Budget tax breaks worth £100m come into force for founders and start-ups

Fresh incentives designed to turbocharge Britain’s start-up and scale-up economy have officially taken effect, with the government forecasting that the measures will channel an additional £100 million into high-growth companies across the country.

The changes, first announced by chancellor Rachel Reeves in last autumn’s budget, target three pillars of early-stage business finance: employee share schemes, the enterprise investment scheme (EIS) and venture capital trusts (VCTs). Together, they represent the most significant expansion of tax-advantaged support for young companies in recent years.

At the heart of the package is a dramatic widening of the enterprise management incentive (EMI) scheme, the mechanism that allows employees to acquire company shares at a predetermined price, potentially well below market value if the business performs strongly. Gains realised on the sale of those shares are subject to capital gains tax rather than income tax, making the arrangement considerably more attractive for employees willing to back a growing firm.

Under the new rules, the gross assets ceiling for companies qualifying for EMI has quadrupled to £120 million, while the maximum number of employees a participating firm may have has doubled to 500. The cap on the total value of unexercised options held across a company at any one time has likewise doubled, rising to £6 million. The Treasury estimates that roughly 1,800 of Britain’s fastest-scaling businesses will now be eligible, opening up share-based rewards for an estimated 70,000 workers.

Dom Hallas, executive director at the Startup Coalition, welcomed the changes, describing them as a genuine boost for the ecosystem and noting that the expanded headroom would help ambitious firms compete more effectively for the talent that ultimately determines whether a business can scale successfully.

Eva Barboni, who leads the Enterprise Britain movement, echoed the sentiment, arguing that widening access to share ownership would strengthen the ability of British scale-ups to attract and hold on to the people they need to compete on the world stage.

Alongside the EMI expansion, the government has doubled the lifetime company investment limits for EIS and VCTs, two schemes that offer investors more favourable tax treatment when they back early-stage ventures. The ceiling now stands at £24 million, with annual company investment limits rising to £10 million. A higher gross assets threshold of £30 million before share issue and £35 million afterwards means a broader pool of companies can tap into the incentives.

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Budget tax breaks worth £100m come into force for founders and start-ups