Autumn Budget 2025: What does it mean for UK Fintech?

The government has announced changes to venture capital trusts (VCTs) and the enterprise investment scheme (EIS). The existing annual and lifetime funding limits will be increased for EIS/VCT companies, along with an increase to the gross assets limit. The upfront income tax relief rate for VCT investors will be reduced.

Summary

The government announced it will increase the annual EIS and VCT company investment limit to £10m (previously £5m), and to £20m (previously £10m) for knowledge intensive companies (KICs). 

In addition, the lifetime EIS and VCT company investment limits will increase to £24m (previously £12m), and to £40m (previously £20m) for KICs. 

The gross assets test will also increase to £30m (previously £15m) immediately before the share issue, and £35m (previously £16m) immediately after.

Alongside the increases in the investment and gross asset size limits, the rate of up-front income tax relief for VCT investments will decrease from 30% to 20%. 

These changes will be legislated in the Finance Bill 2025/26, and will take effect from 6 April 2026.

Our comment

These changes to investment limits will be positively welcomed by EIS/VCT companies, fund managers and investors alike and underline the government’s commitment to UK growth and incentivisation.

The increased fundraising and size limits will allow established and larger companies to attract additional follow-on investment beyond the initial start-up and scale-up phases, where previously companies would have exceeded the fundraising limits or breached the gross asset size limit. 

This will in turn allow more EIS/VCT investors to continue to benefit from the generous tax benefits that the schemes offer for investors, and encourage continued investment in qualifying companies.

By contrast, the reduction in up-front income tax relief for VCT investors will potentially reduce the attractiveness of VCT investments compared to EIS. However, this is partly balanced by the tax-free treatment of dividends received from VCTs and is intended to ensure VCT funds target the highest growth companies.

Unfortunately, though, there was no change to the permitted age test which remains at 7 years, and 10 years for KICs, nor any changes to help simplify the current EIS rules.

The Chancellor has announced:

• Plans to modernise the taxes applicable to transfers of shares and securities, introducing a digital self-assessment system and uniting the taxes applicable to paper and electronic transfers under a single regime
• A three-year exemption from stamp duty reserve tax for companies choosing to list in the UK

Summary

Currently, share and securities transfers can give rise to a 0.5% charge of either stamp duty or stamp duty reserve tax (SDRT), broadly depending on whether they are effected via paper or electronically. The government has announced plans to replace both taxes with a single securities transfer charge (STC) and to digitalise the reporting process. Further details of the proposed new STC will be announced in due course.

In addition, the Chancellor announced a new exemption from the 0.5% SDRT charge for transfers made on or after 27 November 2025. Where a company newly lists its shares on a UK-regulated market, transfers of its securities will be exempt from SDRT for a period of three years from the listing date. There are a few exceptions to this exemption, however. For example, SDRT will still apply to some mergers and takeovers. 

Our comment

The modernisation of the stamp taxes regimes is welcome and should ultimately reduce compliance costs for taxpayers. Of particular interest will be whether or not any changes are made to the current acquisition relief and reconstruction relief rules for stamp duty. These can apply to some corporate restructures where there is no change to the ultimate shareholders, and which currently require complex claims and copy documentation for HMRC. The response to the 2023 consultation also indicated an intent to remove the £1,000 price threshold under which stamp duty is not chargeable. This Autumn Budget did not indicate whether or not this is still intended. 

The government has stated that it will continue to evaluate stamp taxes on shares to ensure that the UK is well positioned for the future, so more reliefs may follow. 

The Autumn Budget 2025 included increases to several important statutory limits for tax-advantaged enterprise management incentive (EMI) employee share options.

Summary

From 6 April 2026 (other than for Northern Irish companies):

• The maximum market value for tax purposes of the shares in a company over which tax-advantaged EMI options can be granted will increase from £3 million to £6 million
• The limit on the value of the gross assets of a company, together with those of any subsidiaries, which can qualify for EMI options over its shares, will increase from £30 million to £120 million
• The limit on the number of full-time employees of a company and its subsidiaries that can qualify for EMI options over its shares will increase from 250 to 500
• The maximum term of an EMI option will increase from ten years from the date of grant to 15 years. It will also be possible for companies and option holders to agree to extend the terms of EMI options granted before 6 April 2026 to up to 15 years without losing EMI tax reliefs in respect of those options

Our comment

These changes will substantially expand the scope for companies with qualifying trading activities to grant EMI options, which offer the most generous tax reliefs of the UK’s four types of tax-advantaged employee share schemes. 

The changes are likely to be welcome to many companies that either cannot currently grant EMI options or have limited scope to do so under the existing restrictions.

