Autumn Budget 2026: What It Means for Start-ups and Founders

In this article you will learn:

• What the new 10% Founders’ Relief is and who will actually qualify;
• How the cut to Business Asset Disposal Relief (BADR) affects a sale before and after April 2027;
• What EMI2 means for share option plans;
• Where the extra £5bn for the British Business Bank is going; and
• The steps founders should take now.

Introduction

John Healey’s first Budget, delivered on 28 October 2026, put founders front and centre. The headlines are a new 10% Founders’ Relief on up to £10m of lifetime gains, a bigger and simpler share option toolkit with CSOP rebranded as EMI2, and a further £5bn for the British Business Bank.

The catch: Business Asset Disposal Relief is halved, and the new relief comes with demanding conditions that many founders will not meet. Most measures take effect from 6 April 2027, so there is time to plan. Draft legislation and consultation detail are still being published, so some of the detail below may change.

Share options: EMI tidied up, CSOP becomes EMI2

This builds on last year’s expansion of EMI, which from April 2026 raised the company option cap to £6m and opened the scheme to companies with up to 500 employees. The new changes mostly apply from 6 April 2027.

EMI administrative easements

• The window to exercise after a disqualifying event (for example, an employee leaving or a takeover) doubles from 90 to 180 days.
• The separate HMRC grant notification is abolished. Grants will instead be reported in the end-of-year return. One trap: a late return containing grant reporting may put the tax advantages of those grants at risk, and HMRC has yet to confirm the position.

CSOP rebranded as EMI2

The Company Share Option Plan will be known as EMI2, positioned as the scheme for companies that have outgrown EMI or never qualified for it. It keeps the CSOP name in legislation, and existing CSOP schemes carry on as EMI2. In addition:

• the individual option limit doubles from £60,000 to £120,000;
• the exercise period extends from 10 to 15 years, matching EMI; and
• the combined EMI and CSOP cap is removed, so an employee can hold £250,000 of EMI options plus £120,000 of EMI2 options: £370,000 in total.

What it means

Scale-ups that have outgrown EMI now have a credible alternative for senior hires. But option holders should not expect a 10% rate on exit. Most will not meet the Founders’ Relief conditions, and BADR is being cut, so standard CGT rates will usually apply.

Founders’ Relief: 10% CGT on up to £10m, for those who qualify

From 6 April 2027, qualifying founders will pay 10% CGT on up to £10m of lifetime gains when selling qualifying shares. The relief is also intended to cover significant early investors. The Chancellor pitched it at “the founders of our most successful firms”, and the conditions reflect that.

The conditions

Based on the technical consultation, the founder must have:

• held at least 25% of the ordinary share capital and voting rights from when the company began trading (or preparing to trade);
• held the shares for at least five years; and
• been UK tax resident throughout.

The company must also pass new tests on turnover, headcount and innovation, showing sustained scale and growth, and must carry on the trade it was set up for without a major change in its nature. The £10m limit is reduced by any BADR or Investors’ Relief claimed.

BADR is halved at the same time

The BADR lifetime limit falls from £1m to £500,000 for disposals from 6 April 2027, at the existing 18% rate. The government says three in four claimants are unaffected, but the maximum benefit of BADR is now around £30,000. The two reliefs compare as follows:

Points of friction we expect to see

• Co-founder teams. 25% is easy for a sole founder, but a team of three or four equal co-founders may find only one or none qualifies. Early cap table splits will matter more than ever.
• It is not yet clear how the 25% test interacts with dilution through funding rounds. A founder who starts at 40% may be well below 25% by Series B.
• Most start-ups change direction at least once. A requirement to continue the original trade could exclude successful businesses that look nothing like their first pitch deck.
• Prior BADR claims. It is unclear whether founders who have already used BADR (or old Entrepreneurs’ Relief) will see their £10m limit reduced by claims made before April 2027.

The technical consultation closes on 30 November 2026. Founders and investors with views on the 25% threshold or the trade test should respond.

