A quick guide to government-backed schemes for UK startups

Starting a business is no small feat, yet the entrepreneurial spirit in the UK has never been stronger.

According to Enterprise Nation's latest Start Up Ambition Report, nearly half of UK adults (47%) are considering launching a business or side hustle in 2025. 

This figure has gone a good way up from previous years, driven predominantly by the younger generation, with 62% of 18-30-year-olds and 51% of 31-40-year-olds saying they have ambitions to start a business in the next 12 months. 

Almost 50% UK adults are thinking about starting a business in 2025.

The potential for economic growth is tremendous; however, despite this enthusiasm, 65% of respondents admitted to being unaware of government-backed schemes designed to support startups - schemes which can be vital to the success of a new business.

Government initiatives are pivotal in supporting fledgling businesses, offering a lifeline to startups through generous incentives. Understanding these schemes could be the difference between an idea staying on paper and becoming a thriving enterprise - so let’s have a look… 

Government support for UK startups

1. Start Up Loan

Even with a great idea and savvy business plan, launching a business requires cash. Many of us simply don’t have that kind of money to hand. 

A government-backed Start Up Loan could be the answer. These loans offer up to £25,000 to start or grow a business. They have a fixed interest rate of 6% per annum, and include 12 months of free mentoring.

2. Innovate UK Grants

Innovate UK, part of UK Research and Innovation, provides grants to businesses undertaking research and development projects.

These grants are particularly valuable for tech-focussed startups and those working on innovative solutions. With up to £25 million up for grabs, this is an amazing opportunity - but be quick, as applications will close in early March.

3. Business rates relief

Small businesses operating from a single property may be eligible for business rates relief, reducing their financial burden in the early stages of operation. Business rates can be a huge burden on any small and fledging business so it’s worth checking if you’re eligible.

4. Help to Grow

It’s not all financial support: experience matters too. If you’re just embarking on an entrepreneurial journey, you may not have the tools and know-how to scale. 

The Help to Grow campaign provides access to discounted software and management training, helping small businesses to tap into the expertise of others to improve their and growth potential. 

5. SEIS and EIS

SEIS and EIS are two of the lesser-known schemes on this list. That’s especially frustrating, as they are invaluable for new enterprises.

The Seed Enterprise Investment Scheme (SEIS) and the Enterprise Investment Scheme (EIS) are government initiatives designed to encourage private investment in early-stage UK businesses.

As startups often face hurdles in securing funding - investing in a brand new business is always risky, after all - these schemes reduce the financial risk for investors by offering a suite of tax incentives.

Key tax benefits for investors include:

• Income Tax Relief
  • SEIS: 50% tax relief on investments up to £200,000 per tax year.
  • EIS: 30% tax relief on investments up to £1 million per tax year (or £2 million for investments in Knowledge-Intensive Companies, or KICs).
• Capital Gains Tax (CGT) Exemption
  • Any profits from the sale of SEIS or EIS shares after three years are exempt from CGT.
• Inheritance Tax Relief
  • Shares held for at least two years are exempt from inheritance tax.
• Loss Relief
  • If shares are sold at a loss, investors can offset the loss against their CGT or income tax bill.

While SEIS and EIS share the same goal of bringing investment to UK startups, they are tailored to businesses at different stages of development.

SEIS is targeted at the earliest stage. These companies are often in their first three years of operation, with fewer than 25 employees and less than £350,000 in gross assets.

On the other hand, EIS supports slightly more established businesses. This covers those that have been trading for up to seven years, have fewer than 250 employees, and gross assets under £15 million.

The key distinction for investors lies in the tax relief rates (50% for SEIS vs 30% for EIS) and the maximum annual investment limits.

Many startups begin with SEIS to attract early-stage investors before transitioning to EIS as they scale.

Your company is likely eligible for SEIS if it meets the following criteria:

• Incorporated and permanently established in the UK
• Trading for less than three years
• Not listed on a public stock exchange
• Fewer than 25 full-time employees
• Gross assets valued at under £350,000
• Has not previously raised EIS funding or received venture capital trust investments

Eligibility for EIS is slightly broader:

• Incorporated and permanently established in the UK
• Trading for less than seven years
• Fewer than 250 full-time employees
• Gross assets valued at under £15 million
• Not listed on a public stock exchange
• Does not control another company (unless it’s a qualifying subsidiary).

Download our free SEIS and EIS guide to learn more.

To go ahead and apply for SEIS/EIS, start with advance assurance.

We offer an end-to-end service that guides startup founders through every stage of the application process. From checking eligibility to handling all necessary documentation, we can take the guesswork out of the application process.

Our InVestd Raise add-on includes SEIS and EIS advance assurance applications, plus a bunch of other useful features for fundraising.

Once approved, founders can also issue shares and share certificates directly to investors through the platform, ensuring seamless management of equity.

Startups! There's support available

With nearly half of UK adults considering entrepreneurship, the potential for economic growth and innovation is immense. However, to truly unlock this potential, greater awareness of government-backed schemes like SEIS and EIS is essential.

Knowledge is power, so make sure to explore the opportunities available through SEIS, EIS, and other government initiatives. And for those ready to take the plunge, Vestd is here to guide you every step of the way.