A budget to champion start-ups and scale-ups, but watch the business rates gap

In this analysis by Dr Martin Turner, Director of Policy and External Affairs, BIA, discover how the 2025 Budget could supercharge UK life sciences scale-ups with major investment incentives - while also highlighting potential risks from rising business rates.

Under tough fiscal circumstances, the Chancellor has delivered a budget that sought to champion entrepreneurs and scale-ups as part of the government’s growth mission. 

Key announcements were:

• EIS, VCT and EMI schemes significantly enhanced following the BIA campaign
• ISA and stamp duty reforms to encourage investment in public companies
• Business rate increases could disproportionately and unfairly impact life science scale-ups and established companies
• £4 million per year for new Enterprise Fellowships and £130 million for “Frontier Companies”
• OBR report notes potential increase in NHS-branded medicines spending

Scale-ups supported with major improvements to EIS, VCT and EMI reliefs

Ahead of the Budget, BIA wrote a letter to the Chancellor, signed by 200 member CEOs, calling on her to “enhance R&D tax reliefs, EIS/VCT, and EMI schemes to target support to innovative knowledge-intensive companies”.

In response, the Chancellor has doubled and in one case quadrupled limits on these schemes, delivering a major win for BIA.

The annual and lifetime fundraising limits for knowledge-intensive companies under the Enterprise Investment Scheme (EIS) and Venture Capital Trust (VCT) reliefs have been doubled to £20 million and £40 million, respectively, and gross asset tests have been doubled to enhance eligibility for scaling companies.

The government is also significantly expanding Enterprise Management Incentive (EMI) company eligibility to increase access to talent support for scaling companies, enabling them to offer competitive remuneration packages. From April 2026, the employee limit and the company share option limit will both double to 500 employees and £6 million, respectively, and the gross assets test will quadruple to £120 million. The maximum holding period will also be increased to 15 years, and this can be applied to existing as well as new EMI contracts, which is extremely welcome and will help many of our members reaching this limit.

These changes deliver on BIA’s pre-Budget campaign and many formal representations we have made to HM Treasury over the past five years.

In one very small concession, the VCT upfront income tax relief will decrease from 30% to 20%, to better balance the amount of upfront tax relief offered compared to EIS, where dividend relief isn’t available.

The Budget also reconfirmed that R&D tax reliefs will be maintained, and a new advance clearance service will be introduced. BIA met with Treasury and HMRC several times on this during its consultation period. Full details of this haven’t been published yet, but we expect the service to be most applicable to sectors where qualifying R&D activity is more ambiguous, so it’s unlikely to be of relevance to life sciences. There are also some small administrative changes to R&D tax relief. This is welcome stability for a crucial programme that supports our members.

More support for entrepreneurs coming?

The Treasury has also published a prospectus on what it is doing to support entrepreneurs and launched a call for evidence on the effectiveness of existing tax incentives, and the wider tax system, for business founders and scaling firms, and how the UK can better support these companies to start, scale and stay in the UK. Although it also said that, as was already known, the Capital Gains Tax rate for Business Asset Disposal Relief and Investors’ Relief (previously known as Entrepreneurs Relief) will increase to match the main lower rate at 18% from April 2026 (this is likely to apply to EMI too). The government will consider responses to their call for evidence when developing further potential reforms to tax support for entrepreneurs. BIA will be responding, led by our Finance and Tax Advisory Committee.

Do get in touch if you’re interested in contributing, and you may like to submit yourself.

UK-listed companies get a boost too

Complementing the venture incentives, ISA reforms and a new stamp duty relief have been announced to encourage more investment into public companies. £8,000 of the £20,000 ISA allowance will be ringfenced for stocks and shares, and there will be a three-year exemption from Stamp Duty Reserve Tax for companies listing in the UK.

Business rate changes could pose a threat

The government is delivering its manifesto commitment to support the high street by lowering business rates for retail, hospitality and leisure properties with Rateable Values below £500,000, funded by a new, high-value multiplier for properties with an RV of £500,000 or above from April 2026.

