Budget 2025: New Incentives for Startups, Scale-Ups & Founders
(EMI, EIS & VCT)
The Autumn Budget 2025 delivered the most significant overhaul of startup and scale-up tax incentives in years. Expanded EMI eligibility, higher EIS/VCT investment limits, and a brand-new UK Listings Relief — here is everything founders and SMEs need to know.
Why These Changes Matter
The government acknowledged that existing limits within the EMI, EIS, and VCT schemes had, over time, become a barrier rather than a bridge — particularly for companies transitioning from early startup to genuine scale-up. A business that outgrew the old EMI employee cap, or that attracted investors eager to follow on via EIS or VCT, could find itself shut out of the very incentives designed to support it.
Budget 2025 directly addresses this gap. Taken together, the reforms represent a material shift in the government's approach: tax-advantaged investment and equity incentives should travel with a company as it grows, not abandon it at the first sign of success.
Expanded EMI Eligibility: Scale-Ups Welcome
The Enterprise Management Incentive scheme allows qualifying companies to grant tax-advantaged share options to employees. Gains are subject to Capital Gains Tax rather than Income Tax or National Insurance, making EMI options substantially more valuable than unapproved arrangements. Until now, however, stringent eligibility thresholds meant that many companies outgrew the scheme just as they needed it most.
What Has Changed?
With effect from 6 April 2026, the following limits will increase:
| EMI Criterion | Before Budget 2025 | From April 2026 |
|---|---|---|
| Maximum employees | 250 | 500 |
| Gross assets test | £30 million | £120 million |
| Company share option limit | £3 million | £6 million |
| Maximum EMI holding period | 10 years | 15 years |
| EMI notification requirement | Required | Removed (from April 2027) |
The changes to employee limits, the gross assets test, the share option limit, and the holding period will be legislated in Finance Bill 2025–26. Removal of the notification requirement follows in Finance Bill 2026–27, taking effect from April 2027.
PISCES Reform
The Budget also confirmed that existing EMI and Company Share Option Plan (CSOP) contracts can be amended to include trading on the Private Intermittent Securities and Capital Exchange System (PISCES) as a valid exercise event. This is retrospective from 15 May 2025 and applies to contracts agreed before 6 April 2028. It allows employees to crystallise value at PISCES trading windows without losing their EMI tax advantages — a meaningful benefit as PISCES develops into a proper secondary market for private company shares.
What This Means for Founders
If your company has been growing but has bumped up against the old 250-employee cap or the £30 million gross assets threshold, you may now qualify for EMI for the first time. Equally, if you have been running EMI options for several years, the extended 15-year holding period (which applies to existing contracts) gives both you and your employees considerably more flexibility.
Removal of the notification requirement from 2027 will cut administrative friction considerably, though HMRC registration of the scheme itself remains a prerequisite.
Not sure whether your company qualifies for EMI?
Our specialists can review your eligibility and design an option scheme that works for your team.
Updated EIS & VCT Rules to Support Later-Stage Scale-Ups
The EIS and VCT regimes are investor-facing, providing Income Tax relief and CGT exemptions to those investing in qualifying companies. Until Budget 2025, limits had not kept pace with the reality of scaling businesses — annual investment caps meant investors could not follow on as their portfolio companies grew, and gross asset thresholds excluded more mature companies entirely.
Key Changes from April 2026
| Limit | Before Budget 2025 | From April 2026 |
|---|---|---|
| Annual company investment limit (EIS/VCT) | £5 million | £10 million |
| Annual limit — Knowledge Intensive Companies (KICs) | £10 million | £20 million |
| Lifetime company investment limit | £12 million | £24 million |
| Lifetime limit — KICs | £20 million | £40 million |
| Gross assets (before share issue) | £15 million | £30 million |
| Gross assets (after share issue) | £16 million | £35 million |
| VCT Income Tax relief rate | 30% | 20% |
KICs broadly include companies carrying out qualifying research, development, or innovation, or that derive a material proportion of their revenues from intellectual property. If your business could qualify, the enhanced KIC limits are worth exploring — they are double the standard caps.
The VCT Relief Reduction
One significant trade-off: the upfront Income Tax relief for VCT investment falls from 30% to 20% from April 2026. The government's stated rationale is to rebalance the relative attractiveness of VCT versus EIS investment, encouraging funds to direct capital towards high-growth companies where the higher annual limits are most impactful.
In practical terms, the reduction affects the immediate tax benefit for individual VCT investors but does not alter the income or CGT tax-free treatment of VCT dividends and returns. For investors primarily motivated by long-term returns, the change may be less significant than the headline figure suggests.
VentureLink and the British Business Bank
Alongside the statutory changes, the British Business Bank is developing a VentureLink initiative to help pension funds navigate the UK venture capital market. By publishing enhanced information on BBB-backed VC funds open for limited partner capital, the initiative aims to unlock institutional money that has historically been cautious about backing UK venture. For scale-ups, this represents a potential deepening of the investor pool beyond traditional EIS and VCT structures.
UK Listings Relief: 0% Stamp Duty for Three Years
With effect from 27 November 2025, companies listing on a UK regulated market will benefit from a full exemption from the 0.5% Stamp Duty Reserve Tax (SDRT) charge on transfers of their securities. This relief runs for three years from the point of listing.
