Tech founders and the Budget: the equity and tax tools that still work

On 28 October 2026, the Autumn Budget put a new exit relief at the centre of its pitch to entrepreneurs, alongside changes to employee share schemes, early-stage investment reliefs, Research & Development (R&D) claims and capital allowances.

Only a few hundred individuals a year are expected to benefit from Founders’ Relief, but the proposed tests make it particularly relevant to high-growth, R&D-intensive technology businesses. Our guide, Founders’ Relief: generous on paper, narrow in practice?, explains who qualifies. This article looks at where the relief fits for tech businesses, what founders and finance teams can use alongside it, and what to plan before April 2027. This article looks at where the relief fits for tech businesses, what founders and finance teams can use alongside it, and what to plan before April 2027.

Founders’ Relief: an opportunity for tech entrepreneurs

For the small group of founders who qualify, Founders’ Relief could cut the tax on a sale by up to £1.4m. Under the proposals, it would tax qualifying gains at 10%, up to a £10m lifetime limit per individual, for disposals on or after 6 April 2027. On £10m of qualifying gains, that is a saving of up to £1.4m compared with paying Capital Gains Tax (CGT) at 24%, assuming a full unused lifetime limit. Both the founder and the company would need to meet demanding conditions, and the detailed rules remain subject to consultation and final legislation.

The proposed R&D test could be a relevant route for technology businesses, but investment in product development alone would not establish eligibility. A company would need to meet the other company conditions, including turnover of at least £10m and at least 15 qualifying full-time employees in the accounting period before disposal, and pass two of three growth and innovation tests.

The R&D test would require at least £1.5m of qualifying R&D expenditure, with qualifying R&D tax relief claims relating to accounting periods ending within the three years before disposal. A company relying on this test would also need to meet either the turnover-growth or employee-growth test.

Check eligibility for both Founders’ Relief and Business Asset Disposal Relief (BADR), because the BADR lifetime limit is being cut from £1m to £500,000 for qualifying disposals on or after 6 April 2027. BADR will remain relevant to many founders who cannot meet the new relief’s demanding conditions.

Tech founders still have a chance to shape the rules. HM Treasury’s consultation on the practical operation of Founders’ Relief closes on 30 November 2026, and the detail may change before it reaches the Finance Bill.

The share scheme changes are some of the most practical outcomes of the Budget, particularly for tech businesses competing for talent. The Company Share Option Plan (CSOP) was rebranded as EMI2 from 28 October 2026, with Enterprise Management Incentives (EMI) remaining a separate scheme.

The Government has announced the following changes from 6 April 2027:

The individual EMI2 option limit will double from £60,000 to £120,000.
The maximum tax-advantaged exercise period for EMI2 options will increase from 10 to 15 years.
EMI2 options will no longer count towards an employee’s individual EMI limit.
The window for exercising EMI options after a disqualifying event, while retaining the associated tax advantages, will increase from 90 to 180 days.

Separately, companies will no longer need to submit a separate grant notification for EMI options granted on or after 6 April 2027. Grants will instead be reported through the existing annual EMI return.

Each scheme suits a different type of business, and the two will sit side by side. EMI remains the strongest route for smaller companies, and its expansion in April 2026 made it available to more medium-sized businesses. EMI2 is available to companies of all sizes and sectors, subject to its eligibility conditions, including businesses that have outgrown or do not qualify for EMI. A business should check which scheme fits its size and plans.

EIS and SEIS: why early funding matters more

When exit reliefs narrow, the tax position at the start of a funding journey carries more weight. The Enterprise Investment Scheme (EIS) and Seed Enterprise Investment Scheme (SEIS) can give investors income tax relief on their investment, and gains on qualifying shares can be free of CGT if conditions are met. That makes a company easier to back.

The Budget announced practical changes to reduce the risk of investors losing relief through technical breaches. These include preserving EIS relief on the eligible portion of an investment that exceeds scheme limits, allowing same-day SEIS and EIS or Venture Capital Trust (VCT) investments, and protecting other investors’ relief where one investor pays late. The changes are intended to apply from 6 April 2027, with legislation to follow in Finance Bill 2026-27.

Founders raising money in the next 12 months should check their EIS and SEIS eligibility early and monitor the final legislation.

R&D tax relief: easier to claim, but not more generous

R&D claims become easier to make from 1 April 2027, when the claim notification requirement is removed for claims made on or after that date. Businesses should continue to comply with the applicable requirements in the meantime. The additional information form will remain, but is due to be simplified from autumn 2027. Removing the requirement takes away a potential barrier for first-time claimants and businesses that have not claimed recently. The rates and the merged scheme are unchanged.

That is welcome administrative news, but it does not improve the headline value of the relief. Chand Chudasama, Chairman at Price Bailey, comments:

“UK R&D relief is now less competitive than in many other OECD countries, which matters for businesses deciding where to locate their research.

“With Founders’ Relief also linked to R&D spend, accurate and well-documented claims carry more weight than before. Technology businesses should keep their project records and cost allocations in order, as these now support both the claim itself and any later exit.”

Capital allowances: check which relief applies first

Before changing purchase dates, businesses should establish whether expenditure qualifies for 100% relief through full expensing or the £1m Annual Investment Allowance. Where neither applies, the higher first-year allowance may accelerate relief. The reduction in writing-down allowances will slow deductions on unrelieved main-pool expenditure, including existing balances.

Two changes affect technology businesses that buy hardware, servers or lab equipment:

The main rate first-year allowance rises from 40% to 50% for qualifying expenditure incurred on or after 1 January 2027.
The main-pool writing-down allowance falls from 14% to 12% from 1 April 2027 for corporation tax and 6 April 2027 for income tax, with a hybrid rate for periods straddling the change.

What should tech founders do now?

Start by checking whether you could qualify for Founders’ Relief. It will suit only a small number of individuals, but the potential saving is substantial. Whatever the answer, look at equity, funding and spending together before April 2027. A sensible starting point is to:

Check whether you could meet the Founders’ Relief criteria, and consider responding to the consultation, which closes on 30 November 2026.
Check whether EMI, EMI2 or both suit your size and plans, and what the changes mean for your team.
Check your EIS and SEIS eligibility before your next funding round.
Continue to comply with the R&D claim notification requirement until it is removed for claims made on or after 1 April 2027, and keep your records in order.
Check which capital allowances apply to your equipment spend before making purchasing decisions.

If you are planning an exit, review how a disposal before or after 6 April 2027 could affect your eligibility, available lifetime limits and overall tax liability. Transaction-specific rules mean signing and completion dates should not be treated as interchangeable.

The Price Bailey Technology team can help you model your options. Get in touch to discuss your plans.

We always recommend that you seek advice from a suitably qualified adviser before taking any action. The information on this page is intended as a general guide only. While we work to keep our content accurate and up to date, we cannot guarantee that it reflects the position at the time you are reading it. No responsibility for loss occasioned by any person acting or refraining from action as a result of this material can be accepted by the authors or the firm. For more information on our editorial process, click here.

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