Welcome support for life sciences, but no step-change in R&D relief – Autumn Budget 2026

The Budget contained several positive measures for UK life sciences businesses. It reduced some of the administration around R&D tax relief, improved share incentives and access to growth capital.

However, critically it did not increase R&D rates which has been requested by the sector.

R&D tax relief

For R&D tax relief claims made on or after 1 April 2027, the requirement to submit an advanced Claim Notification Form will be removed. The Additional Information Form will then be simplified from Autumn 2027. The expectation being that removing the notification requirement will increase claims by first-time claimants. Missing the notification deadline can currently prevent an otherwise valid claim, with a direct impact on cashflow.

The change is administrative rather than an increase in tax support. The Budget did not increase the merged R&D expenditure credit or Enhanced R&D Intensive Support rates,

Share incentives

The Company Share Option Plan will be renamed EMI2, and from April 2027 the individual option limit will double from £60,000 to £120,000 and the maximum exercise period will increase from 10 to 15 years. Employees will also be able to use the full EMI and EMI2 limits independently.

The existing EMI scheme will also become more flexible. The exercise window following a disqualifying event will increase from 90 to 180 days. Separate notification of new EMI option grants will be removed for options granted from 6 April 2027, with grants instead reported on the annual return.

EMI should remain the starting point for qualifying companies, with EMI2 providing an alternative for businesses that have outgrown EMI or cannot meet its conditions.

Click here to learn more about EMI2

Founders’ Relief

Founders’ Relief will provide a 10% CGT rate on up to £10 million of qualifying lifetime gains from 6 April 2027. The proposals include a five-year holding period, five years’ continuous UK residence and a requirement for the founder to have held at least 25% of the company when its trade began.

The company must also have turnover of at least £10 million, 15 qualifying full-time employees and satisfy at least two growth or innovation tests. As many life sciences companies exit while pre-revenue, the relief may have limited application in the sector. The final legislation will need to be reviewed.

Click here to learn more about Founders’ Relief

Capital allowances changes

The first-year allowance for qualifying main-rate plant and machinery expenditure will increase from 40% to 50% from 1 January 2027. From April 2027, the main writing-down allowance will fall from 14% to 12%.

The change may accelerate relief on laboratory and manufacturing equipment where full expensing or the Annual Investment Allowance is unavailable, although the lower writing-down allowance will delay relief on residual pools. Loss-making businesses may see limited immediate cash benefit.

Targeted sector investment

The Budget announced three public-private life sciences investments totalling over £1 billion, backed by almost £70 million in government grants.

The British Business Bank gains £5 billion in financial capacity, including £1.4 billion for equity funds and £450 million for direct venture debt for innovative businesses. Funding is not ring-fenced for life sciences, and benefits depend on deployment and eligibility.PDF type

Talent measures include an expanded High Potential Individual visa route, a two-year Graduate visa for eligible university graduates and revised visa salary requirements from spring 2027. Alongside share scheme reforms, these should help scaling businesses attract specialist talent.

Kreston Reeves sector view

The measures are welcome but incremental. They reduce administrative barriers and improve access to incentives and finance, but R&D rates remain unchanged and Founders’ Relief may have limited application for most life science companies.

If the Budget has raised any questions for you, book your place on our question time webinar this Friday at 9:30am. Alternatively, 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.