Tech Companies' Desires for the Autumn Budget 17: Their Hopes and Expectations
The upcoming UK Autumn Budget 2025 is set to introduce targeted reforms and cuts to tax reliefs for investors, including those in the tech industry. This move is part of a broader effort to raise £10–15 billion in revenue.
While specific details on reliefs exclusively for tech investors are not yet fully published, several relevant changes are anticipated.
R&D Tax Relief Reforms
HMRC has increased compliance activity and information requirements around R&D tax relief schemes, suggesting tighter rules and possible restrictions or scrutiny on claims by tech companies investing in research and development.
Business Property Relief and Share Relief Reductions
From April 2026, the rate of relief on business property and certain shares is reducing from 100% to 50% in some circumstances, including shares traded on recognized but not listed stock exchanges (like AIM, commonly used by tech firms). This would limit investors’ ability to claim full relief on relevant shares, impacting tech investments in these markets.
Potential Fiscal Drag via Freezing Allowances
The Chancellor is expected to freeze personal tax allowances and thresholds, which indirectly increases tax liabilities and reduces the net benefits from available reliefs.
Carried Interest Taxation
Changes to carried interest taxation—relevant for venture capital fund managers investing in tech—are underway, with softened rules and concessions but ongoing reform from April 2025. This may affect the incentives for fund managers backing tech startups.
Investor's Relief and IR35 Changes
Rumours suggest that the Chancellor will announce the expansion of IR35 changes to the private sector. Private sector employers may become more cautious about using self-employed workers due to the potential for tax underpayments. Where IR35 applies, PAYE will be applied on payments to the PSC, as if the payment were made to the individual.
The high number of self-employed workers in IT or other support roles in the technology sector could be affected by the expansion of IR35 changes. The perceived benefit of selecting self-employed workers over direct employees may no longer exist if IR35 changes are announced. Under the expansion of IR35 changes, the employer or hirer will be responsible for determining whether IR35 applies.
EIS and SEIS Reforms
The Enterprise Investment Scheme (EIS) and Seed Enterprise Investment Scheme (SEIS) may be tightened or withdrawn. Over the summer, the Treasury carried out a consultation into the EIS and SEIS schemes, indicating that most funds were being used to preserve capital, not invest in high-risk growth companies.
The EIS and SEIS have encouraged external investment into technology companies, providing significant income tax reliefs and exemption from Capital Gains Tax. The EIS, in particular, has seen £15.9 billion invested via the scheme since 1994, with £1.6 billion invested in 2016 alone.
Investors should prepare for reduced tax benefits and review their circumstances ahead of the legislation publication expected with the 2025-26 Finance Bill.
Unrelated News
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The upcoming changes in R&D Tax Relief schemes could potentially tighten rules and curb claims by tech companies investing in research and development.
The reduction of Business Property Relief and Share Relief on recognized but not listed stock exchanges, such as AIM, could limit tech investors' ability to claim full relief on relevant shares.
