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As the UK's Autumn Budget approaches, investors and high net worth individuals are facing a challenging and rapidly evolving tax landscape, while the country’s startup ecosystem continues to demonstrate resilience and growth, particularly in sectors like artificial intelligence and climate technology. This week’s news strongly suggests that proactive financial planning is essential to navigate the coming fiscal reforms.
Tax turmoil: capital gains, property, and pensions
The core theme dominating investor anxieties is the potential for significant tax increases aimed at generating revenue for the government. The most widely anticipated move is the reform of capital gains tax (CGT). Speculation is high that CGT rates will be brought closer to income tax rates, possibly rising to 24% or higher for top earners. Further compounding this for long-term holders, there is a risk that the CGT uplift on death, which currently resets the cost base of an inherited asset to its market value on the date of death, could be removed, leading to a much larger overall tax charge on succession.
Property is also a target, with proposals to reform stamp duty land tax (SDLT) and potentially introduce a form of ‘mansion tax’ on high-value homes. Critically, there are discussions around ending the current exemption from CGT on the sale of an individual's main residence for high-value properties, often cited as above £1.5 million or £2 million. While official commitments have been made not to charge CGT on a main home, the focus remains on wealthier property owners.
Inheritance tax (IHT) is another area undergoing a significant overhaul. Receipts are already at record highs, driven by frozen thresholds and rising asset values. Looming reforms include a cap of £1 million on the 100% relief for Agricultural Property Relief and Business Property Relief, effective from April 2026. Furthermore, unspent defined contribution pension pots are set to be included within the inheritance tax net from April 2027, severely impacting succession planning for high earners.
Lifetime gifting rules are also under intense scrutiny. Advisers are warning that the current seven-year rule for potentially exempt transfers (PETs) could be extended to ten years, or even replaced entirely by a lifetime gifting allowance, which would dramatically restrict the flexibility currently available for strategic wealth transfer.
Startup strength and investment incentives
In a stark contrast to the tightening tax environment for established wealth, the UK's startup ecosystem is demonstrating powerful momentum, particularly in high-growth, innovation-led sectors. Early-stage startups raised an impressive £7 billion in the first half of 2025, signalling a significant rebound in venture capital activity (Source).
The government appears keen to support this dynamism through targeted investment. AI and climate technology are standout sectors, with AI-related climate tech firms seeing investment surge by over 128% recently, and AI adoption in the climate tech space running at double the UK startup average. This growth is being bolstered by a promised £55 billion in research and development funding to drive breakthroughs from clean energy to artificial intelligence. This support positions the UK as a strong global hub for innovation.
Crucially, tax-efficient investment vehicles remain a vital tool for channelling capital into these businesses. The Enterprise Investment Scheme (EIS), Seed Enterprise Investment Scheme (SEIS), and Venture Capital Trusts (VCTs) continue to offer substantial income tax relief (up to 30–50%) and tax-free growth, as well as tax relief on capital gains and inheritance tax. As general tax allowances are squeezed, the value of these targeted incentives for funding innovative, early-stage companies only increases. Do note that tax treatment depends on individual circumstances and may be subject to change.
On a positive note for founders, the government has abandoned plans for an 'exit tax' on founders relocating abroad, a decision that has been welcomed by the tech sector as a sign of commitment to competitive global incentives.
Global context and investor outlook
These domestic policy shifts are taking place against a backdrop of similar global trends. International moves to tighten capital gains tax rates and re-evaluate privileges for high earners mirror the UK's approach, creating an environment of worldwide policy volatility that necessitates flexible and informed planning. However, global investment appetite for deep science, AI, and climate technology remains robust, aligning perfectly with the UK's areas of fastest startup growth.
In summary, UK investors face a demanding, high-tax environment where general allowances and reliefs are increasingly at risk. The message is clear: the most effective way forward is to be proactive and strategic. By utilising the remaining tax-efficient wrappers and focusing capital on the high-growth sectors being supported by government policy—like the burgeoning AI and climate tech industries—investors can better navigate the coming tax hikes and participate in the innovative core of the UK economy.
Tax efficient investing
If you’re looking to start building your portfolio of high-growth startups and claim tax relief, take a look at the investment opportunities we currently have available:
Carbon13 SEIS Fund VIII
Climatetech-focused Carbon13 SEIS Fund is managed in partnership with expert climatetech venture builder, Carbon13. This fund invests in cutting edge climatetech innovations built by a hand picked cohort of founders that have graduated from Carbon13’s venture builder programme.
NOTE - this fund closes to investment on 28 November, don’t miss out!
The Access EIS Fund.
This is the UK’s most diversified fund. It co-invests with leading UK angel investors to build you a large portfolio of high-potential startups across all sectors, aiming to maximiseing your return potential.
Please note: our office hours are weekdays, 9.30am - 5.30pm.
