Autumn Budget 2026: Stability before growth? What the Autumn Budget 2026 means for scaling businesses

The government has published a consultation to finalise the details of a new founders’ relief. It will provide a 10% CGT rate on up to £10 million of lifetime gains from 6 April 2027.

The relief is intended to reward founders of innovative UK businesses, but the qualifying conditions as drafted are significantly more restrictive than those applying to business asset disposal relief (BADR) and may limit its practical availability.

Summary

The relief is intended to encourage entrepreneurs to establish, grow and retain innovative businesses in the UK by providing a reduced 10% CGT rate on qualifying share disposals. It will be available for disposals made on or after 6 April 2027 and will be subject to a £10 million lifetime limit per individual. The limit will be reduced by amounts claimed under BADR and investors' relief from that date.

To qualify, an individual must have:

• Held at least 25% of the company's ordinary share capital when the trade commenced

• Owned shares or securities in the company for at least five years before disposal, and

• Been UK tax resident for at least five continuous tax years prior to the disposal

Importantly, the relief will apply to all shares disposed of by a qualifying individual and is not restricted to shares acquired when the company was founded.

The company must:

• Be within the scope of UK corporation tax and maintain a substantial UK presence

• Carry on a qualifying trading activity, and

• Have achieved a minimum level of scale, including turnover of at least £10 million and at least 15 qualifying full-time employees before disposal

The company must also meet at least two of three additional tests designed to demonstrate sustained growth and innovation. These focus on turnover growth, employee growth and qualifying R&D expenditure.

Claims will be made through the self-assessment tax return for the year of disposal, and supporting information will be needed to demonstrate the qualifying conditions have been met.

The consultation closes on 30 November 2026 to allow sufficient time for legislation to be finalised before the relief takes effect from 6 April 2027.

Our comment

The government's objective is clear. While the UK has a strong record of creating innovative start-ups, it has historically struggled to scale those businesses into large, internationally competitive companies. By linking this tax relief to growth, employment and innovation, the government seeks to incentivise entrepreneurs whose businesses deliver broader economic benefits to the UK.

It is disappointing, therefore, that the consultation proposes what would become one of the most heavily conditioned tax reliefs in the UK tax system. Qualification depends not only on the founder’s shareholding and residency position, but also on a range of company-level metrics that may span a ten-year period. In practice, founders are likely to require detailed professional advice both before and after a transaction to determine whether the conditions are satisfied.

Some aspects of the design appear particularly restrictive. The requirement that the company continues the same trade for which it was originally established may prevent relief being available where a business has successfully evolved or pivoted in response to market opportunities. While the provision is clearly aimed at preventing abuse, it may not reflect the commercial reality that many highly successful businesses develop significantly from their original business model.

The proposed innovation test may also create uncertainty. Eligibility can depend on whether historic R&D expenditure qualified for relief, an area that has become increasingly subject to HMRC scrutiny. The consultation acknowledges that a subsequent challenge to an R&D claim could lead to founders’ relief being withdrawn, potentially leaving individuals with additional tax liabilities and interest.

There are also practical concerns around compliance. Founders may need access to information that is held by the company, sometimes many years after the relevant period. The consultation therefore proposes granting individuals a statutory right to request information from companies. While this may assist claimants, it will create additional administrative obligations for growing businesses.

In its current form, the breadth and complexity of the proposed conditions impose an added burden on businesses, and the resulting uncertainty may limit the behavioural impact that the relief is intended to achieve.

Founders’ relief achieving its policy objectives will rely on striking the right balance between targeting support and maintaining simplicity. It has the potential to become a valuable addition to the UK's entrepreneurial tax landscape, but not as drafted.

The government has announced that the trading allowance will treble to £3,000 from 6 April 2027.

Summary

The trading allowance is a flat rate deduction against trading and some miscellaneous income, and is an alternative to claiming actual expenses. The allowance was introduced on 6 April 2017 and has been £1,000 per tax year since that date.

