The 2025 UK Budget: A Founder's Reality Check

The government wants you to believe this Budget backs British tech. The headlines talk about “backing technology firms to start-up, scale-up and stay in Britain.” Ministers point to expanded investment schemes, AI champions, and procurement reform.

But if you’re actually building a company here, the picture looks different.

The Tax Squeeze Nobody’s Talking About

Headline rates haven’t jumped dramatically. That’s the talking point. What’s actually happening is more subtle and more damaging.

Income tax and National Insurance thresholds stay frozen. Every year that continues, more founders and key hires drift into higher bands through fiscal drag alone. You’re not getting a tax rise on paper. You’re getting one through the back door.

Dividend taxes are going up. Taxes on savings and property income are rising too. For founders who pay themselves modest salaries and bet everything on equity, this hits hard. The after-tax returns that fuel angel investing, early-stage funds, and second-time founders recycling capital back into the ecosystem are all taking a cut.

The message is clear: the UK sees founder income and exits as a convenient tax base, not as the engine that builds the next generation of companies.

The Gap Between Narrative and Reality

Yes, there are wins buried in here. EIS and VCT frameworks are getting stronger. EMI share options are being updated. Non-compete rules are loosening, making it easier to build and keep teams.

These are genuine micro-improvements. But they’re being layered on top of a macro environment that’s moving in the wrong direction: higher cost of living, rising wage pressure, tight public spending, and elevated overall tax levels.

Trade bodies will celebrate the tweaks. The government press release talks about “paving the way for the next generation of tech leaders and unicorns.” But when you run the actual numbers on burn rate and risk appetite, the story changes.

What This Actually Means If You’re Building Something

For UK founders, this Budget says: we’ll adjust the investment instruments, but you’ll operate in a structurally higher-tax, higher-friction environment than your global competitors.

Extracting profits to reinvest or de-risk personally gets more expensive every year. That pushes founders toward one of two outcomes: permanent reinvestment in an increasingly unpredictable market, or moving somewhere else entirely.

Early-stage companies will welcome the EMI, EIS, and VCT improvements. But they now need to model higher long-run payroll costs, rising founder tax burden, and cost-of-living effects for their teams.

For many, the rational response is hybrid or remote-first hiring centered in lower-tax, lower-cost jurisdictions. The company stays nominally UK-headquartered. The jobs go elsewhere. That’s the opposite of building deep domestic tech clusters.

Everyone Else Is Playing a Different Game

Other ecosystems have spent the last decade doing something different. Lower personal tax on entrepreneurial income. Clearer and more stable capital gains regimes. Aggressive incentives for R&D and stock-based compensation.

While the UK tweaks EMI and adds more process around R&D relief, competing hubs are simplifying and cutting. The gap is widening.

Talent, capital, and code are more mobile than they’ve ever been. A founder can incorporate in one country, bank in another, hire from a third, and sell globally. The marginal drag created by Budget 2025 pushes the decision needle toward “somewhere else.”

The Bottom Line

Until the UK prioritises genuinely lower and simpler founder-facing taxes, predictable rules, and infrastructure that speeds growth rather than slowing it, the “backing business” narrative will ring hollow.

The most ambitious UK entrepreneurs aren’t stupid. They can read a tax code and run a spreadsheet. More of them will quietly choose to build their next thing somewhere else.

That’s not what anyone wants to say out loud. But it’s what’s happening.