Following yesterday’s budget, Game Republic Affiliate member Johnston and Carmichael‘s Head of Gaming and Gaming Technologies Andrew McMillan has responded
“During the Autumn 2025 speech the Chancellor spoke about the importance of start up and scale up businesses in the UK, and the Government’s aim to support such businesses with a view to driving wider economic growth. I think such businesses trolling through the detail as it was drip fed last night could be forgiven for being left a little disappointed. Yes, there were some very positive announcements made, for example the widening of the eligibility criteria for the Enterprise Investment Scheme and Venture Capital Trusts and a similar broadening for the Enterprise Management Investment Scheme, but there will be additional pressures for businesses as a result of this Budget too. Although the games industry has gone through a difficult time of late, it is an economic powerhouse and one of the true pillars of the modern UK economy. I would hope that in future fiscal events the Government aims to support the industry specifically, implementing more generous tax relief in-line with the proposals made by both UKIE and TIGA.”
His team has produced a report on the implications and tips for games companies on what to expect and what actions to take which is available to download here –Budget 2025 Analysis and you can find a summary of their findings and implications below:
Wage Increases: What it means for your payroll
The year has been marked with a number of organisations announcing redundancies and recruitment decisions being delayed and deferred. Announcements yesterday are likely to prolong this as the cost of bringing new staff on continues to be more expensive for employers with National Minimum Wage hourly rates increasing from April 2026 by the following:
| Age | Rate | Increase (%) | Annual Salary (37.5-hour week) | Increase cost to employers (incl
ER NI) |
| Over 21s | ||||
| £12.71 | 50p (4.1%) | £24,784.50 | £1,121.25 | |
| 18-20 | £10.85 | 85p (8.5%) | £21,157.50 | £1,906.13 |
| 16-17/Apprentice Rate | £8.00 | 45p (6.0%) | £15,600 | £1,009.13 |
As this table demonstrates with all pay bands now resulting in the employer having an additional direct cost of at least £1,000 per employee. This is on the top of the 6.7% increase for over 21’s last year and 16.3% rise for 18–20-year-olds last year. We anticipate that employers will have further costs from those in the pay bands above the minimum wage who are looking to ‘keep the gap’ and push employers to pass on similar increases to their package. The impact of this will vary across the sector with those QA service providers, studios with a high percentage of junior developments and support roles likely to be hardest hit.
For those companies with Scottish employees, they will have to endure the long wait until 13 January 2026 where the Scottish Finance Secretary will announce the Scottish Budget to see if there are further impacts from Ms Robison’s announcements in Holyrood.
Ethical employers what to expect
In October, the Living Wage Foundation also announced increases for the those who are Living Wage accredited employers, the increases are as follows:
| Location | Rate | Increase (%) | Annual Salary
(37.5-hour week) |
Increased cost to employers (incl
ER NI) |
| UK (not London) | £13.45 | 85p (6.7%) | £26,227.50 | £1,906.13 |
| London | ||||
| £14.80 | 95p (6.9%) | £28,860 | £2,130.38 | |
The Living Wage Foundation explained that employers have until April 2026 to introduce the new rates above to maintain their listing as a ‘Living Wage accredited’ employer.
Perks of being a ‘smart’ employer
Gaming businesses should plan ahead by modelling wage impacts and exploring cost-neutral benefits to retain talent to ensure incentivisation is maintained creating motivated, productive staff. Further tightening of common employee ‘perks’ were announced in the Budget where salary sacrifice pensions are to be targeted and provide less benefit from 2029 and electric cars under a salary sacrifice scheme that might be less attractive with the new 3p/mile tax from April 2028. It is likely that these will still create a net beneficial position, but the potential benefit will now be substantially less. One area you might want to consider is the introduction of an EMI option scheme, see below for more details on what was announced.
What’s still to come in the Budget?
It was pleasing to hear that some of the additional costs may be offset by the announcement of a scheme to make apprenticeship training for under-25s at small and medium businesses “completely free”. More details are to be expected on that to come.
