE, founder and CEO of Vestd, said:

"Cutbacks on BADR from a threshold of £1m down to £500,000 in this Budget undermine that incentive by halving the relief on potential payouts for employees. That doesn’t tax wealth - it penalises the very people driving growth."

BADR and Founders’ Relief are separate measures with different eligibility rules. Losing BADR on part of a gain does not mean a founder will automatically qualify for Founders’ Relief.

Earlier in the week, Alex Depledge, the Treasury’s entrepreneurship adviser, resigned and accused ministers of treating scaleups as a “sideshow”. The Budget’s mixed messages make that criticism harder to dismiss.

The wider picture

Other measures will matter to growing businesses, and some are positive:

• Funding: The British Business Bank gains £5 billion of extra financial capacity, including £1.4 billion for equity funds backing high-growth firms and £450 million for a new venture debt product offering non-dilutive finance.

• The Growth Guarantee scheme is expanding, and the government expects the Mansion House Accord to unlock around £25 billion of additional private market investment. But these figures describe capacity and expectations - not guaranteed funding for any individual business.

• R&D tax relief: The Claim Notification Form goes from 1 April 2027, and the Additional Information Form will be simplified from autumn 2027. Technical changes to EIS, SEIS and VCTs are also planned. These are administrative improvements, not a higher headline rate.

• Wages: From 1 April 2027, the National Living Wage rises 3.9% to £13.21 an hour, and employers with large numbers of lower-paid staff will need to plan for this.

• Capital allowances: First-year allowances rise to 50% from January 2027, while the main writing-down allowance falls from 18% to 12% from April 2027. Full expensing is retained.

• Hiring: The government plans to legislate to prevent non-compete clauses from blocking startups and scaling firms from hiring promising people. Details are due in early 2027.

An ownership economy needs rewards at the end

Founders’ Relief and EMI2 signal that the government wants more people building companies and more employees owning a stake in them. The BADR change pulls in a different direction, however.

For an ownership economy to work, founders and employees need confidence that the rewards will reflect the risks they take. How the Founders’ Relief consultation and the Finance Bill settle the details will go a long way towards determining whether this package delivers that confidence.

What businesses should do next

None of this calls for panic, but it does call for planning:

• Review existing share option arrangements, especially if the company is nearing the EMI limit.

• Consider whether EMI2 could suit employees who have outgrown EMI or are ineligible.

• Model a future exit under the new BADR limit, particularly for shareholders whose gains may exceed £500,000.

• Follow the Founders’ Relief consultation, which closes on 30 November, and the Finance Bill, as the details will decide who benefits.

• Take advice from a tax professional before making decisions on timing or structure.

Whatever the final rules look like, the businesses best placed to benefit will be those with well-structured, well-managed share schemes.

We help UK companies set up and run EMI, CSOP and other share schemes, keep their cap tables in order and stay ready for changes like these. Join Vestd to make sure your equity is working as hard as your team.

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