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Budget Watch 2026: Pre-Budget briefing for EIS and SEIS
For financial advisers, EIS and SEIS investors, fund managers and founders planning ahead of the 28 October 2026 Budget.
On Wednesday 28 October, John Healey delivers his first Budget as Chancellor of the Exchequer.
With headline rates of income tax, VAT and National Insurance ruled out, and the Institute for Fiscal Studies warning that protecting public spending could require about £35 billion in tax rises or savings, attention has turned to taxes on capital and wealth.
These are the four developments we believe EIS and SEIS fund managers, investors and advisers should watch closely. (This blog has been last updated on the 28th of October.)
Sapphire's perspective is that EIS and SEIS work best when investors can plan years ahead. The reforms that took effect in April, including doubled EIS company limits, were a welcome vote of confidence; what the market needs now is stability, not another round of pre-Budget uncertainty. Tax relief does not remove the risk of investing in early-stage companies, but a predictable framework keeps patient capital flowing to British growth businesses. We will publish our assessment once the measures are confirmed.
1. Capital Gains Tax: a smaller rise, not alignment
The Financial Times reported on 13 October that the Chancellor will not align CGT with income tax, though a smaller rise from today's 18% and 24% rates remains possible. Any increase would lift the intrinsic value of EIS deferral relief, which postpones a gain, and SEIS reinvestment relief, which exempts half of a reinvested gain. The countervailing risk is behavioural: investors who sit on assets to avoid a higher bill realise fewer gains to reinvest.
As of the 28th of October Budget update: The Chancellor did not raise the main rates of Capital Gains Tax, which remain 18% and 24%. The value of EIS deferral relief and SEIS reinvestment relief is therefore unchanged. The government did confirm minor technical fixes to the SEIS, EIS and VCT rules, most taking effect from 6 April 2027 [link: https://www.gov.uk/government/publications/budget-2026-overview-of-tax-legislation-and-rates-ootlar/budget-2026-overview-of-tax-legislation-and-rates-ootlar].
2. A new relief for founders who reinvest
The same reporting suggests the Treasury is developing a CGT relief to encourage entrepreneurs who sell their businesses to reinvest in the UK. The formal response to last November's call for evidence on tax support for entrepreneurs may arrive alongside it. Design is everything. A relief that works through EIS and SEIS could bring experienced founders and fresh capital into the schemes; a standalone alternative could instead compete with them for the same money.
Budget update: Confirmed, with important detail still to come. The new Founders’ Relief will apply a 10% rate of Capital Gains Tax to qualifying disposals of shares, up to a lifetime limit of £10 million of gains per person. It is aimed at founders of, and significant early investors in, high-growth, innovative UK companies, and will apply to disposals on or after 6 April 2027 [link: https://www.gov.uk/government/consultations/founders-relief-technical-consultation].
The relief is subject to a technical consultation that closes on 30 November 2026. The proposed conditions, covering matters such as ownership, turnover, employees, growth and research and development, have yet to be finalised, and the £10 million limit is expected to be reduced by any amounts already claimed under Business Asset Disposal Relief or Investors’ Relief.
At the same time, Business Asset Disposal Relief is being cut back. From 6 April 2027, its lifetime limit falls from £1 million to £500,000, though the 18% rate is unchanged. The overall effect is to concentrate support on founders and early backers of the fastest-growing companies, rather than business owners in general. Whether that brings new money into EIS and SEIS will depend on how the final rules treat reinvestment and early-stage shareholdings.
3. Inheritance Tax: will business relief be revisited?
Since April, 100% business relief has been capped at £2.5 million per person, an allowance that qualifying EIS and SEIS holdings share with family businesses and farmland. The Prime Minister has said he will “look again” at the farming changes, and campaigners want business relief included. A higher cap would strengthen the estate-planning case for EIS; a farm-only fix changes little. With unused pensions entering IHT from April 2027, estate planning is high on advisers' agendas.
As of the 28th of October Budget update: The Chancellor made no change to Inheritance Tax business relief. The £2.5 million allowance for 100% relief, with 50% relief above it, remains in place, as do the farming changes. The estate-planning position for qualifying EIS and SEIS holdings is therefore unchanged.
4. Regional growth funds and follow-on capital
The Prime Minister has promised more detail at the Budget on “good growth funds”, pooling public money in each region to attract private investment. These build on £1 billion for regional innovation and the British Business Bank's new £150 million Northern Scale-Up Fund. For EIS and SEIS managers, the question is follow-on capital: more public co-investment can make later rounds easier to fill, but poorly targeted schemes could crowd out private investors at the earliest stages.
All four watchpoints rest on reporting or formal government statements dated between November 2025 and 15 October 2026. None is a confirmed Budget measure.
QUESTIONS INVESTORS ARE ASKING
Will Capital Gains Tax go up in the 2026 Budget?
Capital Gains Tax is unlikely to rise to income tax rates in the 28 October 2026 Budget, but a smaller rise from today’s 18% and 24% rates remains possible.
Will there be a new tax relief for founders who reinvest?
A new Capital Gains Tax relief for entrepreneurs who sell a business and reinvest in the UK may feature in the 2026 Budget, as the Treasury is reported to be developing one.
Will the 2026 Budget change Inheritance Tax relief on EIS and SEIS shares?
Inheritance Tax business relief on qualifying EIS and SEIS shares could change if the government revisits its April 2026 reforms, although nothing has been announced. Since 6 April 2026, 100% business relief has been capped at £2.5 million per person, an allowance that qualifying EIS and SEIS holdings share with family businesses and farmland.
How could regional growth funds affect EIS and SEIS-backed companies?
Regional growth funds could make it easier for EIS and SEIS-backed companies to raise follow-on funding, depending on how they are targeted.
Update in Brief as of 28th October 2026
In his first Budget, Chancellor John Healey announced a new Founders’ Relief, which will give eligible founders and significant early investors in high-growth, innovative UK companies a 10% rate of Capital Gains Tax on up to £10 million of lifetime gains, from April 2027 and subject to consultation. At the same time, the lifetime limit for Business Asset Disposal Relief will halve to £500,000. The main rates of Capital Gains Tax, the £2.5 million business relief cap and the core EIS and SEIS rules are unchanged, with only minor technical fixes to the venture capital schemes.
Did the 2026 Budget Change EIS and SEIS?
Only at the margins. The government confirmed minor technical fixes to the SEIS, EIS and VCT rules, most taking effect from 6 April 2027. The 30% EIS and 50% SEIS income tax reliefs, and the higher EIS company limits introduced in April 2026, are unchanged.
What is Founders Relief?
A new Capital Gains Tax relief announced in the 2026 Budget. It will offer founders of, and significant early investors in, high-growth, innovative UK companies a 10% rate on up to £10 million of lifetime gains, for disposals from 6 April 2027. The detailed conditions are subject to a consultation closing on 30 November 2026.
What happened to Business Asset Disposal Relief?
Its lifetime limit will fall from £1 million to £500,000 from 6 April 2027. The 18% rate is unchanged.