Northern Irish companies seem to have been excluded because of the continuing relevance of EU state aid requirements (applicable to EMI options before Brexit) and the commitment to maintain an open border with the Republic of Ireland.  

In a well trailed change to salary sacrifice for pension contributions, the Chancellor confirmed that a £2,000 limit will be imposed on the amount of salary sacrifice pension contributions that will benefit from relief from national insurance contributions (NIC). This change will be implemented later than expected, at the start of the 2029/30 tax year.

Summary

While contributions above the £2,000 cap will continue to attract income tax relief, from the start of the 2029/30 tax year both employees and employers will pay NIC on salary sacrifice contributions made above this limit.

Our comment

Pension salary sacrifice has long been one of the ‘protected’ salary sacrifice schemes. It appeared to only be a matter of time before this was reconsidered, due to the perception that predominantly higher earners benefit the most from its easements.

Following the changes, it is expected that a higher rate taxpayer contributing £12,000 to their pension via salary sacrifice will be £200 per year worse off and their employer £1,500 worse off, based on current NIC rates.

While the changes are still more than three years away, employers should consider commencing their preparations now to understand the potential additional employer NIC costs. The impacts this could have on total reward packages for existing employees, and how to structure pension contributions for new joiners to the business between now and April 2029, will also need to be considered.

The government has confirmed plans to impose an additional charge on homes worth more than £2 million, to apply from 6 April 2028. The new charge will start at £2,500 per year, rising to £7,500 for homes worth more than £5 million.

Summary

The new “high value council tax surcharge” will be administered alongside council tax and will be collected by local authorities. Liabilities will fall solely on owners of homes rather than occupiers. The charge will be introduced from April 2028 and will be tiered, with initial charges as follows:

From 2029/30, the annual charges will rise in line with CPI inflation. The government also plans to conduct a targeted valuation exercise to assign properties to the relevant bands, after which homes will be revalued every five years.

Plans were also announced to consult in early 2026 on the operation of the new surcharge, including on appropriate reliefs, support schemes and how to treat homes held in companies, trusts or other structures. The government has also indicated that it will consider how to apply the charge where owners are required to live in a property as part of their job.

Our comment

The concept of a ‘mansion tax’ has been on the political agenda since former Labour leader Ed Miliband promised to introduce such a charge in the run up to the 2015 general election.

Council tax bandings are widely seen as outdated, as they are based on valuations obtained in 1991. This has led to distortions, with some high-value homes paying a relatively low amount of council tax when compared to less valuable properties elsewhere in the country.

It is therefore unsurprising that the government has introduced this measure which is anticipated to impact fewer than 1% of properties and, according to polling, enjoys broad voter support. It is encouraging that the government plans to consult, particularly on support schemes, as paying the charge may be challenging for those whose income is relatively low compared to the value of their home.

At the Autumn Budget 2025, the government announced that the exemption from capital gains tax (CGT) on the sale of a controlling interest in a company to an employee ownership trust (EOT) would be restricted to 50% of a seller’s chargeable gain.

Summary

With effect from 26 November 2025, on the acquisition of a controlling interest in a company by the trustees of an employee ownership trust (EOT):

• The exemption from CGT will apply to only 50% of a seller’s chargeable gain, rather than to 100%, as it did before that date
• A seller will not be able to claim business asset disposal relief (BADR) or investors’ relief in respect of their disposal of shares to the EOT trustees
• The EOT trustees’ CGT acquisition cost for the shares they acquire will be the total consideration paid for them less the 50% of the seller’s chargeable gains exempt from CGT. This is an improvement from the trustees’ perspective, as previously a disposal to an EOT was deemed to be made on a no-loss, no-gain basis, with the EOT trustees assuming the CGT base cost of the seller(s).  

Our comment

With the scheme on course to cost £2 billion, 20 times beyond the original costings when the scheme was announced in 2013, it is somewhat unsurprising that CGT relief has been restricted. These changes will clearly make a disposal to an EOT less tax-efficient and, as result, somewhat less appealing as a possible exit route for shareholders. 

Sales to EOTs seem likely to continue to interest company owners, given that the effective CGT rate for a higher rate taxpayer on a sale to an EOT will now be 12%, rather than 24%. This compares favourably with the 14% effective CGT rate, capped at £1 million of lifetime gains, for disposals qualifying for BADR.

The need to pay CGT on a disposal to an EOT will raise practical concerns about paying tax in respect of a non-cash consideration: In other words, giving rise to the possibility of a dry CGT charge since a substantial proportion of the consideration for an EOT’s acquisition of a controlling interest in the relevant company often takes the form of trustee loan notes.