The chancellor is weighing plans to hand hundreds of millions of pounds in tax incentives to small businesses in next month's budget as she seeks ways to pitch the government as pro-enterprise to Britain's private sector.
Sky News has learnt that officials have drawn up proposals to lift the cap on a scheme called Enterprise Management Incentives (EMIs), which allows smaller companies to offer share options to employees with no income tax or national insurance liabilities.
Money blog: Major changes to vet prices proposed after investigation
The EMI share options cap currently sits at £250,000 over a three-year period, and is applicable to businesses with assets of £30m or less, as well as fewer than 250 employees.
In 2022-23, the scheme cost the exchequer £670m, according to official figures.
Insiders said that Rachel Reeves was considering plans to lift the EMI cap by "a multiple" of its current level, implying that a new threshold could cost a substantial sum in the form of additional tax breaks.
Precise details of the proposed new cap were unclear on Wednesday.
A source said that senior Treasury officials as well as key figures in 10 Downing Street including Varun Chandra, the prime minister's chief business adviser, had been involved in recent talks about the EMI overhaul.
News of the deliberations over the boost to SME tax incentives comes on the same day that the chancellor told Sam Coates, Sky News's deputy political editor, that budget tax rises were under consideration.
"Of course, we're looking at tax and spending as well, but the numbers will always add up with me as chancellor because we saw just three years ago what happens when a government, where the Conservatives, lost control of the public finances: inflation and interest rates went through the roof," she said.
Read more from Sky News:
Royal Mail fined £21m for missing delivery targets
UK to have highest inflation in G7, IMF says
A Treasury spokesperson said: "We do not comment on speculation around tax changes outside of fiscal events."
(c) Sky News 2025: Reeves plots budget boost to entrepreneur tax incentives
UK suffers blow in bid to become minerals superpower - as it's snubbed by its own leading firm
PPE Medpro will be pursued 'with everything we've got' Wes Streeting says
Be bold with tax hikes or risk 'groundhog day', chancellor told
£5bn Bitcoin fraud mastermind had device containing £67m in secret pocket