We haven’t had the chance to properly assess this yet, but this increase for premises with a £500,000+ ratable value could disproportionately and unfairly hit large and scaling life science businesses, and other science and technology companies, which have unusually high building and rent costs due to the need for both lab and office space. There will be a transitional relief to help, and there is a consultation on aspects of these reforms. BIA is investigating further what the potential impact is here – if you think you could be affected now or in the near future as you expand, please let us know.

Research and innovation funding

Hot on the heels of Monday’s announcements from the Science Secretary on how UKRI will support curiosity-driven research and scale-up companies, further details of how public research and innovation will be invested were announced at Budget. As a first step, Innovate UK will launch a new Growth Catalyst programme worth £130 million following a successful pilot, offering grants and tailored support to frontier companies that have already attracted investment. This will likely benefit engineering biology companies, as it is classed as a frontier technology.

UKRI will also invest £4 million per year for new Enterprise Fellowships, bringing 100 top researchers into business across the UK, and up to £25 million for new entrepreneurship-focused doctoral training schemes, and will launch a new £4.5 million round of the Women in Innovation Awards.

We are watching the UKRI space closely, with strong indications from Monday’s announcement that scale-up and economic growth through priority Industrial Strategy sectors will be key:

Record public research funding will be explicitly directed towards supporting promising scale-ups, turbocharging economic growth and job opportunities through our Modern Industrial Strategy, and improving lives, as part of a shake-up of public R&D.

Procurement

The government will also leverage its procurement budgets to drive innovation, which we know is of particular interest to companies working with engineering biology and TechBio. Each department will appoint a senior Procurement Innovation Champion, responsible for defining and delivering its innovation priorities through procurement. To accelerate access for strategically important innovative firms, the government will launch an Innovation Marketplace and establish a task-and-finish group to remove internal barriers to innovative procurement.

NHS and medicines spending

There was little on the NHS in this Budget, as health spending was largely addressed at the Spending Review earlier in the year.

However, Global Counsel have flagged to us some intriguing information detailed within the OBR’s accompanying report, which highlighted the possibility of higher spending on medicines, 'depending on…negotiations over branded medicines’ as a key pressure against the health department’s budgets.

The OBR goes on to state that ‘the Spending Review assumed that spending on branded medicines (around 7% of the NHS resource budget) would rise by 25 per cent (£3.3 billion) between 2025-26 and 2028-29. A 5% larger rise in spending on branded medicines over the Spending Review would cost £0.7 billion by 2028-29’. It’s unclear what this means, but UK-US negotiations concerning the UK’s life sciences commercial environment continue, with Business Secretary Peter Kyle expected to travel to America soon.

Conclusion

The Chancellor’s desire for companies to start, scale and stay in the UK very much echoes BIA’s rallying cry, and her expansion of investment tax incentives valued by our members is extremely welcome. The absence of any updates on the Mansion House agenda and pension reforms is notable, although we had good news on that front last week and the British Business Bank’s five-year strategic plan, published on Monday, gave a clear sense of direction, plus some further details of how they intend to encourage pension fund investment into venture. And, as always, there could be unintended consequences from some measures, such as the business rates hike.

Jane Wall, Managing Director of the UK BioIndustry Association (BIA), said:

BIA has long argued that outdated limits on venture investment tax incentives and employee share options are holding back the scale-up of life science companies, so we are delighted that the Chancellor has chosen to extend these today. Ahead of the Budget, the CEOs of 200 of our member companies wrote to the Chancellor calling for these changes, so we are pleased to see that noted and delivered. 

Under tough economic circumstances, this Budget has prioritised tax and spending decisions in areas where the UK can win. Backing scale-ups in life sciences, biotech and AI will drive economic growth and deliver innovative new products that will improve both health outcomes and global sustainability.

However, we are very concerned about increases to business rates on expensive workspaces. Life science companies will be unfairly and disproportionately affected, given the need for expensive laboratory facilities alongside office space. 

The Chancellor and this government have consistently highlighted life sciences and biotech as a key economic opportunity for the UK. However, domestic and global headwinds continue to create significant challenges and uncertainty for the sector. At times like this, governments need to lead by investing in and demonstrating confidence in national champion sectors, rather than raising their operating costs.