The Government has made it clear that science, technology and innovation are central to its plans for growing the UK economy. And following the Autumn Budget, there are some announcements that should be welcomed by businesses operating in this sector. But did the Chancellor go far enough?
We’ve got changes to R&D tax relief administration, a new tax relief for successful founders, improvements to employee share schemes and additional funding for the British Business Bank and National Wealth Fund.
On the face of it, that’s all encouraging. But as somebody who has spent many years working with science and technology businesses, I think it’s important to look beyond the announcements and consider what they will actually mean for the companies developing new technologies, raising investment and trying to grow.
Some of these changes could make a genuine difference. Others look quite generous until you start examining the detail.
R&D tax relief: A welcome reduction in administration
One announcement I was particularly pleased to see was the decision to abolish the R&D Claim Notification Form from 1 April 2027.
Under the current rules, certain companies, particularly those claiming R&D tax relief for the first time or returning to the scheme after a period without claims, have to notify HMRC of their intention to claim within a prescribed timeframe.
Missing that notification deadline can mean losing the opportunity to claim relief, even where the business has undertaken genuine qualifying R&D.
From 1 April 2027, that separate notification requirement will disappear for claims made on or after that date. The Government has also announced plans to simplify the additional Information Form from Autumn 2027.
I think that’s a sensible move.
Over the last three or four years, we’ve seen significant changes to the R&D tax relief system. Some were absolutely necessary to tackle poor claims and advisers who should never have been operating in the market. But the changes also created additional administration for science and technology companies. Reducing unnecessary administration should begin to make the process a little easier.
I’ve said previously that what the R&D tax relief system really needs now is a period of stability. Genuine companies are still claiming successfully, and the market has started to settle down after several difficult years.
Removing unnecessary administration whilst maintaining proper scrutiny seems a sensible way forward.
Founders’ Relief: An attractive headline, but will businesses qualify?
The introduction of a new Capital Gains Tax Founders’ Relief is potentially one of the most significant announcements for science and technology entrepreneurs.
From 6 April 2027, qualifying founders and significant early investors in high growth, innovative UK companies could benefit from a reduced Capital Gains Tax rate of 10% on up to £10 million of lifetime gains.
For somebody who has spent years building a successful technology business, that could represent a very substantial tax saving when they eventually sell their shares.
And I can understand the thinking behind it. Founders of science and technology businesses often take considerable personal financial risks. They may spend years developing a product, raising investment and building a business, often before seeing any meaningful financial return.
If the Government wants to encourage those businesses to start, grow and remain in the UK, rewarding successful entrepreneurship makes sense.
But the important question is how many founders will actually qualify?
The detailed rules are still subject to consultation, and the eligibility conditions currently being proposed are:
- A founder having held at least 25% of the company’s ordinary share capital when the business began trading or preparing to trade.
- A minimum shareholding period of five tax years and a five year UK residence requirement.
- The company having turnover of at least £10 million and at least 15 qualifying full time employees before the disposal.
- Meeting at least two of three additional tests involving substantial growth in turnover, growth in employee numbers or qualifying R&D expenditure.
The R&D test includes a requirement for at least £1.5 million of qualifying R&D expenditure to have been claimed within the specified period.
This is where I think the distinction between different types of businesses becomes particularly important.
A successful software company might achieve substantial revenue and employee growth relatively quickly. But a medical technology or life sciences business could spend many years developing something of enormous potential value without reaching £10 million in turnover.
That doesn’t make it any less innovative or successful.
So, whilst the proposed relief is attractive, it may not be accessible to many of the businesses the Government says it wants to encourage.
There’s another consideration too. The Budget also reduces the lifetime limit for Business Asset Disposal Relief from £1 million to £500,000 from 6 April 2027. That means founders who don’t qualify for the new relief could actually find themselves in a less favourable position when they sell their business.
The consultation on Founders’ Relief runs until 30 November 2026, and I think the final conditions will be worth watching closely.
For founders considering a future sale, the message is to understand how the proposed rules might apply to your business rather than assume the 10% tax rate will automatically be available.
EMI and EMI2: Helping technology businesses compete for talent
Another challenge for growing science and technology businesses is attracting and retaining the right people.
We work with companies that need highly specialised scientists, software developers, engineers and technical experts. These are people who can be difficult to recruit, particularly when a relatively small business is competing against much larger organisations.
And for a company that is still developing its technology or working towards profitability, offering the same salary packages as an established company simply isn’t always possible.
That’s where employee share option schemes can be particularly valuable.
Enterprise Management Incentives (EMI) allow qualifying businesses to give employees the opportunity to acquire shares in the company, often with significant tax advantages.
Employees can then benefit financially if the company grows in value.
The Budget announced further improvements to these arrangements, including the introduction of EMI2.
Despite the name, EMI2 isn’t an entirely new scheme. It is the existing Company Share Option Plan (CSOP), now renamed and enhanced.
