Budget 2026 Unleashes Fintech Impact: Founders Supported, Banks Face New Taxes

John Healey's inaugural Budget has introduced significant changes impacting founders, financial institutions, and small businesses across the UK. The Budget unveiled a new Founders' Relief, a revamped Company Share Option Plan (EMI2), and an increased corporation tax surcharge for banks, sparking a range of reactions from industry specialists, particularly within the fintech sector.

A centerpiece for start-ups is the new Founders' Relief, set to take effect from April 6, 2027. This relief will allow qualifying founders of high-growth, innovative companies to pay capital gains tax at a reduced rate of 10 percent on up to £10 million of lifetime gains. The detailed design for eligibility is currently undergoing technical consultation, with legislation expected in Finance Bill 2026-27. This measure partially reverses a trend seen since 2020, when Entrepreneurs' Relief (now Business Asset Disposal Relief) had its lifetime limit slashed from £10 million to £1 million, with its rate subsequently rising. The same Budget further halves the Business Asset Disposal Relief limit to £500,000 from April 2027, meaning that while a select group of high-growth founders receive more relief, most individuals selling a business will receive less.

Regarding share options, the Company Share Option Plan is being relaunched as EMI2, also effective from April 6, 2027. This reform will enable employees to hold tax-advantaged options worth up to £120,000, double the previous £60,000 limit, and removes the overlap with the Enterprise Management Incentive limit. Arjun Kumar, co-founder of Taxd, generally welcomed the founder package, stating, "This is a Budget with the right ambition for people who build things: founders’ relief back on the table, better share options, support for young entrepreneurs and a real plan to give cities their own money." However, he noted the downside for the self-employed and landlords. Janine Hirt, CEO of Innovate Finance, praised the share option changes, highlighting their importance for attracting and retaining staff in UK fintechs. Yet, she warned that the proposed Founders' Relief, as currently drafted, might exclude financial services and thus most fintechs, urging for an extension of eligibility. She also encouraged a review of exclusions from the Enterprise Management Incentive scheme for some fintechs. Andy Oury, tax partner at Oury Clark, questioned the effectiveness of a relief exclusively focused on founders, suggesting that it overlooks the contributions of managers, owners, and investors in a business's growth, advocating for a broader revival of Entrepreneurs' Relief.

The Budget also addressed non-compete clauses, confirming the government's intention to legislate to prevent these clauses from hindering start-ups and scaling firms from hiring. A consultation on broader restrictive practices will precede detailed policy, expected in early 2027, before legislation. Jonno Evans, partner at IQ Capital, believes this reform will foster talent mobility and new ventures. Conversely, Emmanuelle Ries, employment partner at Kingsley Napley, interpreted the timetable as pushing reform into the "medium to long grass," suggesting that immediate change is unlikely.

Banks will face a temporary increase in their corporation tax surcharge, rising from 3 percent to 6 percent for a 15-month period, from January 1, 2027, to March 31, 2028. This measure is intended to help fund the £100 Household Energy Payment. While the Budget specifies this period will not be extended, David Postings, chief executive of UK Finance, expressed concerns that increasing bank taxes is not conducive to growth and emphasized the importance of a time-limited increase to maintain international competitiveness. Janine Hirt pointed out that the £100 million profit threshold for the surcharge, which historically exempted new banks, remains. She advocated for raising this threshold in the long term to support growing digital banks that are crucial for lending to small firms. Hirt also welcomed the Chancellor's directive to the Bank of England's Financial Policy Committee to enhance the international competitiveness of bank capital requirements and promote competition. Anil Oncu, CEO of Bitpace, anticipates that higher corporate surcharges for tier-one clearing banks will translate into increased costs, such as higher FX margins and SWIFT fees, for mid-market merchants and exporters.

Further support for small firms includes a £5 billion increase in the British Business Bank's financial capacity, bringing its total to £30.6 billion. This includes an additional £1.4 billion for equity funds supporting high-growth businesses and £450 million for a new venture debt product. Kristaps Zips, UK CEO of payabl., hailed this as a welcome announcement for scaling fintechs, acknowledging fintech's role as a UK success story. However, some lenders closer to the high street, such as Rob Keown-Boyd, CEO of multifi, argued that these measures fall short for SMEs grappling with immediate cashflow crises, noting a significant rise in demand for working capital. Paul Joyce, partner at LAVA Advisory Partners, raised concerns about the accessibility of these funds for many perfectly viable businesses. Innovate Finance also welcomed the government's commitment to explore the use of HMRC data in Open Finance, which Hirt believes can unlock finance for small firms and the self-employed.

Changes to tax payments include a shift for those who make Payments on Account for Income Tax Self Assessment. From April 2029, these individuals will make smaller, more regular payments throughout the year instead of two large installments. Arjun Kumar labeled this as the Budget's single biggest revenue raiser, warning that it impacts cashflow, a critical factor for small business survival. Andy Oury predicted a "brutal" transition, potentially squeezing eighteen months of tax into twelve, which could pose a solvency risk for some.

In a move towards modernization, the Budget confirmed that VAT invoices must be issued in a specified electronic format from April 1, 2029. An implementation roadmap was published, with full policy and technical design details expected by April 2028. Pierre Arman, managing director at Alvarez & Marsal, cautioned that the late release of full details could leave businesses with insufficient time to prepare, potentially threatening business continuity. Conversely, Alex Baulf, VP of global indirect tax at Avalara, viewed the roadmap as providing much-needed clarity, allowing businesses to actively prepare for the 2029 mandate after years of uncertainty. Abigail Myers-Antiaye, VP of global compliance at Basware, drawing on international experience, advised businesses to start internal preparations now to avoid carrying existing invoicing problems into the new system.

Market reactions to the Budget were relatively subdued. Joe Calnan, head of FX dealing at iBanFirst, gave the Budget a "15 out of 20," acknowledging its difficulty under a new Prime Minister, but not expecting it to alter monetary policy. Todd Laddusaw, CFO at Kyriba, cautioned against complacency, warning that a calm market reaction should not be mistaken for a clean bill of financial health, especially with interest rates remaining a moving target.

Looking ahead, the Bank of England's next interest rate decision is scheduled for November 5. The higher bank surcharge will be implemented from January 1, 2027, and the government's detailed position on non-competes is due in early 2027. Founders' Relief, EMI2, and the reduced £500,000 limit for Business Asset Disposal Relief all become effective from April 2027. Full e-invoicing details are anticipated by April 2028, preceding the April 2029 mandate.