The government wants the UK to be a destination for talent, founders and ambitious businesses. Budget 2026 backs that ambition with changes spanning tax, employee incentives and immigration. We pick out some of the key announcements and consider whether they strengthen the UK’s appeal to internationally mobile people and scaling businesses.
Encouraging entrepreneurs to the UK
Founders’ Relief
The big-ticket announcement was a “world-leading tax offer for founders and their companies”. As explored in our recent article: Founders’ Relief: out of reach?, Founders’ Relief offers a potentially valuable 10% Capital Gains Tax (CGT) rate on qualifying gains. However, demanding conditions around founder ownership, UK residence, company size and growth will significantly narrow its reach, raising questions over whether it will deliver its policy objective of encouraging founders to start and scale businesses in the UK. A five-year personal tax residence test requires individual founders to have made a significant medium-term commitment to the UK before disposal.
The technical consultation on Founders’ Relief closes on 30 November 2026, with relief to apply to disposals on or after 6 April 2027.
This new offering must be balanced with the announced reduction in Business Asset Disposal Relief (BADR) (formerly Entrepreneurs’ Relief), from £1m to £500,000 of qualifying gains, applicable for disposals made on or after 6 April 2027. BADR has been whittled away by consecutive governments, firstly by slashing the lifetime limit to £1m of gains in 2020, followed by an increase in the CGT rate for 2025/26 and 2026/27 tax years bringing it to its current 18%. Given the stringent conditions for accessing the new Founders’ Relief, this further reduction in BADR is likely to leave most UK-taxpaying entrepreneurs paying more UK tax when they come to exit their investment. As with any change in domestic tax regime, it will be interesting to see whether this has any longer-term impact on entrepreneur global mobility.
Immigration considerations
Despite the government’s aim to make the UK attractive to overseas nationals coming to the UK to set up businesses there, there are surprisingly few viable immigration routes available to them. For example, the UK does not have an investor visa option.
The Innovator Founder route is a potential option but requires entrepreneurs to demonstrate an innovative, viable and scalable business and to obtain an endorsement letter from an approved endorsing body. In reality, few applicants meet the strict criteria.
Another route, the Global Talent visa, is intended to attract talented and promising individuals in specific sectors, including the sciences, medicine, research, engineering, arts, culture and digital technology. Again, an endorsement from the relevant endorsing body is required and the threshold for eligibility is high.
A further option for young entrepreneurs who have graduated from a top overseas university in the last five years is the High Potential Individual (HPI) route. The government announced as part of the Budget that graduates from the top 150 overseas universities will potentially be eligible to apply under this route in the future (whereas at the moment this is limited to those who have graduated from the top 80 overseas universities). There is also an annual cap under this route.
Otherwise, the Budget has done little to address this and other options are limited to sponsorship or categories such as the Ancestry route, for those from a Commonwealth country with a British-born grandparent.
These limited options mean that entrepreneurs are in practice often unable to come to the UK to set up their business.
Bringing international talent to the UK
Sponsorship – salary thresholds
In most cases, employers have to sponsor individuals if they wish to employ overseas nationals. This is expensive, with fees running into thousands of pounds, and sponsors also have to comply with onerous reporting and record keeping requirements.
Further, changes in the last few years mean that the minimum salary thresholds for sponsorship are currently calculated on the median salary for the role, using Office for National Statistics data. Employers will be relieved to learn that the government is intending in 2027 to align minimum salary thresholds to the 25th percentile (rather than the median). Minimum salaries will also be updated to take into account the latest salary data but it is likely that in many cases the minimum salary requirements will reduce in 2027. This will be particularly beneficial to smaller employers and those based outside of London, where salaries are often lower.
Employer-paid sponsorship fees – new Income Tax exemption
Previously, employers could be required to bear mandatory sponsorship costs while their payment could nevertheless trigger an employment tax charge. Budget 2026 removes that anomaly by exempting employer-paid Immigration Skills Charges and Certificate of Sponsorship fees from Income Tax and Class 1A NIC.
However, employers should note that if they pay for other immigration costs (such as application fees and the Immigration Health Surcharge), these may be taxable benefits.
Incentivising growth in the UK
Employee equity
Equity rewards have long been used as a tool to attract and retain talent, thereby incentivising business growth. The most efficient schemes for UK taxpayers are the Enterprise Management Incentive (EMI) scheme and Company Share Option Plans (CSOP). EMI is generally focused at smaller, high-growth businesses, but the April 2026 expansion of qualifying conditions widens its accessibility significantly. Our article: Outgrew EMI? The 2026 reforms could put it back on the table provides greater detail on those changes. CSOP provides less generous tax benefits, but was typically used by companies that had either outgrown EMI, or didn’t otherwise meet the stricter qualifying conditions. The Budget 2026 makes some changes to EMI and CSOP from 6 April 2027:
- CSOP is rebranded to “EMI2” – positioning CSOP as complementary to EMI.
- The individual EMI2 shares limit will double from £60,000 to £120,000.
- EMI2 options will not count towards individual EMI limits.
- Increase of the maximum period for exercising EMI2 options from 10 to 15 years (in line with recent April 2026 EMI changes).
- Employee Ownership Trusts (EOT) exception in the EMI rules is extended to companies with arrangements in place to become controlled by an EOT.
- Increase of the exercise window for EMI options following disqualifying events from 90 days to 180 days.
- Requirement to separately notify HMRC of a grant of EMI options will be removed, reporting will be done through existing annual EMI return.
These schemes provide companies with a valuable means of incentivising UK-taxpaying individuals of growing businesses.
Equity investment in UK businesses
Attracting tax efficient investment is a prominent concern for early-stage scaling businesses. The Budget also included relaxing the rules for the Seed Enterprise Investment Scheme (SEIS), Enterprise Investment Scheme (EIS) and Venture Capital Trusts (VCT). The changes will ensure that exceeding an EIS investment limit does not automatically result in all tax relief being lost, allowing relief to remain available on the part of the investment that falls within the scheme’s limits. The Advanced Assurance service is also due to be improved after stakeholder engagement.
They will also:
- Allow SEIS and EIS or VCT investment to take place on the same day.
- Prevent late payment by one or more investors from affecting the tax relief available to other investors.
- Align the SEIS rules on interest charged when relief is withdrawn or reduced with the equivalent EIS rules.
- Amend the VCT rules to ensure any withdrawal of Income Tax relief is calculated using the rate that applied when the shares were issued.
Cross-border investment
International investors
Double taxation has historically discouraged investment in certain foreign entities, sometimes resulting in effective tax rates exceeding 75%. This can arise on international M&A transactions where UK individuals are required to roll over or reinvest equity into a non-UK entity.
Following consultation, the government proposes a domestic credit-based relief, with distributions subject to UK Income Tax at the applicable dividend rate. The regime will cover specified foreign entities treated as opaque for UK tax purposes, including US LLCs and S-Corps, Jersey LLCs and French SCIs. Legislation is expected in Finance Bill 2027-28.
