What the Budget Means for UK Founders

The November 2025 Budget was so comprehensively leaked that, by the time the Chancellor stood up, most of us had already skimmed the headlines. That usually means bad news: leaks soften the blow before the fine print lands. This year, it was the opposite. The surprises, at least for early-stage founders, were the good kind.

As a founder who has built and exited companies, and now invests in early stage ones, I read a Budget through a simple lens: does this make the UK a more competitive place to build and scale? This one nudges us in that direction. But as always, the devil is in the detail — and we need to be honest about where ambition is still lacking.

Below are the three changes that matter most for early-stage and scaling founders, and how I’d interpret them.

1. EMI: More breathing room to hire and retain top talent

Let’s start with the most founder-friendly move. The Government is expanding the eligibility limits for EMI (Enterprise Management Incentives), which means companies that have outgrown the original thresholds can keep using EMI schemes as they scale. Specifically from April 2026, the following changes come into effect:

• Company options will be increased from £3 million to £6 million
• Gross assets limits will be increased from £30 million to £120 million
• Limits on number of employees will be increased from 250 employees to 500 employees

For anyone new to it: EMI is the UK’s flagship employee share option scheme. It lets employees receive equity options with significant tax advantages. Until now, once you crossed certain size or valuation limits, you were out, and many scale-ups hit that boundary earlier than expected.

Why expanding EMI eligibility matters

• Talent is a bottleneck in many of the sectors UK founders operate in: AI, cyber, clean energy, life sciences.
• Fast-growing companies were being penalised at the exact stage they most needed to attract senior or specialist hires.
• The change aligns employer and employee incentives for longer — something both sides want, but the previous rules made harder.

From my own experience hiring technical teams, EMI can make a huge difference for those deciding between a big-tech salary or a startup adventure. It creates transparency: employees know what they’re earning, what it’s worth, and how it vests.

This is also a rare UK advantage. Other countries admire EMI; very few match it. Expanding it sends a strong signal that the UK intends to compete globally for talent, not just capital.

2. EIS and VCT boost: A more generous environment for early-stage capital

The second major decision is the increase in EIS (Enterprise Investment Scheme) and VCT limits. These have long been the backbone of early-stage investing in the UK — particularly for angel syndicates, early-stage funds and sector specialists.

The specific change, from April 2026:

• Annual investment limits rise to £10m or £20m for knowledge-intensive companies (KICs)
• Lifetime limits rise to £24m, or £40m for KICs
• Gross assets thresholds increase to £30m pre-issue and £35m post-issue
• VCT income tax relief is reduced from 30% to 20%

For context: EIS activity has been soft since the peak of 2021–22. HMRC data shows fewer companies raising through EIS and fewer investors claiming relief. Investors shifted more capital into SEIS at the pre-seed end, where limits were improved in 2023. The upper end of EIS became squeezed, and increasing these limits helps rebalance that.

How the re-engineering of EIS and VCT helps founders

• Larger rounds under one scheme. You avoid fragmentation across multiple instruments or disproportionate dilution early on.
• Better alignment with real capital needs. AI, clean energy, healthcare tech and advanced manufacturing companies simply need more up front to build something meaningful.
• A clearer runway. Angels and early VCs can follow on for longer before switching structure, reducing legal overhead and friction.

The impact of reducing VCT income tax relief is more nuanced. The reduction makes VCTs relatively less attractive, especially compared with other tax-efficient options like SIPPs. The rationale from the Treasury is that “The reduction is designed to better balance the amount of upfront tax relief compared to EIS, which does not offer dividend relief, and incentivising funds to seek out higher returns, to ensure they are targeting the highest growth companies.”

The intended outcome being to nudge some investors toward earlier-stage opportunities via SEIS and EIS, and to address concerns that generous VCT relief had attracted capital that was less hands-on or less committed to long-term company building, which may be detrimental to the UK’s long term growth prospects.

The risk, of course, is that this change will shrink the pool of VC funding, something the UK can’t afford given how vital venture capital is to our startup ecosystem.

Whilst these changes are positive overall, EIS and VCT reform won’t magically refill the early-stage pipeline, but they do move the UK closer to global competitiveness — something we’ve been edging behind on, especially for R&D-heavy startups with longer timelines to launch and profit.

3. UK listing relief: Directionally right, but not bold enough

The third announcement is the most mixed. The Government is introducing a stamp duty reserve tax (SDRT) exemption for the first three years after a company lists on a UK exchange.

On paper, this makes a lot of sense: removing friction on secondary-market trading should support higher initial valuations and deeper liquidity. In practice, though, it won’t repair the structural issues that have made UK listings unattractive compared to US markets.

Why founders should still care, even at pre-seed or seed

• Your future exit routes shape investor appetite today.
• The vast majority of UK exits are still acquisitions, not IPOs. Tech Nation reports that 98% of 2024 UK tech exits were M&A, with only a handful of listings¹.
• If the UK wants to attract more late-stage capital, it needs a credible listing pipeline — otherwise the growth-stage gap persists, and overseas buyers continue to set the terms.

The relief is welcome, but we have to be honest: it’s incremental. The UK still needs deeper pension reform, stronger institutional participation, and clearer regulatory pathways for scaling companies. Without those, we’ll remain a strong place to start a business but a weaker place to scale one. Sadly, that remains the sentiment among many founders.

So, does this Budget help founders?

Yes, much more than I expected.

Expanding EMI helps you hire. Increasing EIS limits helps you raise. Listing relief hints at long-term ambition. These are not small wins, and they show recognition that early-stage companies are part of the UK’s growth engine.

But we shouldn’t pretend this fixes everything. The UK is still 10–15% behind the US on VC intensity. Early-stage founders still face a challenging fundraising landscape of low confidence and a shrinking pool of wealthy individuals. And capital continues to concentrate among later-stage companies, making it harder for new founders to break through.

That’s exactly why we’re building ThatRound — to create the infrastructure founders start with. A place where you can find and compare angel syndicates, networks and other funding routes, and access the full early-stage fundraising market without wasting months on cold outreach.

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References

1. 1. The Tech Nation Report 2025 | TechNation – https://report.technation.io