How is the technology sector impacted by the Budget? – Autumn Budget 2025

The technology sector has been identified by the Government and its Modern Industrial Strategy as key for helping to achieve growth for the UK’s economy, so the Budget was eagerly awaited to see what incentives and support would be announced.

The results could be described as a mixed bag with promised Government spending and enhancements to schemes to attract talent and investment, but also tax rises to factor in.

Investment in AI, computer infrastructure and skills

The Chancellor reaffirmed plans to back high-growth tech sectors, including those centred around AI, semiconductors and advanced computing through providing Government investment. The hope is that this public investment will also attract additional private investment.

The Government has recognised the need for investment in training for the country’s workforce to develop the digital skills for the future through a £187million package.

Expansion of the Enterprise Management Incentives (EMI) scheme

The EMI scheme, widely used by tech firms to attract and retain talent via share-based compensation, has been expanded. From 6 April 2026, the limits on EMI contracts granted will change as follows:

• The maximum value of options will be increased from £3million to £6million; 

• The value in the gross assets test will be increased from £30million to £120 million; 

• The number of employees test will be increased from 250 employees to 500 employees; 

• The maximum exercise period will be increased from 10 years to 15 years. 

Changes to the Enterprise Investment Scheme (EIS) and Venture Capital Trusts (VCTs)

The limits for the Enterprise Investment Scheme (EIS) and the Venture Capital Trust (VCT) framework will be increased from 6 April 2026 in respect of:

• The gross asset requirement; 

• The annual investment that companies can raise; 

• The lifetime investment that companies can raise.

At the same time, the rate of the tax relief that an individual will receive through investing in VCTs will reduce from 30% to 20%.

What about Research and Development (R&D) tax credits?

Following significant changes to the R&D tax credits regime in recent years, the tech sector will be relieved that there was relatively little announced in this area to enable some stability to be established. There was a clarification regarding a company receiving payment for transferring its Research and Development Expenditure Credit (RDEC) claim to another group company.  Following the conclusion of an HMRC consultation, there is a forewarning that some sectors will need to obtain advanced assurance from HMRC before they can make a claim for R&D tax credits.

Capital allowances

A new 40% First Year Allowance is being introduced on qualifying capital expenditure incurred from 1 January 2026 to go alongside the retained annual investment allowance and full expensing regime.

However, the rate of writing down allowance is being reduced in April 2026 from 18% to 14%.

Electric vehicles

From 2028, electric cars will be taxed at 3p per mile and hybrids at 1.5p per mile.

Tax on dividends

From April 2026, the tax rates on dividends will increase by 2%.

Salary sacrifice for pension contributions

From April 2029, there will be a £2,000 limit on employees paying pension contributions under salary sacrifice arrangement. This will lead to additional national insurance being paid by the employee and employer on contributions above £2,000 per year.

Conclusion

Whilst the increase in Government investment in the technology sector is to be welcomed along with the expansion of schemes designed to attract talent and investment, there will be concern about the impact of the tax increases that have been announced.

If you would like to discuss any of the announcements in more detail, please contact us.

If the Budget has raised any questions for you, or if you would like any further information or guidance on this topic, get in touch with your usual Kreston Reeves contact or contact us here.