The UK Budget was announced on October 30, 2024. You can read the detailed Autumn Budget 2024 document published by HM Treasury here.

The Chancellor stated the government’s intention is to “continue to work with leading entrepreneurs and venture capital firms to ensure our policies support a positive environment for entrepreneurship in the UK”. It’s a very positive sentiment, but what might the various changes announced in the budget mean for the Stakeholderz ecosystem of sustainability-focused investing and M&A activity?

Businesses

At Stakeholderz we’re helping to support some of the most innovative businesses in their growth journeys. One of the biggest tax increases announced (taking effect from April 2025) is to Employer’s National Insurance (from 13.8% at present to 15%, with the threshold lowering from £9,100 to £5,000), projected to raise an additional £25bn a year. The Chancellor presented this as “the right choice to make” based on the reasoning that “successful businesses depend on successful schools; healthy businesses depend on a healthy NHS; and a strong economy depends on strong public finances.”

For any business, an increase in costs in one area naturally requires choices about costs in other areas, so higher Employer’s NI is likely to mean many companies needing to hire and/or award pay rises more slowly. The Chancellor offered an olive branch to the smallest businesses by increasing the Employment Allowance from £5,000 to £10,500, which she stated “means 865,000 employers won’t pay any National Insurance at all next year and over 1 million will pay the same or less than they did previously”. Whilst this may be very helpful for the first 1-2 hires, the growth companies we support will quickly outstrip this level.

There was at least some welcome stability around confirmation that corporation tax rates will not rise above 25%, which the Chancellor stated is the lowest among the G7 countries.

For founders exiting their businesses, the lifetime limit for Business Asset Disposal Relief (previously known as Entrepreneur’s Relief) will remain at £1m, but in April 2025 the rate will rise from 10% to 14%, and then to 18% in the 2026-27 tax year. This will still be below the higher rate of Capital Gains Tax (which itself is increasing), but it is clearly a less attractive incentive. Nevertheless, for successful scale-up entrepreneurs, particularly multiple-exited founders, because the £1m cap is a lifetime limit, the BADR increases on their own may not actually be a notable deterrent when an entrepreneur considers whether to build their next venture in the UK or elsewhere.

Investors and Private Equity

For individual angel investors and founders, there had been much anticipation in the run-up to the budget that Capital Gains Tax (CGT) would be increasing, with some speculation that the CGT rates might even be increased to the same levels as income tax. The only arguably “good” news on this front was that the increases were smaller than the average expectations had been (with the lower rate rising from 10% to 18% and the higher rate from 20% to 24%), and certainly nowhere near parity with income tax. Nevertheless, at the higher rate this means investors giving up an additional 20% of their gains; in simple terms that means after the sale of an asset the investor will have less money to re-invest.

The attractive (S)EIS and VCT tax relief schemes will continue in place, as had been confirmed prior to budget day, and we believe that EIS in particular will continue to be an active focus for the businesses we support, because of its strong appeal to angels.

Another area where the “good” news is simply that it wasn’t as bad as expected is that inheritance tax relief for shares held on alternative exchanges such as Aquis Stock Exchange and AIM will be subject to a 50% relief – but not scrapped entirely, as many had feared. Exchanges like Aquis and AIM represent one of a number of possible exit and/or liquidity routes for the scale-up businesses and entrepreneurs Stakeholderz works with, and if these are perceived to be less attractive markets for investors, that could further decrease the appeal of UK IPOs (already subdued) as exit/liquidity routes.

When it comes to private equity (PE), a much-anticipated change to the treatment of carried interest was introduced, increasing the 18% and 28% rates of CGT to 32%, with a somewhat nebulous indication that from April 2026 there will be “further reforms to ensure that the specific rules for carried interest are simpler, fairer and better targeted”. PE represents another exit and/or liquidity option for founders and investors, so again, if this leads to fewer PE players in the market and/or fewer funds available to drive M&A deals, this reduces the options for successful businesses.

Sustainability

As a sustainability-focused advisory firm, Stakeholderz paid keen attention to the Chancellor’s announcements surrounding the green economy and her intention to make the UK a “clean energy superpower”, capitalising the National Wealth Fund to catalyst private investment in “the industries of the future”.

There were positive messages around recently-announced investments in the Merseyside and Teesside regions to create 4,000 jobs around carbon capture and storage, plus new funding announced for 11 “commercial-scale” green hydrogen projects across England, Scotland and Wales. The Chancellor reiterated the commitment to establish GB Energy in Aberdeen, and announced an initial £3.4bn over 3 years for the Warm Homes Plan, which could lead to positive business opportunities for technical innovation around green/smart homes.

Summary

The Chancellor’s approach seems to be that even if, individually, some of the levers she has pulled might be said to reduce the ability of some businesses to grow or some investors to invest, the overall resulting picture of the UK as a more stable environment, with a clear plan for the next 5 years to improve public services and manage public finances, should provide a more attractive context for investment and growth. Time will, of course, tell if this is the case.