In last month’s long-awaited Budget, UK finance minister Rachel Reeves announced a range of new policies, partly aimed at improving the landscape for startups and incentivising them to remain and grow in Britain.
Previous UK administrations have sought to use tax incentives to support young companies and startups, but these have not always been beneficial to growth-stage scaleups. The Budget, alongside a recent call for evidence on tax support for entrepreneurs, is seeking to make the UK an even more welcoming place for startups.
The government increased the Enterprise Management Incentives (EMI) framework, which aims to help startups attract talent by awarding employee shares in a company with minimal tax obligations.
Another shift comes in a bid to curb the number of people leaving the UK to establish their businesses in nations with friendlier tax regimes, with Reeves announcing a new three-year stamp duty exemption for firms that list in the UK.
But not every change brought in by Reeves has been welcomed by founders and businesses. One of the more unpopular reforms saw a reduction in tax relief for Venture Capital Trusts (VCT) potentially impacting fundraising in early stage companies.
While several measures were nudged in a more supportive direction, founders and investors largely viewed the policies as incremental rather than catalytic.“I would say this budget was treading water. I don't think the budget has made it worse to be a startup in the UK,” says Dr Joseba Martinez, Assistant Professor of Economics at London Business School.
“It’s a missed opportunity. The country desperately needs growth, and the Budget overlooked several opportunities to do this."
So what does the Autumn Budget mean for budding entrepreneurs hoping to grow their business in the UK and what does it fail to address?
EIS increase a ‘positive surprise’
The government doubled investment limits under the Enterprise Investment Scheme (EIS) and VCT schemes.
Companies can now raise £10m in line with their annual investment limit and lifetime limits also rising to £24m from £12m. This is the same for knowledge-intensive firms, which can raise £20m and £40m as per their annual and lifetime investment limits, respectively.
Meanwhile, firms with ”gross assets” of below £30m before the issue of shares or securities are eligible for tax relief under the EIS scheme. This represents a significant increase on the previous £15m limit.
The EIS increases were definitely a positive aspect. There's not a lot in the Budget about growth, and this was something that felt like it was going in that direction, at least.
This is potentially good news for investors and scaleups, with the changes intended to allow investors to make qualifying investments in companies growing past the early stage.
Eli Khrapko, cofounder of the UK’s fastest-growing sustainable bottom care brand Wype says the increase in EIS was a "positive surprise”.
“The EIS increases were definitely a positive aspect. There's not a lot in the Budget about growth, and this was something that felt like it was going in that direction, at least.”
The government also announced a reduction in the amount of upfront income tax relief available to VCT investors from 30% to 20% — a decision that may be considered counteractive.
“On the one hand, you're increasing the pool of companies who are eligible to get this type of investment, but then you're actually reducing the pool of investors that are happy to invest in those businesses,” Khrapko said. “It seems a bit strange that you do one and then offset it with the other.”
The UK’s tax regime is highly competitive in attracting talent and early-stage capital, through EMI and schemes like EIS and SEIS, according to Martinez. “The real gaps are elsewhere: in how we tax IP, in R&D support for scaling companies, and in policies that drive growth beyond the early stage.” He says the government should allow firms to write off the cost of intellectual property purchases, in the same way it does with external innovation as a way to boost productivity.
While firms can fully deduct the cost of machinery or equipment from profits the year it is bought, the cost of acquiring intellectual property — such as patents and software — must be written off slowly over 15 to 25 years.
It seems a bit strange that you do one and then offset it with the other.
“That matters enormously for startups,” he says, “because it directly affects cash flow, valuations, and therefore the willingness to invest in growth.”
For young scale-ups, intellectual property is often the main asset they are building or acquiring. Spreading tax relief over decades means firms face higher tax bills when they are at their most cash-constrained, making it harder to reinvest, hire, and scale.
Allowing faster write-offs would improve near-term cash flow and raise the effective value of innovation assets, Martinez tells Sifted.
Lack of funding into universities
The changes outlined in the Budget did not focus on the funding of academic research institutions enough, despite the UK being a hub for academic research, says Martinez.
“The UK has an outstanding university system. Universities produce talented people and innovative ideas, which often evolve into products and businesses,” he says.
According to monthly data published by the Home Office, applications from Sponsored Study visa main applicants in the year ending October 2025 (434k) were 13% lower than the year ending October 2023. There were a further 22.4k applications from dependents of international students in the year ending October 2025 — 85% fewer than the year ending December 2023.
Universities produce talented people and innovative ideas, which often evolve into products and businesses.
The drop in study visa applications by international students follows a rule implemented in January 2024 by the Conservative government preventing partners and children of international students on non-research courses from applying to live in the UK.
The cut to funding also impacts the hiring of international talent, added Khrapko. This, coupled with changes to the graduate visa scheme, makes it “more difficult for international talent to remain in the UK after they've graduated.”
The graduate visa duration will be reduced from two years to 18 months from January 2027. New applicants for Skilled Worker, Scale-up and High Potential Individual visas will also need a higher level of English (B2) from January 2026 compared to the current B1 level. For startups reliant on global talent — particularly in STEM — these shifts risk creating a bottleneck in the very pipeline that fuels innovation.
Cost Pressures
Cost pressures, especially for London-based businesses, have not been relieved by the budget either. With operating costs climbing and market access narrowing, many founders feel that talent incentives and tax tweaks alone cannot compensate for structural pressures.
Reduced access to the EU makes it less attractive to absorb the early costs of building and scaling a tech company in the UK.
Nina Briance, CEO and founder of London-based luxury fashion marketplace Cult Mia says: “High living costs in London continue to put pressure on salary expectations. For smaller, high growth businesses, meeting those expectations at a pace that aligns with sustainable growth can be challenging.
Martinez adds that following the UK’s withdrawal from the EU in January 2020, it is now far less advantageous for UK businesses to pay high fixed costs.
“The problem with the UK is that we’re a small place and we’ve cut ourselves off from our nearest neighbour following Brexit. Market access matters enormously when deciding where to start a business, and reduced access to the EU makes it less attractive to absorb the early costs of building and scaling a tech company in the UK.”
Hiring and Retention
For Briance, the UK’s capital remains a hub for talent; but one that is incredibly competitive in specialised sectors including product, AI and performance marketing.
My confidence in the UK as a base remains strong, but the Budget didn’t materially shift it.
She says: “The Budget didn’t introduce anything that meaningfully expands these particular talent pools or improves access to specialised skills for startups. My confidence in the UK as a base remains strong, but the Budget didn’t materially shift it.”
Khrapko agrees that there remains “quality of talent” in the UK, but adds: “The good ones are hard to find.”
“One of the really key talent pools that businesses like ours are looking for is digital marketing and performance marketers, and those types of roles are in really high demand.”
He suggests one solution could be to “look at remote teams abroad.”
