Autumn Budget 2025: Technology Sector Commentary

After a long-awaited Budget announcement, a lot of predicted big changes have not come to fruition. Whilst income tax thresholds are frozen, the rates for employment and self-employment income have not changed. However, dividend income tax at the basic and higher rates have been increased by two percentage points, meaning investors into tech businesses will face a higher tax bill where those businesses are profit making and able to distribute dividends.

Happily no big announcements were made relating to Capital Gains Tax or Inheritance Tax – but that is not to say these won’t happen in a future Labour Budget, so it is still worth considering your tax-planning now, particularly if you are hoping to exit in the short-term future.

CGT relief has been reduced from 100% to 50% on qualifying disposals of Employee Ownership Trusts, effective immediately. This has been introduced in attempts to promote employee-owned businesses, and prevent the wealthiest from obtaining the highest tax reliefs.

Costs that will hit tech businesses include an increase to the National Minimum Wage and National Living Wage, and as predicted, NICs on pensions contributed via salary sacrifice over £2,000. This means pension contributions over £2,000 will be treated like normal earnings and subject to both employer’s and employee’s NICs. Whilst the individual will take a hit on the employee’s NICs, the employer rate is 15% so where this incentive has been offered to staff this will further hit profit margins. Tech employers may wish to re-assess the package of staff benefits on offer.

In better news, eligibility limits for the EMI scheme will be increased, to allow scale-ups as well as start-ups to offer these tax-advantaged share options to key talent in their tech companies. For individuals, the holding period will be increased to 15 years and this will apply to existing EMI contracts.

The message from the Chancellor was “if you build here, Britain will back you”. To back up the message, both VCT and EIS limits are being increased. This will allow investors to provide much needed capital to tech companies beyond their start-up phase. In addition, there has been a call for evidence, seeking input from the scale-up and investor community on the impact of these schemes. The government appears to be committed to attracting investment into UK tech companies and we can only hope opportunities for investment increase in future.

Separately, the British Business Bank (BBB) will invest at least £5bn into growth-stage funds and scale-up companies. The BBB will also launch an initiative for pension funds, boosting investment capability, with a longer term intention that these investments can be used for UK science, technology and innovation.

The Cryptoasset Reporting Framework (CARF) already exists to ensure offshore jurisdictions report user data to HMRC. From 1 January 2026, UK Cryptoasset Service Providers will also be required to report on their UK tax resident customers under CARF, with first reports being sent to HMRC in 2027. HMRC have already started sending “nudge” letters to taxpayers where HMRC believes there to be an under-declaration of crypto related income or gains, but the CARF rules will provide HMRC with a much larger source of data and we expect to see taxpayers receive nudge letters relating to crypto in much larger numbers over the coming years.

A summary of responses to the consultation on taxation of DeFi involving lending and staking is expected to be published soon.