UK's 2026 Autumn Budget: Key Tax Implications for Founders and Tech Companies

The UK Government's Autumn Budget 2026 contains several new tax policies of relevance to the tech sector.

Here are our key highlights for tech companies and their teams.

1. Capital Gains Tax (CGT)

There has been no increase in CGT rates, despite press speculation to the contrary. However, Business Asset Disposal Relief (BADR), which offers a lower CGT rate (i.e. 18% instead of 24%) where available, is being scaled back, as the lifetime limit is being reduced from £1m to £500k.  At the same time, the Government has launched a consultation on the design of a proposed new Founders' Relief, with a proposed 10% rate and £10m lifetime limit, although it may be more difficult to meet the qualifying conditions for Founders' Relief than for BADR. These measures are summarised further below.

Introduction of Founders' Relief

The Government has launched a consultation on a new Capital Gains Tax (CGT relief for founders and early investors. The consultation closes on 30 November 2026. The proposed relief would provide a materially lower CGT rate of 10% on qualifying disposals on or after 6 April 2027 (which sits well below current 24% higher rate). There are several requirements at both the individual level and company level.

Individual requirements include:

• a lifetime limit of £10 million of gains (reduced by claims made against BADR and Investors’ Relief);
• the individual must have held at least 25% of the ordinary share capital when the company's trade began; and
• the individual must have held the shares, and been UK resident, for at least five tax years before the disposal.

Company requirements include:

• the company must have turnover of at least £10 million and employ at least 15 full-time equivalent employees in the accounting period ending in the year before disposal;
• the company must pass two out of three tests: (i) annual average compound growth in turnover of 25% across three consecutive accounting periods within the 10 years before disposal (with a turnover of at least £10 million before the first of these three periods), (ii) annual average compound growth of at least 25% in qualifying full-time equivalent employees across three consecutive accounting periods within the 10 years before disposal (with at least 15 full-time employees in the accounting period before the first of these three periods), or (iii) at least £1.5 million of qualifying R&D expenditure for an accounting period or periods ending within the three years before disposal; and
• trades excluded from the Enterprise Investment Scheme, such as financial services, do not qualify.

The shareholding requirements and growth test represent significant barriers to eligibility. The initial policy paper estimates that approximately 600 individuals per year could benefit from the relief.

BADR lifetime limit halved

The key changes are:

• the lifetime limit falls from £1 million to £500,000 for qualifying disposals on or after 6 April 2027;
• relief already claimed counts towards the new limit, so a founder who has used £500,000 or more will have none left; and
• anti-forestalling rules apply the £500,000 limit to unconditional contracts entered into before 6 April 2027 but completed afterwards, unless the parties can demonstrate the timing was not tax-driven.

2.  CSOP becomes EMI2

From 28 October 2026, CSOP (renamed "EMI2") will remain open to companies of any size and sector. Key changes for EMI2 will take effect from 6 April 2027, these include:

• the individual option limit doubling from £60,000 to £120,000;
• EMI2 options no longer count towards an individual’s £250,000 EMI limit so, in this respect, the two schemes operate independently, meaning a total £370,000 limit applies across both EMI and EMI2 schemes for a company; and
• in line with EMI, the maximum exercise period rises from 10 to 15 years (importantly, existing agreements can be amended without losing their tax advantages).

3. Seed Enterprise Investment Scheme (SEIS) and Enterprise Investment Scheme (EIS)

Certain technical changes have been proposed in respect of the SEIS and EIS rules, including that from 6 April 2027 it is expected to be possible for SEIS shares and EIS shares to be issued on the same day (whereas under the current rules the SEIS and EIS share issuances need to be staggered over different days, with EIS share issuance taking place on a later day).

4. Distributions and repayments of capital

The Government has published responses to the consultation on modernising the distributions framework, and has announced that it is proceeding with the proposals.  The consultation contemplates changes to a number of different sets of rules involving the extraction of value from companies, including in respect of share buy-backs, and distributions from non-UK resident companies.  The changes are broadly expected to reduce the circumstances in which it is possible to extract value in capital form in certain scenarios.  Draft legislation is expected to be published in 2027, with changes expected to be effective from April 2028.

If you have any questions or would like to discuss the implications of the Budget on your business, please contact Jonathan Rosen and Rebecca Servian.