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This year's Autumn Budget was a tale of two halves for our industry. On one side, the Chancellor set out an ambitious agenda to accelerate the growth of the UK's venture capital ecosystem - expanding investment limits for VCTs and signalling a renewed commitment to supporting innovative British companies at every stage of their growth journey. On the other, she implemented a series of targeted tax rises that will meaningfully affect personal tax planning and, for many clients, reduce the overall efficiency of existing strategies.
The combination of growth-focused investment policy and tighter taxes creates a clear opportunity for advisers to guide clients through the Budget's implications and explore a more diversified range of tax-efficient options. We'll unpack the main announcements and how they might affect client planning.
Now is the time to invest in VCTs
It was encouraging to see the Chancellor recognise the importance of supporting British businesses and the vital role that schemes like VCTs play in helping them start up, scale up, and remain in the UK. Expanding VCT and EIS investment limits provides a significant boost to the venture capital ecosystem, strengthening the pipeline of patient capital at every stage of growth.
These measures are complemented by other initiatives, including AI commitments, updates to EMI schemes, and the new UK Listing Relief - a three-year exemption from Stamp Duty Reserve Tax for companies listing in the UK - which supports both growth companies and UK exchanges and encourages businesses to stay domestic.
However, in a more surprising move, this enhanced access to ambitious UK scale-ups through VCTs comes ahead of a planned reduction in income tax relief from 30% to 20% in April 2026.
This presents a huge opportunity for the current tax year, allowing investors to utilise the higher tax relief now and benefit from tax-free dividends. Even after the income tax relief is reduced, VCTs remain attractive: with dividend tax rates having increased in this Budget, the ability to receive tax-free dividends continues to provide a meaningful advantage for investors.
What are some of the key changes that will impact tax planning?
Rather than introducing major overhaul that would break manifesto commitments, the Chancellor focused on a string of targeted, smaller tax rises.
Here are main takeaways that could affect clients:
- A reduction in the Cash ISA allowance: From April 2027, the Cash ISA allowance will be cut to £12,000 from £20,000 for savers under the age of 65.
- Savings and dividend tax increased: From April 2026, tax on dividends will increase by 2% for basic and higher rate taxpayers. Plus, the higher and additional rates of income tax on savings will also increase by 2% from April 2027.
- A continued freeze on income tax thresholds: The government has extended the freeze on the tax thresholds until 2030/31, expecting to pull more earners into higher tax bands.
- A cap on pension salary sacrifice: The government has restricted the tax-free amount that can be contributed to a pension under salary sacrifice to £2,000 from April 2029.
What changes mean looking ahead
Individually, these changes may feel incremental. But in an environment where UK taxpayers are already facing a high tax burden, this Budget has only added to the pressure. Collectively, the measures erode several longstanding levers used to deliver tax efficiency - particularly for higher-earners.
Over the past decade, tax-efficient investment options have steadily narrowed, with many traditional schemes scaling back or becoming harder to access, which now has only been exacerbated further. For high earners especially, pension and ISA contribution limits are reached quickly, leaving fewer meaningful routes for tax planning. In this context, VCTs have become one of the last substantial "islands" of tax efficiency.
For advisers, the implication is clear: more clients are likely to need alternative tax-efficient vehicles to maintain balance and effectiveness across their financial plans. VCTs, in particular, continue to offer a compelling opportunity - supported by government policy and providing valuable advantages such as income tax relief and tax-free dividends at a time when other allowances are tightening.
Moving forward with estate planning
Amid a raft of wider tax changes, the Chancellor confirmed her previously announced updates to inheritance tax (IHT) treatment on pensions and Business Relief (BR). The Budget reconfirms that, from April 2026, a new £1 million allowance for unlisted BR-qualifying assets will proceed as planned, alongside unused pensions coming into scope for IHT from April 2027. She also announced that the BR allowance will be transferable between spouses, significantly enhancing flexibility for estate planning.
We recognise that advisers and clients have shown hesitancy in recent months. This renewed clarity, bolstered by the Chancellor's confirmation that IHT nil-rate bands and allowances for BR will be extended through 2031, should give advisers greater confidence when guiding clients on long-term estate planning decisions.
Crucially, this outcome highlights the continuing importance of BR as a core component of holistic estate planning. It reinforces the value of using BR alongside other IHT solutions – particularly with pensions coming into scope for IHT from April 2027 – ensuring clients have a diversified and effective approach to intergenerational wealth transfer.
Support from Octopus Investments
This Budget adds yet another layer of complexity to an already challenging landscape. Having the right specialist support is essential, and at Octopus Investments we're here to help advisers steer clients through these changes with confidence.
Our new Autumn Budget 2025 Hub is now live, packed with insights and resources to help advisers navigate what this Budget means in practice. Explore expert commentary and tax-efficient investment options to support clients through a shifting tax landscape - and take advantage of the opportunities to support growing British businesses.
Key risks to keep in mind:
- VCTs and unlisted BR-qualifying assets are high-risk investments. The value of an investment, and any income from it, can fall as well as rise. Investors may not get back the full amount they invest.
- Tax treatment depends on individual circumstances and may change in the future.
- Tax reliefs depend on the VCT maintaining its VCT-qualifying status.
- The shares of smaller companies and VCTs are by their nature high risk, their share price may be volatile and they may be hard to sell.
Our investments are not suitable for everyone. Any recommendation should be based on a holistic review of your client's financial situation, objectives and needs. This communication does not constitute advice on investments, legal matters, taxation or any other matters. Personal opinions may change and should not be seen as advice or recommendation. Issued by Octopus Investments Limited, which is authorised and regulated by the Financial Conduct Authority. Registered office: 33 Holborn, London EC1N 2HT. Registered in England and Wales No. 03942880. December 2025. CAM015508.
