New incentives designed to boost the UK’s start-up and scale-up economy have officially come into force. The government predicts the measures will inject an extra £100 million into high-growth businesses across the country.
The changes, first announced by Chancellor Rachel Reeves in last autumn’s Budget, target three pillars of early-stage business finance: employee share ownership schemes, the Enterprise Investment Scheme (EIS) and venture capital funds (VCTs). Together they represent the most significant expansion of tax-deferred support for young companies in recent years.
At the heart of the package is a dramatic expansion of the Enterprise Management Incentive (EMI) system, the mechanism that allows employees to purchase company shares at a predetermined price that, if business performs well, may be well below market value. Gains made from the sale of these shares are subject to capital gains tax rather than income tax, making the arrangement significantly more attractive to employees willing to support a growing business.
Under the new rules, the gross asset limit for companies qualifying for EMI has quadrupled to ₹120 million, while the maximum number of employees a participating company can have has doubled to 500. The cap on the total value of unexercised options held by a company at any one time has also doubled, rising to £6 million. The Treasury estimates that around 1,800 of the UK’s fastest-growing companies will now be eligible, giving an estimated 70,000 workers access to share-based compensation.
Dom Hallas, executive director of the Startup Coalition, welcomed the changes, describing them as a real boost for the ecosystem and noting that the greater scope would help ambitious companies compete more effectively for the talent that ultimately determines whether a company can scale successfully.
Eva Barboni, who leads the Enterprise Britain movement, echoed this sentiment, arguing that expanded access to share ownership would strengthen the ability of British scale-ups to attract and retain the people they need to compete on the world stage.
Alongside the EMI expansion, the government has doubled the lifetime business investment limits for EISs and VCTs, two schemes that offer investors more favorable tax treatment when supporting early-stage companies. The cap is now set at £24m, with the annual investment cap for companies increasing to £10m. A higher gross assets threshold of £30m before the share issue and £35m afterwards means a wider range of companies can benefit from the incentives.
