What the Autumn Budget might mean for fintech

In summary

• Despite government commitments to the fintech sector, recent changes haven’t always helped 
• With the chancellor under pressure to find savings, there are fears that tax changes could harm the sector 
• While personal tax changes could undermine the UK’s attractiveness as a base of operations, restrictions on R&D reliefs would probably do most harm 

The achievements of the UK’s fintech sector are well recognised: It’s a European, and indeed world, leader, trailing only the US in the number of unicorns it’s created and the investment it attracts. Many more businesses with more modest valuations have also helped build a thriving industry employing over 82,000 people, according to industry body Innovate Finance. 

It also benefits from significant government support. Despite a tight fiscal backdrop to the Spring Spending Review in June, the chancellor still found scope for expanding the British Business Bank, announcing a record £22bn annual R&D funding and £2bn for AI adoption. 

Its industrial strategy in June stated that it aimed to make the UK the “world’s most innovative full-service financial centre” by 2035, and “a leading jurisdiction for fintechs to start up, scale, and eventually list”. 

Financial services is one of the eight “growth driving sectors” identified in the strategy, and fintech a “frontier industry” within it.    

Both the government’s commitment to the sector and its continued success face tough challenges ahead, however.  

Global funding slowed sharply last year, according to Innovate Finance, and while it recovered in the first half of 2025 (up 6% on the previous six months), it was essentially flat in the UK. British fintechs still led the way in Europe, attracting more than half the total of the rest of the continent combined, but they were overtaken by the UAE, slipping from second to third place for fintech investment.  

Moreover, in some ways, the sector has become a victim of its own success: The consumer fintech space is increasingly crowded, making differentiation more difficult; competition for talent is intense, so recruiting and retaining the right skills are persistent challenges; and cyber security risks have become more prominent for many fintechs as they’ve scaled.  

Despite all the warm words, the government’s actions haven’t always helped, either. Stringent compliance requirements, especially for digital assets and online payments, have created uncertainty in the sector and increased costs. Non-dom tax changes, meanwhile, have made the UK less attractive for some high-net worth individuals, including fintech founders, potentially influencing decisions on where to base operations. 

The worry is that, despite the government’s enthusiasm for the sector, the chancellor could add to its problems in her November Budget.  

For founders, potential tax hikes, whether inheritance tax, wealth taxes, capital gains tax or any of the others in recent speculation, could serve to further diminish the UK’s attractiveness as a jurisdiction. The sector is highly international, and personal tax rates inevitably influence founders, the talent the industry relies on and, ultimately, where the next unicorns will be based.  

Slipping behind the UAE in the most recent funding figures should be a warning not to take the success of the sector for granted.  

Potentially even more damaging, however, would be any restriction in the R&D regime. Reductions in reliefs and the merger of the SME and RDEC schemes have significantly reduced the effective relief rates for startups from 33.4% for loss-making companies and 24.7% profit-making ones before April 2023 to 16.2% and 15%, respectively, from April 2024. That has hit startups hard

Crucially, while the changes merged two schemes into one, it would be a mistake to think it has made things simple.  

For example, for accounting periods beginning on or after 1 April 2024, loss-making companies that are classified as R&D intensive (spending over 30% of their total expenditure on qualifying R&D) may be eligible for an enhanced relief rate of 27%. This calculation must include the total spend of any connected companies, though, making ownership structure and founder control critical considerations, particularly in early-stage businesses where R&D intensity is typically high. 

Further changes from April 2024, meanwhile, also introduce restrictions on claiming costs related to overseas subcontractors and externally provided workers (EPWs). These are now only eligible if the overseas work was necessary due to regulatory requirements or due to geographical, environmental or social conditions that could not reasonably be replicated in the UK. Cost or the availability of expertise are no longer valid justifications.  

This change should be carefully considered when weighing the use of offshore contractors, which is often preferred in early-stage development, against onshore alternatives. 

While the financial incentives for R&D since April 2024 are less favourable than before, the definition of qualifying R&D activity remains fairly broad, and the scope for claims is still significant. Businesses should be careful to ensure they’re claiming for qualifying work. 

The chancellor, meanwhile, should carefully consider further changes to the R&D regime. Any further narrowing of either the financial or technical criteria would be unwelcome news for the sector. 

Speaking at the British Private Equity & Venture Capital Summit last week, the chancellor acknowledged the impact of taxes on the growth she badly needs in the UK economy. In recent years, the fintech sector has been among the most reliable contributors. If she wants that to continue, she should look for savings elsewhere.