Budget 2025 – What did the Budget mean for entrepreneurs?

The November Budget was something of a mixed bag for entrepreneurs – some good and some bad.  Following a plethora of pre-Budget rumours, some of the most important developments were measures which did not in fact happen - there were no significant changes to inheritance tax, capital gains tax or corporation tax for most taxpayers, no changes to rates of tax or NICs for members of LLPs, and no changes to SDLT or ATED.  There was also no announcement of a new wealth tax or an exit tax.  Otherwise, there were some welcome expansions of investment reliefs but also some tax increases and tightening of existing rules.

Tax support for entrepreneurs

In a welcome move, the Enterprise Management Investment (EMI) scheme, which offers tax advantages to employees of qualifying companies, was expanded so that from 6 April 2026 the gross assets test will be quadrupled from £30 million to £120 million, the employee limit will be doubled from 250 to 500 employees, and the company share option limit will be doubled from £3 million to £6 million. The maximum holding period will increase to 15 years, and this can be applied to existing as well as new contracts. From 6 April 2027, the requirement for an employer to submit a notification of a grant of EMI options is set to be removed.

The assets thresholds and company investment limits for companies to issue shares qualifying for EIS and VCT tax reliefs will also double from April 2026, although at the same time the income tax relief for VCT investments will reduce from 30% to 20% (for EIS shares, it remains at 30%).

Newly listed companies will benefit from a three-year stamp duty reserve tax exemption, although individuals transferring existing businesses into newly incorporated companies will have to apply for incorporation tax relief from CGT in their self-assessment returns rather than it applying automatically.

A call for evidence on tax support for entrepreneurs was launched with a view to reviewing cliff edges and gaps in tax support for growing businesses and producing a generous but effective tax incentive system.

Business taxation

With immediate effect from Budget Day (26 November 2025), the 100% capital gains tax relief for transfers of shares to employee ownership trusts (EOTs) will be halved. CGT will be payable on 50% of the gain, which may disincentivise some employers from transferring ownership of their business to their employees.

The capital gains tax avoidance rules that apply to limit the ability to rollover gains on shares for share exchanges and company reconstructions have been altered. The new provisions are wider and will apply to arrangements where the main purpose is to reduce or avoid liability to capital gains tax or corporation tax, regardless of whether part of a genuine commercial transaction. Clearance procedures will continue to be available and where clearance had been granted under the old rules, the taxpayer has 60 days from Budget Day (until 26 January) to implement their reorganisation, which may create practical challenges for some affected businesses.

The Government will consult in 2026 to modernise the formula that restricts gift holdover relief on the disposal of qualifying shares or securities, to include assets within the intangible fixed assets regime or that qualify for the substantial shareholding exemption.

Income tax

In addition to an extension of the freeze on income tax and NIC thresholds and allowances for an additional three years, some income tax rates for certain types of income will increase. For dividends from April 2026, the basic and higher rates will increase by 2% (to 10.75% and 35.75% respectively), although the additional rate will  remain at 39.35%, For savings and rental incomes from April 2027, all rates will all rise by 2%.

Inheritance tax

The changes to remove 100% APR/BPR relief will go ahead from next April with a welcome minor amendment. The £1m 100% allowance will be transferable to a surviving spouse or civil partner on the first death of a married couple, providing up to £2m of relief (in addition to other available nil rate bands) on the second death.

It is also worth noting that from 6 April 2027, unused pension funds and death benefits payable from a pension will form part of a person’s estate for inheritance tax purposes and the mechanics of how this will be administered continue to be developed.

For more details of key budget measures of particular interest to entrepreneurs, please read our first reactions.