With the Budget at last behind us after a long and unhelpful period of intense speculation and with fiscal headroom rebuilt businesses can now look forward with more certainty around the UK fiscal environment as they consider their investment plans including hiring.

The Autumn Budget brought a renewed push to back innovation but also introduced tougher tax and employment cost factors that will have an impact on future strategy for growth, recruitment and capitalisation.

Positives

• Stable & enhanced R&D support: The Budget reinforces long-term support for R&D, with maintained funding for public research and new frameworks to encourage private-sector investment.
• “First-customer” public procurement for AI and deep-tech: The government has committed to proactively purchasing AI and advanced-computer hardware from UK companies.
• Digital infrastructure & industrial strategy backing: The Budget renews commitment to digital infrastructure deployment and offers better structural support for tech clusters, innovation hubs and cross-sector adoption of digital technologies.
• Support for scale-ups and SMEs: The annual and lifetime limits for VCTs and EIS are increasing to £24million and for knowledge based companies the limit will increase to £40million.  At any one time more businesses will therefore be eligible for VCT and EIS which is a significant positive for early-stage and growth-phase tech businesses seeking capital.

• EMI scheme reforms allow scaleups with up to 500 employees and £120 million in assets to offer tax-advantaged share incentives. Industry leaders note this “will make it easier for companies to attract, retain and reward talent”, particularly critical for AI and digital asset firms where talent costs are elevated.

All of these factors support the UK commitment to making itself an attractive place for innovation, AI, deep tech, Fin Tech and scale-up activity, especially in sectors aligned with strategic national priorities.

Challenges

• Employment costs – Will continue to come under pressure as employees contend with the impact of frozen thresholds for the next 6 years, reduced incentives of saving into salary sacrifice schemes which and higher taxes on dividends and savings.  It is likely that companies will be expected to look to absorb significant elements of the additional costs.
• Shareholder value extraction – the changes to dividend taxation and reduction in the capital gains exemption for sale to Employee Ownership Trusts to 50% may impact how shareholders look to extract the valuation created in their business.
• Tax relief on VCTs is reducing by 10% to 20% from 6 April 2026.  EIS relief remains at 30%.