Autumn Budget 2025: News for Businesses EMI and VCTs

Some of the headline news for businesses from the 2025 Budget…

Salary sacrifice for pension contributions

From 6 April 2029, employers’ and employees’ National Insurance Contributions will be payable on pension contributions above £2,000 per employee under salary sacrifice arrangements.

Rate of charge on loans to participators

In line with the increase in dividend rates, the rate of charge under the loans to participator rules will increase to 35.75% from 31 March 2026.

Enterprise Management Incentives (EMI) schemes

The use of EMI options to incentivise key employees is very popular and the Chancellor announced that the scheme would be expanded so that much larger companies will be able to benefit.

From 6 April 2026, the following qualifying conditions will increase as follows:

• The gross asset test for the relevant company/group will quadruple to £120 million.
• The employee limit for the relevant company/group will double to 500.
• The company share option limit will double to £6 million.

Currently, the maximum length of time that options can be held is 10 years. However, this is set to increase to 15 years from 6 April 2026 for both new and existing options (subject to confirmation).

Enterprise Investment Schemes and Venture Capital Trusts

With effect from 6 April 2026 the key qualifying conditions in respect of the company looking to raise funds via Enterprise Investment Schemes (EIS) or Venture Capital Trusts (VCTs) will double to the following:

• Gross assets before and after the issue of the shares or securities must not exceed £30 million and £35 million, respectively.
• The Annual Investment Limit that a company can raise will be £10 million (£20 million for ‘knowledge-intensive companies’).
• The lifetime investment limit to £24 million (£40million for ‘knowledge-intensive companies’).

However, from 6 April 2026, the rate of income tax relief for the investor in VCTs will reduce from 30% to 20%. The rate of income tax relief for EIS investments will remain at 30%.

Employee Ownership Trust (EOTs)

For shares disposals made on or after 26 November 2025 to an EOT, the following tax treatment will apply:

• 50% of the gain realised by the vendor will be chargeable to Capital Gains Tax (CGT).
• This gain will not be eligible for Business Asset Disposal Relief, even if the qualifying conditions for the relief are met.
• The 50% of the gain that is not taxable on the vendor will be deducted from the trustees’ base cost for the shares for CGT purposes, such that on a future disposal of the shares the gain will effectively be taxable on the trustees.

Anti-avoidance provisions for Share for Share Exchanges and Reconstructions

There are provisions within the tax legislation that are designed to avoid a Capital Gains Tax charge arising in certain circumstances where there is an exchange of shares or securities as part of a reorganisation. This is an important relief as often no cash proceeds are received and therefore any tax liability that arises would have be funded from other sources.

Where shares or securities are issued on or after 26 November 2025 as part of a scheme of reconstruction, amended anti-avoidance rules will deny the application of this valuable relief to taxpayers who have entered into arrangements where the main purpose, or one of the main purposes, of those arrangements was to secure them a tax advantage. The rules will be applied on a taxpayer-by-taxpayer basis, rather than the transaction as a whole.

To discuss any of the key news for businesses announced in the Autumn Budget 2025, please don’t hesitate to get in touch with me, or with your usual Mercer & Hole contact.