Tax Support for Entrepreneurs:
What might the future hold?

The call for evidence was published alongside a number of important announcements at Budget 2025 (which will be implemented subject to the passing of Finance Bill 2025-26). These included increases to certain limits for EMI, EIS and VCT from 6 April 2026. In addition, the period within which EMI options can be exercised with the benefit of tax relief will be extended from 10 to 15 years for most employees.

These changes are welcome, but the Treasury acknowledges there remain opportunities for further reforms. However, this might also include a ‘rebalancing’ of existing incentives/reliefs. In this regard, from 6 April 2026:

• The rate of income tax relief for VCT will reduce (from 30 percent to 20 percent); and
• The BADR CGT tax rate will increase from 14 percent to 18 percent. 

What did we say in our submissions to HM Treasury?

The points we made included specific, targeted reforms across EMI, EIS, and VCT, such as:

• The introduction of transitional arrangements where one or more of the relevant limits has been reached, to smooth out current cliff-edges;
• The removal or simplification of the ‘independence requirements’ so that a company is not prevented from qualifying merely due to the way investors have structured their investments; and
• Conducting a review of the ‘excluded activities’ which may prevent a company’s trade from qualifying, to ensure they remain appropriate in the UK’s modern economy, and particularly with regard to the Government’s Modern Industrial Strategy, published in 2025.

In our view, adopting these (and other) targeted reforms could not only provide greater access to these support programmes for companies that cannot currently qualify (in particular, some private-equity backed companies), but may also have the added advantage of tipping the balance in favour of use by companies which can currently qualify but previously decided against it (e.g. due to the perceived complexity of complying with the qualifying requirements).

More broadly, based on our conversations with entrepreneurs and other stakeholders we highlighted in our response the importance of:

• An overarching and coherent strategy regarding the interaction of all relevant tax incentives/reliefs to support the Government’s policy aims; and
• The predictability and stability of tax policies to promote longer-term decision making and investment (e.g. some companies we spoke to said that the sudden and repeated erosions of reliefs such as BADR has increased uncertainty and impended longer-term decision making).

Calls for evidence are typically used by the Government to gain the views and perspectives of taxpayers and their advisers on key tax policy developments and a number of suggestions put forward by respondents to a previous Call for Evidence in relation to EMI have been implemented and/or were announced at Budget 2025, as referred to above. 

The latest formal call for evidence has now closed, and the Treasury is considering the written responses, together with discussions it has had during the response period. However, dialogue between the Treasury and interested parties is expected to continue over the coming months. As a result, we anticipate that there will be further opportunities to put forward views, particularly once there has been an opportunity to assess the practical impact of the changes announced at Budget 2025 outlined above.

With the Government’s desire to have only one major fiscal event a year (and now that the Spring Forecast has taken place) our current expectation is that the Treasury’s formal response to the call for evidence will be published as part of any Autumn Budget 2026 announcements. To the extent that the Treasury proposes policy changes, these would likely be subject to further consultation to seek views on how those changes might best be implemented.

We advise on EMI, EIS, VCT and BADR, as well as a wider range of tax incentives and reliefs relevant to entrepreneurial business and private capital. We can help guide you through all aspects of the existing rules as well as in relation to implementation and ongoing compliance.

Please contact the authors or your usual KPMG contact if you would like to discuss this further and/or what the issues addressed in the call for evidence might mean for you in the future.

For further information please contact:

• Chris Barnes
• Hannah Barraclough