Our verdict on the Budget

The Budget is out, ending months of speculation. Our verdict: this is a welcome recognition from the Chancellor of the power of entrepreneurship.

The wins

‍Chancellor John Healey said this would be a Budget for “bloody-minded entrepreneurs”. And in some key areas, he delivered. 

1. New ‘Founders Relief’

We’ve urged the government to bring back a version of the old Entrepreneurs’ Relief, which was killed in 2020.

The government launched a consultation for a new Founders’ Relief, with a 10% CGT rate on lifetime gains up to £10 million. However, the proposed eligibility requirements mean that this will apply to a much narrower group of founders than Entrepreneurs' Relief did. We will be engaging with that consultation and sharing our feedback.

Unfortunately, the government also reduced the ceiling for Business Asset Disposal Relief, which isn’t good news for founders.

2. Action on non-competes 

We’ve been pushing for the government to ban non-competes and curb long notice periods, ensuring companies can hire at a speed that matches their ambition. The 400+ scale-up leaders we surveyed agreed that this should be a priority. 87% said non-competes are a hurdle to hiring. 79% said the same about long notice periods.

The government listened. They have committed to legislate on non-competes and open a consultation on notice periods and other restrictive covenants.

3. Expansion of employee share options

We called for the government to create a scale-up tier for the Enterprise Management Incentives (EMI) scheme, ensuring companies don’t lose access to a critical tool for attracting and retaining top talent as they grow.  

We didn’t quite get what we asked for, but the government announced the creation of “EMI2”, which will replace the Company Share Option Plan. The changes mean employees can receive up to £370,000 of tax-advantaged options (£120,000 under EMI2 and £250,000 under EMI).

4. Less unnecessary red tape

We’ve pushed the government to reduce the friction companies face as they scale, including addressing unnecessary regulatory and admin burdens. One issue we’ve raised repeatedly in our conversations is the complexity of applying for R&D tax credits. 

The government listened. They doubled down on their commitment to reduce regulatory burdens, and they are making changes to streamline R&D tax credits.

5. More procurement from start-ups and scale-ups

Alongside Founders Forum, we’ve encouraged the government to use its purchasing power to bolster British start-ups and scale-ups. 

The government listened. They are launching a new Innovation Marketplace next Spring, they announced an £80m expansion of the Sovereign AI Fund’s Procurement Scheme, and they created a new AI Challenge Prize to develop solutions to major public-service challenges.

6. Making the UK a beacon for global talent

We’ve urged the government to make the UK a beacon for global talent, ensuring that British companies can hire the people they need to grow and succeed.

The government listened. They’ve announced visa reforms, including expanding the High Potential Individual visa to graduates of the world’s top 150 universities.

7. No CGT rise or exit tax

We heard a few months ago that the government was considering increasing capital gains tax (CGT) – potentially equalising it with income tax. We took action, pushing back against any increase in CGT through the press and behind the scenes. We did the same when there were rumours of an exit tax.

The government listened. They left the CGT rate alone and didn’t introduce an exit tax. We would love to see them rule these out for the rest of this Parliament.

A few missed opportunities

We’re pleased with the wins above, but there were also a few missed opportunities.

1. Incentivising successful entrepreneurs to reinvest

Alongside Founders Forum, we pushed for the government to create Repeat Entrepreneur Relief, a reduction in capital gains tax for entrepreneurs who reinvest money from an exit in a new British business or fund. This wasn’t included in the Budget, but the new Founders’ Relief highlighted above could still be a win if it's structured in the right way.

2. Attracting global investors

We urged the government to create a new Growth Visa, which would have attracted global investors to Britain. We know it was on the table, but unfortunately it hasn’t happened, at least not yet. We believe the data will soon show how much of an opportunity was lost due to previous changes to Inheritance Tax (IHT) on foreign assets.

3. Boosting domestic investment from pension providers

We asked the government to create more incentives for pension providers to invest in Britain – while still giving savers control over their retirements. With providers still far from meeting their commitments in the Mansion House Accord, action in this area is urgently needed. We were glad to hear Healey mention pension fund investment, but we wish there had been a bit more detail on this front.

The Budget is an important milestone, but it’s not the end of the journey on these issues. We will continue to advocate for measures to help ambitious businesses scale and succeed in Britain.