By Amelia Isaacs on Monday 26 September 2022
Kwasi Kwarteng shared plans for tax cuts, support for startup investors and plans to make the UK more competitive in an emergency "mini budget".
In possibly the largest “mini budget” the new Chancellor could have presented, Kwasi Kwarteng put forth an extensive list of commitments and plans for the country’s finances.
For the land of tech and fintech startups, Kwarteng hit on a number of key areas in his growth plan: tax cuts, efforts to make the UK more competitive and big tax breaks for those looking to invest in startups.
Kwarteng praised the “unbounded entrepreneurial drive” of founders, announcing long-term commitments to the Seed Enterprise Investment Scheme (SEIS), the Enterprise Investment Scheme (EIS) and venture capital trusts (VCTs).
“As an integral part of the UK’s early-stage funding landscape, these schemes have greatly supported many new technology companies, including PensionBee prior to our IPO in 2021.
“Due to the increase in the generosity and availability of these schemes, I hope to see SEIS and EIS investments continue to support the most innovative young businesses in the UK.”
The EIS and VCT schemes will be extended past the original 2025 sunset clause and the SEIS caps will be increased.
Companies will be able to raise up to £250,000 of SEIS investment from next April, which is a two-thirds increase, while the gross asset limit will be increased to £350,000 and the cap for investors will rise to £200,000.
Kwarteng also committed to accelerating reforms to the pension charge cap to unlock more capital, with more support coming from a new British Business Bank fund for scale-ups.
“Startups will be cheering the planned increases to the SEIS and long-term commitment to other schemes including the EIS,” Coadec executive director Dom Hallas said.
“Along with changes to pension funds and more capital through the British Business Bank, it’s a strong signal that the government wants growth - and that growth will come from UK tech startups.”
When it comes to the pension fund, the Chancellor said the government will bring forward draft regulations to “remove well-designed performance fees from the occupational defined pension charge cap”.
While the budget laid out a number of seemingly positive commitments for startups from the Chancellor, some were unimpressed with the lack of support for a huge proportion of businesses in the UK.
“[E]ven with the reversal of the planned hike to corporation tax, real substantive and comprehensive financial support for [small and medium-sized enterprise] SME businesses slipped off the agenda in today’s budget,” Nucleus Commercial Finance CEO Chirag Shah said.
“While the government's £60bn energy package will go some way to ease business cost pressures at supply level, there was precious little else delivered that would guarantee support for the SME economy.
“The proposed creation of low-tax zones in almost 40 areas across the UK does little to help the smaller companies who still face supply chain issues, spiralling costs and staff shortages.”
Shah added that with tough times ahead for SMEs, a package of targeted support would have been a “real lifeline” to those who might have to scale back or delay investment to stay afloat this year.
While Kwarteng’s growth plan introduced a lot of new cuts – income tax, stamp duty and business taxes included – it missed out on a number of areas where additions would not have gone amiss.
Hopefully these are issues that will be addressed head-on in a “full” budget later in the year – if this was just “mini”, who knows what the “maxi” budget will have in store.