British Business Bank: £5bn more firepower

The British Business Bank’s financial capacity rises by £5bn to £30.6bn, part of a £20.4bn package shared with the National Wealth Fund. The money is aimed at the eight Industrial Strategy sectors, defence and dual-use technology, female founders and the regions outside London. The main elements are:

The venture debt product is the most interesting development for later-stage companies. UK venture debt has historically been limited to smaller tickets, and a state-backed product could give scale-ups a real alternative to a down round or bridge.

Other measures that matter to start-ups

• Trading allowance tripled. The amount you can earn from a new venture tax-free rises from £1,000 to £3,000, helpful for side projects before incorporation.
• Young Entrepreneurs Allowance. A new allowance covering a year of living costs for young founders while they build their business. Eligibility and amounts are still to be published.
• Talent and visas. The High Potential Individual visa extends to graduates of the world’s top 150 institutions. More R&D-intensive businesses can endorse Global Talent applicants. The Graduate visa stays at two years for graduates of high-compliance universities.
• Sponsorship costs. From 28 October 2026, an employer that pays the Certificate of Sponsorship fee and Immigration Skills Charge to sponsor overseas workers no longer creates a taxable benefit for the sponsored worker.
• Non-compete clauses. The government will review non-competes so they do not block hiring by start-ups and scale-ups, with a consultation expected in early 2027. Founder and shareholder covenants in investment documents could come into scope.
• Capital allowances. The main rate first-year allowance rises from 40% to 50% for expenditure from 1 January 2027, while the main writing down allowance falls from 14% to 12% from April 2027. Full expensing is retained.
• Company distributions. A package of reforms to the taxation of distributions, including share buybacks and the transactions in securities rules, will be consulted on in 2027 for April 2028. This could affect how founders take value out ahead of an exit.
• Government as first customer. Challenge-led procurement is being expanded, and a regulatory carve-out will let products such as drones and medicines be tested and scaled.
• Main CGT rates, dividend tax rates and the Corporation Tax roadmap.

What founders should do now

• Exits before 6 April 2027. If a sale is close and you rely on BADR, completing before April 2027 keeps the £1m limit. Get advice before rushing a deal for tax reasons alone.
• Check Founders’ Relief eligibility. Look at your shareholding since incorporation, likely dilution and how far the business has moved from its original trade.
• Respond to the consultation. It closes on 30 November 2026. The 25% threshold and the trade test are the points most likely to move.
• Revisit option plans. Companies that have outgrown EMI should look at EMI2 for senior hires from April 2027. Make sure end-of-year returns are filed on time once grant notifications move into them.
• New cap tables. Founders splitting equity at incorporation should factor the 25% Founders’ Relief threshold into the cap table.
• Scale-ups in Industrial Strategy sectors, defence and dual-use, and female-led businesses should watch for the new British Business Bank funds and venture debt product.

FAQs

When does Founders’ Relief start?

Founders’ Relief applies to qualifying disposals from 6 April 2027. The rules are out for technical consultation until 30 November 2026 and will be legislated in the next Finance Bill, so the conditions could still change.

Who qualifies for Founders’ Relief?

Based on the consultation, a founder who has held at least 25% of the ordinary shares and voting rights since the company began trading, has held the shares for at least five years and has been UK tax resident throughout, in a company that passes new tests on turnover, headcount and innovation. The relief is also intended to cover significant early investors.

Is BADR being abolished?

No. BADR continues at 18%, but the lifetime limit halves from £1 million to £500,000 for disposals from 6 April 2027. The maximum saving falls to around £30,000.

What is EMI2?

EMI2 is the new name for the Company Share Option Plan (CSOP). From 6 April 2027 the individual option limit doubles to £120,000, the exercise period extends to 15 years and the cap that linked CSOP and EMI limits is removed. Existing CSOP schemes carry on as EMI2.

Should I sell my business before April 2027?

If a sale is already close and you rely on BADR, completing before 6 April 2027 preserves the £1 million limit, worth up to £30,000 extra. That is not a reason on its own to rush a deal. Take advice on the full tax position first.

How Buckworths can help

Buckworths works exclusively with start-ups and high-growth businesses. We advise on equity splits and cap tables, EMI and EMI2 option plans, investment rounds and exits, and we will tell you plainly whether Founders’ Relief is realistic for your business.

To talk through what the Budget means for you, Book a Free Consultation, call 020 7952 1723 or email [email protected].