The Budget’s big bet: Backing start-ups while leaving established businesses to take the strain

By doubling Enterprise Management Incentive share limits to £6 million and quadrupling gross asset thresholds to £120 million, the Government are backing high-growth businesses with meaningful support.

These changes are undeniably substantial. Expanding EMI eligibility to companies with up to 500 employees and lengthening option periods to 15 years addresses real constraints that limited scale-ups at critical stages.

Similarly, doubling EIS and VCT investment limits recognises that yesterday's thresholds cannot support tomorrow's champions. For advisers working with venture-backed businesses, these reforms remove ceilings that forced promising companies to compromise their growth ambitions or look abroad for more favourable conditions.

Yet tax incentives alone do not build thriving businesses. High-growth firms still struggle with skills shortages, regulatory complexity and the notorious funding gap between early-stage capital and sustained profitability.

It is also important to recognise the pressures on businesses outside these schemes. Established companies face a perfect storm: increased employer National Insurance Contributions through both higher rates and lower thresholds, frozen income tax bands creating fiscal drag and rising National Minimum Wage costs.

These are not marginal adjustments. For mid-sized companies operating on competitive margins, the cumulative impact represents a significant hit to their ability to invest and grow.

The government's implicit wager is that supporting high-risk, high-potential ventures will generate outsized returns in jobs, innovation and future tax revenue.

There is economic logic here. The UK has historically struggled to scale businesses compared to international competitors, and targeted intervention may help address this gap. The venture capital ecosystem needs predictable, generous incentives to function effectively.

These schemes (EIS, EMI and VCT) structurally and intentionally favour higher-risk, growth-stage companies over asset-rich or lower-risk businesses, because those businesses would find it harder to raise funding in conventional ways.  But the growth challenge extends beyond the entrepreneurial ecosystem.

Businesses that provide stability, supply chain resilience and consistent employment remain vital to the economy.  To unlock investment across the wider corporate landscape, there is a clear case for complementary measures such as expanded capital allowances or broader investment-focused tax reforms to ensure growth opportunities are shared more widely.

Ultimately, the question is whether tax policy should focus on picking winners or creating conditions for all productive businesses to thrive.  The current package leans decisively toward the former. It may generate headline-worthy successes, but risks alienating the stable employment base that ultimately sustains our economy.

Backing tomorrow's engines of growth makes sense, but not if we break the hard-working businesses that currently underpin the economy in the process.

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David Ward, Partner and Head of Specialist Taxes, Johnston Carmichael

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