by Frank Spurway – Assistant Director, Investor Relations
The 2026 Budget was delivered by John Healey, the eighth Chancellor in ten years. For context, the eight before him spanned 37 years. Turnover on that scale does little for confidence, and after a period in which faith in the Treasury’s stewardship had worn steadily thin, the new Chancellor’s first task was to restore some calm. Appointed by Andy Burnham in July, Mr Healey arrived at Number 11 after two years as Defence Secretary. Few in Cabinet have a clearer view of what the country’s defence requires, and that will inevitably shape how public money is spent and how taxes are raised.
The brief, then, was consistency. At the start of October the 30-year gilt yield breached 6% for the first time since 1998; ten years ago it stood at 1.9%. The bond market now passes judgement on every move Mr Healey makes, and its verdict sets the price at which the Government borrows. Mr Healey acknowledged as much in the Commons, telling the House that in such conditions the course must be steered with discipline. Alongside this sat a second and no less pressing demand: to fund the Armed Forces properly as the world grows more fractured, and to honour the commitment to raise defence spending to 3% of GDP.
The wider backdrop is hardly forgiving. Conflict in the Middle East continues to push up global energy prices, and inflation with them. The need for growth, meanwhile, has not gone away. Successive Chancellors have fought that battle with limited success: over the past decade, UK GDP per person has grown by around 7%, against 19% in the US.
Calculus has backed UK entrepreneurs for more than 27 years, investing over £300 million along the way, so we were encouraged to see the Chancellor make a theme of supporting those who build businesses. The headline measure is a new relief for founders and early investors. From April 2027 it will apply a 10% rate of Capital Gains Tax to the first £10 million of lifetime gains. The Treasury is consulting on the detail until 30 November, and the detail will matter, but the intent is welcome. So too are a tripled trading allowance for new ventures and a new allowance to cover a year’s living costs for young founders. Set against this, Business Asset Disposal Relief has been halved, with the lifetime limit falling from £1 million to £500,000. The Chancellor says three in four claimants will be unaffected. For the rest, the relief is now worth at most £30,000 over a lifetime.
Given that consistency was the brief, it is fitting that the headline reliefs for Venture Capital Trusts, the Enterprise Investment Scheme and Business Relief are unchanged. Recent years have brought a cut to VCT income tax relief, a cap on Business Relief and shifting limits on what qualifying companies can raise. This time, rather than redraw the map, the Chancellor has chosen to fix some of the potholes.
Following its call for evidence on tax support for entrepreneurs, the Government has turned its attention to the small print, and the small print has needed it. From April 2027, an investor who strays over an EIS limit will no longer lose all of their relief for the trouble. SEIS, EIS and VCT money will be able to go into a company on the same day, rather than being staggered for the sake of procedure. In a funding round, one investor’s late payment will no longer put everyone else’s relief at risk. Additionally if VCT relief has to be clawed back, it will be at the rate the investor actually received when the shares were issued, not the new relief.
None of this will make the front pages. But anyone who has watched a perfectly sound investment lose its relief over an administrative slip will know these changes are overdue. They don’t make the schemes more generous. They do make them fairer and simpler to use, for companies and investors alike.
The Government has also committed to raising awareness of the Capital Gains Tax deferral relief available when gains are reinvested in EIS shares. It is a valuable relief that remains too little understood. On VCTs, the Government acknowledges the concerns raised about the reduced rate of income tax relief and will keep the schemes under review. That is not a commitment, but nor is it a closed door.
Taken together, the playing field is much as it was yesterday, with fewer potholes. Given steady rules, UK small businesses have shown time and again that innovation and sheer determination will do the rest.