Budget 2026 announced an increase to the allowance to £3,000 per tax year from 6 April 2027, alongside an increase to the self-assessment reporting threshold to £3,000.

Our comment

The increase to the allowance will be a welcome change for individuals taking their first steps in starting a business, and those with small amounts of income from hobbies or side businesses.

For some individuals, this will mean no longer having to file self-assessment tax returns. The reduced administrative burden may be the most valuable implication of the change for some, especially those who incur professional fees in dealing with their tax affairs.

Under the proposed changes, individuals with trading and miscellaneous income above £3,000 will still be required to file a tax return, even where no tax liability is due because of other allowances, for example, the personal allowance.

From 6 April 2027, the individual limit for tax advantaged company share option plan (CSOP) share options will increase to £120,000. The tax advantaged enterprise management incentives (EMI) share option rules will be changed so that an employee can hold EMI options over shares worth up to £250,000 and CSOP options over shares worth up to £120,000. There will also be a few other helpful changes to the EMI and CSOP rules, as well as other tax rules relating to employee share plans.

Summary 

From 28 October 2026, the government will refer to CSOP as “EMI2” to emphasise the usefulness of CSOP options for companies that can no longer grant EMI options. However, it does not intend to amend the CSOP legislation to reflect the rebrand.

From 6 April 2027:

• The CSOP individual limit will increase to £120,000

• The interactions between the EMI and CSOP individual limits will be removed. As a result, it will be possible for an employee to hold EMI and CSOP options over shares worth up to £370,000

• The maximum period for the tax advantaged exercise of a CSOP option will increase from ten to 15 years, aligning CSOP and EMI options

• The exercise window for EMI options following disqualifying events will be extended from 90 days to 180 days without any loss of tax reliefs

• It will become possible to grant EMI options over shares in a company, subject to arrangements, which will bring that company under the control of the corporate trustee of an employee ownership trust (EOT). (It is already possible to grant EMI options over shares in a company subject to an EOT);

• As expected, the requirement for the grant of each EMI option to be notified to HMRC will be folded into the annual EMI return

• The period for which shares or share options held by third parties may be excepted from the disguised remuneration rules will be extended to 15 years

Our comment

The increase to the CSOP individual limit and the effective combined EMI and CSOP individual limit from £250,000 to £370,000 will be very welcome to companies that grant, or may grant, EMI and CSOP options. The other changes, although less significant, will also help certain companies and share plan participants.

However, the reduction in the lifetime limit for gains qualifying for CGT business asset disposal relief (BADR) from £1 million to £500,000 from 6 April 2027 will reduce the tax advantage available to some EMI option holders, as substantially less restrictive BADR qualifying conditions apply to disposals of shares acquired under EMI options.

HMRC announced it will remove the R&D claim notification requirements for claims made on or after 1 April 2027. The additional information form (AIF) will also be simplified from autumn 2027.

Summary

The Finance Bill 2026/27 will remove the requirement to notify HMRC of the intention to make an R&D claim for claims made on or after 1 April 2027. These changes will impact companies that claim tax relief under both the R&D expenditure credit (RDEC) and the enhanced R&D intensive support (ERIS) schemes.

HMRC has also announced it will rationalise and simplify the AIF to remove duplication, ask for more targeted information on contractors and externally provided workers, and will clarify the project information requirements.

HMRC is also seeking practical suggestions on simplification of the R&D legislation while maintaining the safeguards and policy intent.

Our comment

Following several changes to the R&D tax relief regime over recent years, this announcement maintains the status quo of the current reliefs. The removal of the claim notification requirement is a welcome amendment, as this often caught out first-time claimants or taxpayers who have had a break in their R&D claim periods.

HMRC is welcoming practical suggestions on further simplification of the R&D legislation to make the rules easier to comply with, while maintaining the safeguards that the recent changes have introduced.