From 6 April 2027:
- The maximum value of EMI2 share options per employee will double from £60,000 to £120,000.
- EMI2 options will be able to operate independently of the existing EMI individual option limit.
- The maximum period for exercising EMI2 options will increase from 10 to 15 years.
There are also improvements to EMI itself.
- The period employees have to exercise qualifying EMI options following certain disqualifying events will increase from 90 to 180 days.
- For EMI options granted from 6 April 2027, companies will also be able to report grants through their annual EMI return rather than submitting a separate notification for each grant.
These are useful changes, particularly for technology businesses that have grown beyond the qualifying limits for EMI. They may also benefit companies developing technologies with much longer commercial development timescales.
A business developing new medical treatments, for example, may take years to reach the point where its technology becomes commercially successful. Having greater flexibility around share options can help it retain the people who are critical to getting there.
Of course, share schemes need to be structured properly and won’t be appropriate for every business or employee. But I think anything that helps growing UK science and technology companies compete for talent, without putting additional pressure on cash flow, is worth welcoming.
£20.4 billion more financial capacity: Will it help technology businesses seeking investment?
The Budget also announced significant additional financial capacity for two of the UK’s major public investment institutions.
The British Business Bank will receive an additional £5 billion of financial capacity, whilst the National Wealth Fund will receive £15.4 billion.
These are substantial commitments, and access to finance is an area where I think the UK science and technology sector still faces some real challenges.
I’ve spoken before about the difficulties early stage technology businesses can face when raising investment. A company might successfully raise £300,000 or £500,000, but that money may only finance another year or two of research and development. Before long, the founders are preparing for their next funding round.
Some businesses go through several rounds of investment before reaching commercial profitability. And whilst the funding environment has started to improve, we’ve also seen UK technology businesses looking overseas, particularly to America, to access the capital they need.
So, will these Budget announcements help?
The British Business Bank
The additional £5 billion will increase the British Business Bank’s overall financial capacity to £30.6 billion.
The Government has confirmed that this includes £1.4 billion in additional commitments to commercial equity investment funds and £450 million for a new venture debt product aimed at innovative businesses.
For science and technology companies, particularly those moving from initial development into commercial growth, that could open up more funding opportunities. Venture debt could be particularly interesting for companies that want to raise additional finance without giving away further equity and diluting existing shareholders.
But debt still needs to be repaid. For a business that is several years away from generating meaningful revenue, it may not be an appropriate alternative to equity investment.
The National Wealth Fund
The additional £15.4 billion for the National Wealth Fund includes £2 billion for a new Energy Wealth Fund.
The wider investment is intended to support businesses and strategic projects across the UK, potentially benefiting sectors including clean technology, energy innovation, advanced manufacturing and other technologies linked to major infrastructure and industrial development.
That could be important for companies developing technologies that require significant capital before they can be brought to market. However, these announcements represent additional investment and lending capacity, not £20.4 billion in grants available for individual businesses to apply for.
Will the funding reach the businesses that need it?
We have some genuinely world class science and technology being developed in the UK. We have excellent universities, talented researchers and entrepreneurs who are developing products that could make a real difference.
What we need is a funding environment that allows those businesses to turn their ideas into commercial success here in the UK, rather than having to look elsewhere for the investment they need.
The additional funding is encouraging, but the way it is delivered will be just as important as the amounts announced.
A positive Budget for science and technology, but the detail matters
Overall, I think there are reasons to be positive about the announcements in this Budget.
Simplifying R&D claims administration is sensible. Improvements to employee share schemes could help businesses retain talented people. Additional investment capacity is welcome, particularly after some difficult years for fundraising.
And the proposed Founders’ Relief sends a positive message about rewarding people who build successful innovative businesses, even if the qualifying conditions look rather restrictive at this stage.
But I wouldn’t describe this as a major transformation of the funding and tax environment for UK science and technology businesses. There are still questions about access to finance, the cost of developing new technologies and whether the UK can compete internationally for investment and specialist talent.
The Government has clearly recognised the importance of this sector. The next challenge is making sure the support being announced works for the businesses actually developing the technology.
For science and technology business owners, my advice would be to look at how these announcements affect your own plans.
If you’re investing in R&D, review how and when you make your claims. If you’re growing your team, consider whether share options could help. And if you’re raising finance or thinking about an eventual exit, make sure you understand the implications for your funding strategy, ownership structure and tax position.
These decisions need to be considered as part of the wider financial journey of the business, not in isolation.
Talk to Edwards about your science and technology business
At Edwards, we’ve spent many years working with science and technology businesses, from early stage companies undertaking complex research and development through to established businesses raising investment and planning for future growth.
We understand that these businesses often have very different financial needs from conventional tradi90.ng companies.
Whether you need advice on R&D tax relief, employee share schemes, fundraising, business growth or future exit planning, our specialist team can help you understand what the latest changes mean for your business.
Contact Edwards today to discuss your plans and how we can support the next stage of your business’s development.