What does the chancellor’s “mini budget” mean for fintech?

Kwasi Kwarteng shared plans for tax cuts, support for start-up investors and plans to make Britain more competitive in an emergency “mini budget”.

Image source: Kwasi Kwarteng/CC BY 3.0.

In possibly the biggest “mini-budget” the new chancellor could have presented, Kwasi Kwarteng laid out a comprehensive list of commitments and plans for the country’s finances.

For the country of tech and fintech startups, Kwarteng hit on a number of key areas in his growth plan: tax cuts, efforts to make Britain more competitive and big tax breaks for those looking to invest in startups.

Praising the “unlimited entrepreneurial drive” of founders, Kwarteng announced long-term commitments to the Seed Enterprise Investment Scheme (SEIS), Enterprise Investment Scheme (EIS) and venture capital trusts (VCTs).

“By guaranteeing the future of EIS and expanding the parameters of SEIS, the Chancellor has given UK startups a huge boost,” said PensionBee CEO Romi Savova.

“As an integral part of the UK’s early stage funding landscape, these schemes have heavily supported many emerging technology companies, including PensionBee ahead of our IPO in 2021.

“Due to the increase in the generosity and availability of these schemes, I hope to see SEIS and EIS investment continue to support the most innovative young businesses in the UK.”

The EIS and VCT schemes will be extended beyond the original sunset clause from 2025 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 an increase of two-thirds, while the gross capital limit will be increased to £350,000 and the limit for investors will rise to £200,000.

Kwarteng also committed to speeding up pension tax cap reforms to free up more capital, with more support from a new British Business Bank scale-up fund.

“Startups will welcome the planned increases to SEIS and long-term commitment to other schemes including EIS,” said Coadec CEO Dom Hallas.

“Along with pension fund changes 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.”

On the pension fund, the chancellor said the government would bring forward draft regulations to “remove well-designed benefit charges from the occupational pension cap”.

While the Budget laid out a number of seemingly positive commitments for startups from the Chancellor, some were unimpressed by the lack of support for a large proportion of UK businesses.

“[E]friend with the reversal of the planned increase in corporation tax, real real and extensive financial support for [small and medium-sized enterprise] SMEs fell off the agenda in today’s budget, said Chirag Shah, managing director of Nucleus Commercial Finance.

“While the Government’s £60 billion energy package will help ease cost pressures for businesses at the supply level, very little else was delivered that would guarantee support for the SME economy.

“The proposed creation of low tax zones in almost 40 areas across the UK will do little to help the smaller companies who continue to face supply chain issues, rising costs and staff shortages.”

Shah added that with tough times ahead for SMEs, a package of targeted support would have been a “real lifeline” for those who had to scale back or delay investment to stay afloat this year.

While Kwarteng’s growth plan introduced many new cuts – including income tax, stamp duty and business tax – it missed a number of areas where additions would not have gone amiss.

Hopefully these are issues that will be addressed directly in a “full” budget later in the year – if this was just “mini”, who knows what the “maxi” budget will have in store.