For a company raising £50 million at IPO with active secondary trading in its first years, the stamp duty saving can be considerable — and for retail and institutional investors alike, reduced friction on secondary trades helps support post-IPO liquidity. The measure is designed to make UK public markets more competitive relative to overseas venues, and sits alongside the broader Leeds Reforms to UK financial services regulation.
The UK Listing Relief took effect immediately on 27 November 2025. If your company is considering a public market listing in the near term, this relief is already available.
How Founders and SMEs Can Use These Incentives
Reviewing EMI Eligibility
If your company previously failed the employee headcount or gross assets tests, review your position against the April 2026 thresholds now. The process of setting up an EMI scheme — drafting option agreements, agreeing a valuation with HMRC, and registering the scheme — takes time, so beginning ahead of the implementation date puts you in the best position.
Refreshing Existing Option Pools
The increase in the company share option limit from £3 million to £6 million means you may have headroom to issue further options to existing or new employees without the scheme becoming non-qualifying. This is particularly relevant for companies approaching the current limit as part of a planned restructure or senior hire.
Attracting Investment via EIS and VCT
Doubled annual and lifetime investment limits make EIS investment considerably more viable for scale-up rounds that previously could not be structured within the old caps. If you are planning a Series B or later raise and your company qualifies, advance assurance from HMRC should be obtained early, as the process can take several months and investors will typically require it before committing funds.
Planning for the PISCES and Public Market Pathway
For companies with PISCES trading ambitions, the ability to incorporate PISCES exercise events into existing EMI and CSOP contracts — retrospectively from May 2025 — should be reviewed. Your legal and tax advisers will need to work through the amendments required to existing option agreements.
- Check company headcount and gross assets against the new EMI thresholds (effective April 2026)
- Review existing option agreements for potential PISCES amendment opportunities
- Engage HMRC for EMI scheme registration and, if relevant, advance assurance for EIS
- Assess whether your company qualifies as a Knowledge Intensive Company for the higher EIS/VCT limits
- If considering a public listing, factor in the three-year SDRT exemption in structuring discussions
- Brief existing VCT investors on the relief reduction from 30% to 20% ahead of April 2026
Warning Points and Compliance Reminders
- Disqualifying activities: The EMI, EIS, and VCT schemes all exclude companies carrying on certain trades (financial activities, property development, legal or accountancy services, farming, and others). Eligibility must be reviewed at the time of grant or investment, not just at scheme inception.
- Independence requirement: EMI options are only valid if the company is genuinely independent. If your company is acquired or comes under the control of another entity, existing options may need to be exercised within 90 days to retain EMI tax treatment.
- Post-investment conditions (EIS): EIS relief is at risk of withdrawal if the company or investor breaches conditions within a three-year period following investment. These include the investor becoming connected to the company, and the company ceasing to carry on a qualifying trade.
- VCT qualifying conditions: VCTs must themselves meet strict portfolio requirements. Investors should satisfy themselves that the VCT meets the relevant conditions before treating relief as certain.
- Advance Assurance is not a guarantee: HMRC advance assurance confirms that a company appears to qualify at the time of the application. It does not bind HMRC to grant relief if facts subsequently change.
- The notification requirement removal (April 2027) does not apply yet: Until April 2027, companies must still notify HMRC of EMI option grants within 92 days of the date of grant. Missing this deadline can invalidate the options' EMI status.
- Valuation: EMI options must be granted at or above market value (unless deliberately structured for a discount, which carries different consequences). An agreed HMRC valuation should be obtained before grant.
- State aid successor rules: The EIS and VCT schemes are subject to Subsidy Control rules. Seek confirmation that any investment will not create a cumulative subsidy that conflicts with relevant thresholds, particularly for companies receiving other forms of public support.
These schemes reward proactive, well-advised structuring. They penalise retrospective attempts to correct mistakes. The most common errors — late notifications, incorrect valuation, inadvertent disqualifying events — are overwhelmingly preventable with timely professional input.
Ready to take advantage of the Budget 2025 reforms?
Speak to an MA & Co adviser — we specialise in EMI, EIS, and VCT structuring for UK founders and scale-ups.
Summary
The Budget 2025 reforms to EMI, EIS, VCT, and the introduction of UK Listings Relief represent a genuine step forward for the UK's entrepreneurial ecosystem. The doubling of gross asset thresholds, the expansion of employee limits, and the increased investment caps all address long-standing criticisms that these schemes had been overtaken by the realities of modern scale-up growth. The PISCES integration is forward-looking, and the UK Listings Relief adds a further incentive for companies to remain listed domestically.
The reduction in VCT Income Tax relief from 30% to 20% is a notable counterbalance — one that deserves careful consideration from both VCT fund managers and individual investors. But for founders and their companies, the direction of travel is unmistakably positive.
As always, the detail is in the legislation. Finance Bill 2025–26 will set out the precise operative provisions, and there will be secondary legislation to follow. Keeping abreast of those developments — and ensuring your scheme documentation, valuation agreements, and HMRC correspondence are in order — is where professional guidance pays for itself many times over.
MA & Co Accountants works with founders, scale-ups, and investors across the UK to structure EMI schemes, obtain EIS advance assurance, and navigate the compliance requirements of tax-advantaged investment. Book a free 15-minute consultation to discuss your specific position.
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