With the new budget being released, you may be wondering what this means for you as a founder of a small company or startup. There is some good news for founders, and an increasingly complex tax system with 2 tax-free allowances and 2 different Entrepreneurs’ Relief taxes. 

Exits & Capital Gains Tax on Exit

• Founders’ Relief: 10% Capital Gains Tax (“CGT”) rate on lifetime gains of up to £10m , from April 2027 (strict conditions, still under consultation).

• BADR (Business Asset Disposal Relief): the lifetime limit is cut from £1m to £500k from April 2027, so the maximum CGT relief is now just £30k.

• Interestingly, BADR used to be called Entrepreneurs’ Relief and now there are two tax reliefs doing the same thing. 

Hiring and employee incentives

• EMI2: CSOP rebranded to EMI2 (hopefully not a hat tip to HS2) and made more generous. From 6th April 2027 the individual option limit rises from £60k to £120k, it’s separated from the EMI limit, and the exercise period goes from 10 to 15 years.

• Wage Increases: National Living Wage and National Minimum Wage increase by 3.9% from April 2027.

R&D Tax Relief

• R&D: no advance notification to HMRC needed for claims made from 1st April 2027, and a simpler additional information form from autumn 2027. Relief rates are unchanged.

Starting Up

• Young Entrepreneurs Allowance (pilot in England) to cover living costs for a founder’s first year.

• Trading allowance (i.e. “side hustle allowance”) increased from £1k to £3k from 6th April 2027.

• New scale-up programme for female founders.

Funding

• British Business Bank: £1.4bn of additional capacity for equity funds, £450m for a new venture debt product, and a £165m expansion of Community ENABLE Funding. It’s also doubling its commitments to women-led businesses in funds to £200m .

• AI: an extra £140m for the Sovereign AI Unit. That’s £60m more for the £500m Sovereign AI Fund (adding a focus on physical and industrial AI such as robotics) and £80m for its R&D Procurement Scheme, through which the government buys AI capabilities from UK startups and SMEs.

• Cybersecurity: £154m to strengthen cyber defences and £40m to set up a National Agentic Security Unit to investigate and respond to rogue agentic incidents.

• Life sciences: over £1bn of private investment, backed by almost £70m of government grants, from Convatec (R&D hub, Manchester), Vertex (Oxford) and Kindeva (Loughborough). Also £100m for the NHS to buy robotic-assisted surgery, opening up opportunities for innovative suppliers.

Compliance

• HMRC is planning to get tougher on late payments and filings, with extra compliance funding and a new power from July 2029 to collect smaller tax debts directly from bank accounts.

• Self Assessment: from April 2029, payments on account become smaller and more frequent instead of two lump sums, which affects founders taking dividends or higher earners. 

• VAT e-invoicing becomes mandatory from 1st April 2029.