The UK’s upcoming Employment Rights Bill (ERB) introduces wide-ranging reforms aimed at strengthening job security, improving working conditions and extending protections for workers, especially those in insecure or flexible roles. Key measures include day-one rights to sick pay, parental leave and flexible-working requests, along with the removal of the two-year qualifying period for unfair dismissal claims. The Bill also offers stronger protections for pregnant workers and parents, limits the use of fire-and-rehire, and introduces new rights for zero-hours, casual and agency workers, such as predictable hours, compensation for cancelled shifts and greater scheduling notice. Statutory Sick Pay will be expanded and pay transparency initiatives are expected to increase.
For employers, the ERB represents a significant shift. Businesses face higher employment costs, especially around sick pay, guaranteed hours and staffing flexibility. There is an increased risk of litigation, particularly around dismissal and redundancies. Employers relying on irregular or shift-based labour- such as hospitality, care and retail- may experience reduced flexibility and greater workforce-planning challenges.
Organisations will need to update contracts, policies and HR processes, retrain managers and enhance rostering and record-keeping systems. While compliance demands will increase, employers who adapt early may benefit from improved retention and workforce stability.
Key actions:
- Review current and future salary structures and build into your financial forecasting
- Reassess employee incentivisation package – both financial and non-financial
- Explore apprenticeship programmes for junior roles
Enterprise Management Investment Scheme
The Autumn Budget 2025 significantly expands EMI eligibility by raising company and employee thresholds and extends option life to 15 years. Effective 6 April 2026, this is a move designed to make EMI usable by larger scale-ups and to improve long-term employee retention.
Key changes
- Employee headcount limit increased to 500 (from 250).
- Gross assets threshold raised to £120m (from £30m).
- Company limit increased to £6m (from £3m).
- Maximum life of an EMI option extended to 15 years (from 10 years), with retrospective application to unexpired options where relevant. All changes apply to EMI options granted on or after 6 April 2026.
What this means for businesses
- Broader eligibility for scale-ups. Companies that have outgrown traditional SME thresholds but still want to use tax-advantaged equity incentives can now grant EMI options, widening the pool of firms able to attract and retain senior hires and technical talent using a familiar tax-efficient vehicle.
- Improved retention economics. Extending option life to 15 years gives companies and employees more flexibility over exercise timing, aligning incentives with longer growth and exit horizons common in scale-ups.
- Administrative considerations. Firms must still meet the other EMI conditions (e.g., qualifying trade, individual limits) and should review plan rules and grant documentation to reflect the new thresholds and option term.
Investor, HR and tax team implications
- HR / reward teams: Update option grant policies, performance vesting schedules and communications to reflect longer option life and the ability to include more employees. Consider re-running option modelling to show post-tax outcomes under the new rules.
- Finance / tax teams: Reassess valuation, dilution and accounting impacts of larger option pools; ensure compliance with HMRC qualifying conditions and document evidence of eligibility at grant date.
- Recruitment and retention: Employers can now offer EMI-style packages to a wider set of hires, improving competitiveness versus cash compensation or non-tax-advantaged equity plans.
Risks and recommended mitigations
- Risk — Mis-classification: Expanding thresholds increases the chance of borderline cases; incorrectly granting EMI options can lead to loss of tax advantages. Mitigation: run a pre-grant eligibility checklist and obtain external tax sign-off for borderline grants.
- Risk — Dilution and accounting impact: Larger option pools and longer lives affect EPS and share-based payment charges. Mitigation: update financial models and communicate impacts to investors and auditors early.
- Risk — Retrospective complexity: Although option life extension applies retrospectively to unexpired options, administrative and tax reporting adjustments may be needed. Mitigation: audit existing option documentation and amend plan rules where permitted, with professional advice.
Bottom line
The Budget’s EMI reforms are pro-scale-up: they materially widen the universe of companies that can use EMI and make options a more flexible, long-term retention tool. Companies should act now to review plan design, update documentation, re-model financial impacts and seek HMRC/tax advice ahead of the 6 April 2026 implementation date to capture the benefits and avoid compliance pitfalls.
Enterprise Investment Scheme and Venture Capital Trusts
The Autumn Budget 2025 re-engineers EIS and VCTs by raising company and asset limits to support scale-ups while cutting upfront VCT income tax relief from 30% to 20%. Changes take effect 6 April 2026 and are intended to shift capital toward larger, later-stage high-growth firms.
Key policy changes
- VCT income tax relief reduced from 30% to 20% for subscriptions from 6 April 2026.
