UKinbound member Ostberg & Sinclair Co advises entrepreneurs, investors, and companies on the full spectrum of UK business tax matters. In this guest article, Ostberg & Sinclair Co delve into the Chancellor’s Budget of 28 October contained a series of employment tax measures with significant implications for the UK inbound tourism sector. Enhanced employee share schemes, clearer rules on visa sponsorship costs and more generous travel allowances will benefit employers, while changes to the taxation of business exits will require business owners and founders to plan ahead.
Share schemes expanded
The headline change concerns tax-advantaged share schemes for UK-based employees. From April 2027, the individual limit under the Company Share Option Plan (CSOP) will double from £60,000 to £120,000, and the interaction between CSOP and Enterprise Management Incentives (EMI) limits will be removed. An eligible employee could therefore hold up to £370,000 of tax-advantaged options: £250,000 under EMI and £120,000 under CSOP. The CSOP exercise period will extend from 10 to 15 years, in line with earlier EMI changes, and the plan will be renamed “EMI2”, signalling its link to EMI and its suitability for companies that have outgrown EMI’s size limits.
Together with the April 2026 increase in the EMI qualifying company limits, from £30 million gross assets and 250 full-time employees to £120 million and 500 respectively, the case for introducing or expanding an employee share scheme has rarely been stronger. Overseas-headquartered operators with a UK trading subsidiary can often still offer tax-advantaged schemes to UK staff, either stand-alone or as a sub-plan of a group plan.
New Founders’ Relief arrives as BADR is halved
Two changes affecting business owners take effect for disposals on or after 6 April 2027. The lifetime limit for Business Asset Disposal Relief (BADR) will fall from £1 million to £500,000. The 18% rate is unchanged but gains above the limit will be taxed at 24%, halving the maximum saving from £60,000 to £30,000. The Government has said around three in four claimants will be unaffected.
Alongside this, the Government has proposed a new Founders’ Relief, taxing qualifying gains at 10% on up to £10 million over a founder’s lifetime. It is aimed at founders of high-growth, innovative companies and the proposed conditions are demanding. The founder must hold at least 25% of the company’s ordinary share capital, retain that holding for at least five years and be UK resident throughout a consecutive five-year period. The company must be a UK trading business with turnover of at least £10 million and at least 15 qualifying full-time employees in the period before disposal and must also meet two of three growth and innovation tests covering turnover growth, headcount growth and research and development spend. Any BADR or Investors’ Relief claimed from April 2027 will reduce the £10 million allowance.
The proposals remain subject to a technical consultation closing on 30 November 2026, with legislation expected in Finance Bill 2026-27. The 25% threshold means option holders, later joiners and management teams are unlikely to benefit, so the new relief is not intended to be generally available to employees holding EMI options. For most owner-managed tourism businesses, including tour operators, destination management companies and attractions, BADR is likely to remain the relevant relief, now at a lower ceiling.
Owners considering a sale should review the timing of any disposal, as completion before 6 April 2027 would preserve the higher £1 million BADR limit, and should take advice. Founders’ Relief may prove valuable for qualifying founders, however its interaction with BADR and its impact on a particular exit should be modelled before any decisions are made.
Travel and expenses modernised
The Budget also brought welcome changes for employers managing mobile workforces. The Immigration Skills Charge and Certificate of Sponsorship fees will no longer be treated as taxable benefits in kind when paid by the employer, for payments made from 28 October. Certain visa costs, such as extensions for staff already in the UK, remain taxable, and historic compliance risks are unaffected.
The Approved Mileage Allowance Payment rate of 55p per mile for the first 10,000 business miles is confirmed as permanent. From April 2027, the rate above 10,000 miles will rise from 25p to 35p.
From April 2028, HMRC’s travel and subsistence scale rates will be replaced by simpler allowances of £20 for travel exceeding five hours, £60 for 10 hours and £75 for 24 hours. Overseas rates will move to a tiered system, and the £2,500 threshold for employees claiming their own tax relief on expenses will be removed.
As the new scale rates will not take effect until April 2028, employers may need to manage staff expectations regarding the current limits in the interim. Businesses are advised to review their travel, expenses and global mobility policies now to prepare for the changes ahead.
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