A major entrepreneurship tax relief package has now come into force at the start of the 2026-27 tax year. The reforms, announced by Chancellor Rachel Reeves at Budget 2025 and taking effect from 6 April 2026, expand three of the UK's core investment and employee ownership schemes EMI, EIS, and VCTs and are expected to unlock around £100 million a year in additional private investment for start-ups and scale-ups.
The package sits alongside wider measures including a new UK Listings Relief and the British Business Bank's updated Five Year Strategic Plan.
What's Happening and Why It Matters
The UK has long been seen as a good place to start a company. The government's stated aim with these reforms is to make it an equally strong place to grow one, helping companies hire specialist talent, raise bigger rounds of investment, and list on UK markets rather than heading abroad.
The changes affect three tax relief mechanisms that many people outside the startup world have never heard of, but which play a significant role in how early stage and growing businesses attract both talent and investment in the UK.
Enterprise Management Incentives (EMI): What It Is and What's Changed
The EMI scheme allows eligible companies to offer their employees tax advantaged share options, essentially a way for staff to own a stake in the company at a reduced tax cost. This is particularly important for high growth businesses that cannot always compete with large corporations on salary alone.
From 6 April 2026, the scheme has been significantly expanded:
- Gross assets limit: raised from £30 million to £120 million, meaning larger companies can now qualify
- Employee limit: raised from 250 to 500 more staff can benefit from the scheme
- Company share option limit: raised from £3 million to £6 million, companies can offer more shares under the scheme
The government expects these changes to support around 1,800 high growth scale-up companies in sectors including fintech, life sciences and AI over the next five years, with an estimated 70,000 employees gaining access to tax advantaged options.
The practical effect is that more growing companies ones that have moved beyond the early startup stage but are not yet large corporations can use this mechanism to attract and hold on to the people they need.
Enterprise Investment Scheme (EIS) and Venture Capital Trusts (VCTs): More Money In
EIS and VCTs are tax relief schemes designed to encourage investors to back earlystage, higher risk companies. They do this by offering tax breaks to investors willing to put money into businesses that face the biggest challenges in accessing traditional finance.
From 6 April 2026, the investment limits have been doubled:
- Lifetime company investment limit: doubled from £12 million to £24 million
- Annual company investment limit: increased to £10 million
- Gross assets test: £30 million before share issue, £35 million after
These higher limits mean that companies can raise more money through these tax relief routes before they need to move on to other forms of financing.
What About VCT Income Tax Relief?
There is one adjustment that goes the other way: Income Tax relief available to investors in VCTs has been reduced from 30% to 20%. The government says this rebalances incentives between VCTs and EIS, and pushes VCT funds to target companies with higher growth potential rather than seeking the easiest tax benefit. In other words, the change is intended to direct capital toward the companies that need it most.
Knowledge Intensive Companies
Businesses classed as knowledge intensive typically those doing significant research and development or relying heavily on intellectual property continue to benefit from higher limits under both EIS and VCT. This ensures they remain eligible as they grow and scale.
UK Listings Relief: Staying and Listing at Home
A recurring problem for the UK's startup ecosystem has been that promising companies often choose to list on overseas stock markets, particularly in the United States, rather than in London. This new measure is designed to address that.
From 6 April 2026, companies listing in the UK receive a three year exemption from Stamp Duty Reserve Tax (SDRT). The government describes this as an international first. The aim is to improve trading volumes and share prices for UK listed scale-ups, making a domestic listing more attractive.
British Business Bank: A Bigger Long Term Role
The British Business Bank (BBB) the government owned development bank that supports smaller businesses with finance, now has a permanent financial capacity of £25.6 billion under its new Five Year Strategic Plan.
Under that plan, the BBB has committed to:
- Invest at least £5 billion in growth stage funds and scale-up companies
- Explore using its existing guarantee capacity to support IP backed lending allowing companies to use their intellectual property as collateral for loans
The BBB is intended to fill gaps in the private market and work alongside rather than replace private investment.
Call for Evidence: More Changes May Be Coming
At Budget 2025, the government launched a Call for Evidence on how tax policy can better support investment in high growth UK companies. That consultation closed in February 2026. The government has said it will respond in due course, which means further reforms to the tax landscape for founders and investors may follow.
What Businesses and Industry Groups Have Said
Carolyn Dawson, CEO at Founders Forum Group, said:
"The UK has always been a brilliant place to start a company and today's reforms are a positive step towards making it just as compelling a place to scale. We're particularly pleased to see the expansion of the EMI scheme: giving more employees a genuine stake in the companies they're building is one of the most powerful ways to attract talent and reward the risk takers who drive British innovation forward."
Eva Barboni, Executive Director of Enterprise Britain, said:
"Britain needs more companies to make the leap from start-up to scale-up to global champion. These measures speak directly to two of the three pillars we set out as urgent priorities in our most recent report: access to capital and the ability to attract and retain talent."
Dom Hallas, Executive Director of Startup Coalition, said:
"Expanding EMI is a genuine win for the startup ecosystem, it gives high growth companies far more room to compete for talent, which is ultimately what drives scaling success. The improvements to EIS will also help unlock more capital into early stage businesses, particularly in knowledge intensive sectors where the UK has real comparative advantage."
Irene Graham OBE, CEO at ScaleUp Institute, said:
"It is very good to see the commitments made in the Budget now being fully enacted. The changes now in effect for EIS / VCT / EMI make a tangible difference to businesses scaling across sectors and geographies as they progress their global growth ambitions."
Hannah Seal, Partner at Index Ventures, said:
"The UK now has the most competitive stock option scheme of any large economy in the world. By doubling the headcount cap and quadrupling the asset threshold for EMI, the Government has created a world leading scheme that surpasses its global peers. This is a game changer for British entrepreneurship, allowing UK startups to compete with global giants for the best talent."
Elaine Stroud, Chief Executive of Entrepreneurs Forum, said:
"It's encouraging to see real practical support which will help ambitious businesses to scale. Access to funding remains one of the biggest barriers to growth, and these measures should make it easier for entrepreneurs to unlock that next stage."
The Bigger Picture: Start, Scale and Stay in the UK
The government's policy narrative here is a shift in emphasis. While the UK has long been considered a strong environment for starting a business, many founders have historically found that as their companies grew, they needed to look elsewhere to the US in particular for the talent, capital and stock market infrastructure to take the next step.
These reforms are an attempt to close that gap. The combined effect of expanding EMI, doubling EIS and VCT limits, introducing a listings tax break, and growing the British Business Bank is intended to send a signal that the UK wants companies to start here, grow here, and list here.
Whether that ambition is fully realised will depend on how the reforms play out in practice, and whether the ongoing Call for Evidence leads to further improvements to the tax landscape that founders and investors say they still need.