- Company investment limits increased: the annual company investment limit will rise to £10m (and £20m for Knowledge Intensive Companies) with lifetime limits increased to £24m (and £40m for KICs).
- Gross assets test raised to £30m before share issue and £35m after (effective April 2026), widening the pool of eligible companies.
What this means for businesses
- Bigger funding rounds qualify. Raising the gross assets and investment limits means later-stage and larger high-growth companies can now access EIS/VCT capital, improving options for scale-up financing and potentially smoothing the path to growth and listing.
- Greater administrative scope. Companies that previously exceeded thresholds may now be eligible, but they should review compliance and investor reporting requirements before issuing qualifying shares.
- Timing matters. Companies planning raises in 2026 should align structuring and investor communications with the 6 April 2026 implementation date.
What this means for investors
- Lower upfront VCT incentive. Cutting VCT income tax relief to 20% reduces the immediate tax benefit of VCT subscriptions, which may dampen retail demand for VCTs and make advisers less likely to recommend them on the same basis as before.
- EIS remains very attractive. EIS income tax relief and CGT advantages remain important for investors targeting early-stage equity, and the expanded company limits may broaden EIS opportunities.
- Historical precedent warns of fundraising impact. When VCT relief was cut previously, fundraising fell sharply; industry bodies warn a similar contraction in VCT capital could follow, potentially reducing available funding for smaller companies that rely on VCTs.
Practical recommendations
- For businesses: Reassess fundraising strategy to target EIS- and VCT-eligible investors where appropriate; consider timing raises around the April 2026 changes and update investor materials to highlight new eligibility.
- For investors and advisers: Re-model after-tax returns on VCTs with the 20% relief, re-evaluate allocation to VCTs versus EIS and other vehicles, and communicate the changed risk/reward to clients.
R&D and Creative Industries Tax Reliefs
The Autumn Budget 2025 introduced technical administrative clarifications to the Research and Development Expenditure Credit (RDEC) and Video Games Expenditure Credit (VGEC)/Audio-Visual Expenditure Credit (AVEC) regimes, chiefly clarifying the corporation tax treatment of intra-group payments for surrendered credits. An advance-assurance pilot scheme was also announced in relation to R&D tax relief.
These changes are procedural but have the aim of materially reducing tax-treatment risk for groups and, for R&D, providing more certainty over eligibility.
Intra-group payments
The announcements, which will have immediate effect, confirmed that payments made between group companies in return for one company surrendering RDEC, AVEC or VGEC to another will be ignored for corporation tax purposes, provided the payment does not exceed the amount of the credit surrendered. This reduces double tax risks for group companies, simplifying intra-group cash flows and tax computations. This will be particularly helpful for groups with mixed profit profiles across entities.
We would recommend:
- Reviewing intercompany agreements to ensure payments for surrendered credits are capped at the surrendered amount and documented clearly.
- Update tax positions and models to reflect the clarified non-taxable treatment of qualifying intra group payments.
R&D Tax Relief – Advanced Assurance Pilot
We welcome HMRC’s continued efforts to ensure that R&D tax relief reaches the businesses that are entitled to it, while providing greater certainty over eligibility and the level of relief available. These measures are vital for fostering innovation and supporting growth across the UK.
In response to stakeholder feedback, HMRC will launch a limited pilot of a new targeted advance assurance service in Spring 2026. This pilot aims to make assurance more accessible and focused, particularly on complex or high-risk aspects of claims. Businesses will be able to seek clarity on key issues such as:
- Whether a project meets the definition of R&D for tax purposes
- Qualification of overseas expenditure
- Which party can claim relief for contracted-out work
- Exemption from the PAYE/NICs cap
We look forward to hearing more details of the limited pilot and will work alongside ICAS to provide our feedback on any further measures proposed. As with all matters in the Budget, we would recommend speaking to your trusted business advisor to assess how these changes impact you and your business. The team at Johnston Carmichael are on hand to help.
This document and article has been prepared for information purposes only by Johnston Carmichael Chartered Accountants and Business Advisers (“JCCA”). The information contained in this document represents JCCA’s interpretation of current legislation and HMRC practice at the date of this document. The contents of this document are not a substitute for specific tax, legal or professional advice and readers should seek tax advice based upon their own particular circumstances.
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