Tech founders and Investors are encouraged by some of Kwasi Kwarteng’s new plans. As Chancellor of the Exchequer, Rishi Sunak’s agenda was cut short when he resigned earlier this year. So, all eyes were on the new chancellor’s support for the startup ecosystem.
Several key policy changes have been made by Kwarteng that some startups believe will help accelerate their growth. Listed below are all the proposed changes startups need to know.
Proposed extension of EIS beyond 2025
The Enterprise Investment Scheme (EIS) had been due to expire in April 2025 because of a sunset clause that was introduced by the EU. Kwarteng has now extended the scheme, which the government hopes will once again give UK startups a big boost during these challenging times.
Proposed extension of VCT tax relief beyond 2025
Under the same sunset clause as the EIS scheme, VCT tax reliefs were due to expire in April 2025. VCTs (Venture Capital Trusts) provide scale-up finance and invest in higher-risk companies that struggle to raise capital from banks and other traditional sources. A 30% tax relief is currently available if these investments are held for five years. These investments also pay tax-free dividends, which encourages them to make these higher-risk investments. The government’s intention to continue the scheme beyond 2025 has been applauded by various industry bodies.
SEIS access and funding proposed to increase
The SEIS scheme grants tax relief to investors who back early-stage UK startups. As a result of the three main changes proposed to the scheme, early-stage UK businesses will be able to accelerate their growth, and jobs will be created at both a regional and national scale. The maximum amount a company can raise under the SEIS has risen from £150,000 to £250,000. Eligibility criteria is now more inclusive, with businesses being able to hold assets of up to £350,000 (up from £200,000) and have been trading for up to 3 years (as opposed to 2 years) to qualify for the SEIS. The annual SEIS investment allowance for investors has doubled, from £100,000 to £200,000.
Plan to accelerate pension charge cap reforms
The plans to accelerate reforms to the pensions charge cap is an effort to “unlock” pension investments into UK assets and high-growth businesses.
The government previously confirmed that it would proceed with proposals to exclude performance fees from the 0.75 per cent charge cap on defined contribution (DC) default arrangements
Plan to double stock options allowances
With effect from 6 April 2023, the Treasury is doubling the limit for the Company Share Option Plan (CSOP). This means that qualifying companies can issue up to £60k of CSOP options to employees, doubling up from the current £30k cap which has been in place for almost thirty years.Do you need to know what a CSOP is, what favourable tax treatment CSOP offers, and whether much will change because of the increase?
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