Budget 2026: The devil is in the detail – what it means for your business

With all the speculation ahead of Budget 2026, including potential increases in alcohol duty, we thought it only right to honour an old Budget tradition and watch the Chancellor's speech from our local pub.

After all, Chancellors have traditionally been allowed a tipple at the despatch box. Why shouldn't those watching?

In the event, there were few surprises. Much had already been briefed in advance. Thankfully, Capital Gains Tax (“CGT”) rates escaped another increase.

But look beyond the headlines and a clear picture emerges: the UK is becoming an increasingly attractive place to start and grow a business. Selling one, however, could become more expensive.

Starting up: Making life easier for entrepreneurs

The UK is already an attractive place to start a business, particularly compared with some of our European neighbours. This Budget offers entrepreneurs a further boost.

From April 2027, the Trading Allowance will triple from £1,000 to £3,000, whilst a new Young Entrepreneurs Allowance pilot will support first-time young founders with living costs.

Raising finance should also get easier. The government plans improvements to the Enterprise Investment Scheme (“EIS”), Seed Enterprise Investment Scheme (“SEIS”) and Venture Capital Trusts (“VCTs”), which encourage investment in smaller businesses through tax reliefs.

Crucially, it also wants to improve HMRC's Advance Assurance process, giving investors greater certainty that a business qualifies for these reliefs before committing funds. For founders raising capital, fewer delays and less uncertainty could make a real difference.

Scaling up: More money, better incentives

Starting a business is one thing. Growing it is another.

The Budget gives the British Business Bank an extra £5 billion in financial capacity, including £1.4 billion for investment funds and £450 million for a new venture debt product. There's also £140 million more for the Sovereign AI Unit, backing promising UK technology businesses.

For companies investing in research and development (“R&D”), simpler claims from 2027 should mean less paperwork and more time spent innovating.

But some of the biggest opportunities lie in employee share schemes.

Enterprise Management Incentives (“EMI”) allow businesses to reward key employees with shares on tax-advantaged terms. For growing companies competing with larger employers for talent, that can be a powerful tool.

EMI has already been expanded, allowing larger businesses to qualify. Companies can now have gross assets of up to £120 million (previously £30 million) and up to 500 employees (previously 250) whilst remaining eligible for the scheme.

From April 2027, the maximum value of options an employee can hold under the Company Share Option Plan (“CSOP”), to be renamed EMI2, will double from £60,000 to £120,000. Employees will also have longer to exercise EMI options following certain events (180 days rather than 90), with the administration simplified by replacing separate grant notifications with annual reporting.

We've recently advised on the sale of a business where several employees held shares acquired through EMI. What started as a way of retaining and rewarding talented people meant they shared in the proceeds when the business was sold.

That's the attraction: employees don't just help build the business. They get to share in its value.

But there's a catch when those shares are sold.

Selling up: The sting in the tail

The headline announcement was a new 10% Founders' Relief.

From April 2027, qualifying founders could pay just 10% CGT on up to £10 million of gains. On a £10 million gain, that's a potential £1.4 million saving compared with the standard 24% rate.

Sounds generous. But look closer.

Under the government's proposals, currently subject to consultation, founders would need to have owned at least 25% of their company from the outset, held their shares for five years and been UK resident for five continuous tax years.

Their business would also need turnover of at least £10 million, 15 employees and substantial UK operations, alongside exceptional growth or significant R&D investment.

Many successful owner-managed businesses may never qualify. Neither would managers who acquired shares later, including through management buyouts.

And whilst offering a new relief to a relatively narrow group of founders, the Chancellor cut back an existing relief available to many more shareholders.

Business Asset Disposal Relief (“BADR”), formerly Entrepreneurs' Relief, once offered a 10% CGT rate on £10 million of lifetime gains. That limit fell to £1 million in 2020, with the tax rate subsequently rising to 18%. From 6 April 2027, the limit will halve again to £500,000.

That affects founders, qualifying directors and employee shareholders alike, including those who acquired shares through EMI.

Take someone selling shares at a qualifying gain of £1 million. With their full BADR allowance available, their CGT bill would rise from £180,000 today to £210,000 from April 2027.

Is an extra £30,000 enough to trigger a business sale? Probably not.

But if you're already planning to sell, completing before 6 April 2027 could save enough tax to cover a substantial part of the professional fees.

And selling isn't the only way to plan ahead.

We recently helped a client establish a discretionary trust to fund his children's education, using shares gifted from his business. The shares qualified for Business Property Relief, meaning no IHT on the gift, and the gain qualified for BADR at 18%.

The point? There are opportunities to use today's reliefs before they become less generous. You don't necessarily need to sell your business to take advantage.

Looking ahead: Changes to restructurings and international tax

More changes are coming, and some could reshape how business owners prepare for an exit.

The government plans to tighten the rules around extracting company profits at capital rather than income tax rates. That could affect share buybacks, capital reductions and other shareholder transactions.

There could also be good news for genuine business restructurings. The government wants to make corporate demergers easier, including allowing relief in some circumstances where a business is split up ahead of a third-party sale.

The detail is still being developed. Draft legislation is expected in 2027, with implementation planned for April 2028.

For those with US business interests, another significant development concerns US limited liability companies (“LLCs”).

LLCs can create tax headaches because the two countries treat them differently. In the US, an LLC is commonly treated as transparent for tax purposes, much like a partnership, with its profits taxed directly on its owners as they arise. The default UK position, however, is to treat an LLC like a company, with tax potentially arising when profits are distributed.

This mismatch can mean US and UK tax being charged at different times, making it difficult to obtain relief for tax already paid in the other country. This can result in significant tax leakage.

Following a public consultation earlier this year, the government has now announced plans to introduce a new mechanism allowing UK taxpayers to obtain relief for US tax paid on income arising through LLCs.

The detail is still being worked through, with legislation not expected until Finance Bill 2027–28. The changes are also not expected to alter how LLCs are classified for UK tax purposes, but they could finally address a longstanding double taxation problem for individuals with US business interests.

What should business owners take away?

The UK remains an attractive place to start and grow a business. More funding, better employee incentives and support for innovation should strengthen that position.

Selling is a different story. Founders' Relief could deliver significant savings, but only for those who meet its demanding conditions. BADR is becoming less generous, although the standard 24% CGT rate remains competitive internationally.

At Ostberg Sinclair & Co, we advise entrepreneurs and owner-managed businesses from establishment and growth through to succession and exit.

Whether you're raising investment, rewarding employees, planning for your family's future or preparing for a sale, we can help you understand the changes, navigate the complex tax landscape and achieve the best outcome for you and your business.