Tapping into UK Government Grants for Startups

Government support schemes

A guide to the top regional and central government entrepreneurship schemes / government grants for startups in the UK

There were mixed reactions when Rishi Sunak, the Chancellor of the Exchequer announced that the UK government was now a shareholder in 158 companies under its Future Fund. By August 2021, the Fund had disbursed over £1 billion in convertible loans to 1,200 high-growth, innovative companies of which 158 had converted to equity. The Future Fund, launched in 2020 and expanded in 2021 is just one of several ways the U.K. government supports entrepreneurship.

For entrepreneurs starting a business or a side hustle in the UK, there is arguably no better way to start than being aware and taking advantage of the support provided by the government. We have split this guide into two -central government and local government.

U.K. Central Government Initiatives

(1) Venture Capital Schemes
: The Enterprise Investment Scheme (EIS), Social Investment Tax Relief (SITR) and Seed Enterprise Investment Scheme (SEIS) are three of the four Schemes run by the government. These empower small and medium businesses and social enterprises grow by increasing their attractiveness to private investors. Investors are able to claim tax relief on 30% to 50% of their investment in a qualifying private company. Any small business owner intending to bring onboard external investors should apply as soon as possible as the process often takes a while.

(2) Network & Support:
is a U.K. government backed organisation which supports the growth of companies towards ensuring the UK remains one of the leading global entrepreneurship hubs. Technation runs growth programmesvisa schemes to attract tech talenttraining academy and founder networks. Monzo, Shazam, Deliveroo and Revolut are just some of the world-class companies that Technation counts as its alumni. Technation’s programmes are available all the time and it does not hurt to join as soon as you have made the jump to entrepreneurship

(3) Free Staff:
does an offer of a young, skilled, all expense paid staff for 6-months sound too good to be true? If you are a bootstrapped founder tired of wearing multiple hats in your small company then you need to check out Kickstart. The application process takes up to six months so it is advisable to apply as soon as you have a registered UK company.

(4) Grants, Loans & Credits:
through Innovate UK, the government offers innovative startups an opportunity to compete for funding to help them create new product and services that rely on research and development. From 2004 till date, Innovate UK has financed over 44,000 projects with an average award of £263k. More recently, in March 2022 Innovate UK announced that an earlier pilot programme was being expanded. Businesses with innovative late-stage projects can apply for loans between £100,000 and £2 million to support their research and development.

For more established companies, the recently announced The Future Fund: Breakthrough is a £375 million programme which encourages private investors to co-invest in high-growth, innovative firms. The Fund co-invests up to 30% in funding rounds provide the company has commitments from other funding sources for the balance.

(5) Tax Credits
: cash is cash no matter what it is called. Over 50,000 small businesses claim up to £5 billion annually under the HMRC’s research & development (R&D) tax credit relief. The scheme allows small companies claim up to 33% of the amounts spent on research and development projects. R&D is broadly defined and includes staff, software, utilities and sub-contractor costs. Application is through annual tax return and the HMRC seeks to verify calculations and asks for evidence of expenditure.

Watch out for Part II where we detail the local government initiatives available to entrepreneurs across the UK.


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