Chancellor Kwasi Quarting unveiled a set of “mini-budget” measures today aimed at spurring growth in the British economy that have been widely welcomed by the UK technology community and investors.
The small budget It is Prime Minister Liz Truss’s government’s first major financial event and comes at a time when people and businesses are grappling with rising energy costs, rising inflation and a looming recession.
A survey of UK small and medium businesses, conducted by Funding Options and Censuswide, found that four out of five business owners are considering returning to work due to rising energy costs, supplier costs and the cost of living.
Truss said her priority is to stimulate growth through tax cuts for individuals and businesses and deregulation.
Economists have warned that personal tax cuts disproportionately benefit the wealthy and raised concerns that the chancellor did not ask the Office of Budget Responsibility to make an independent assessment of the cost and impact of the mini-budget.
The tax cuts are estimated to cost £45 billion by 2026/7, while an additional £72 billion of debt is planned for this financial year.
Despite this, the business community welcomed many of the measures outlined in the mini-budget, such as scrapping a planned increase in corporate tax to 25% next year.
“It’s bold, agile and fast. Economists will argue for months to come, but small businesses will wait for this budget to affect their sales tonight,” said Emma Jones, CBE, founder of small business support platform Enterprise Nation.
The new management has clearly defined its booth today and stands firmly on the side of entrepreneurs and wealth makers. The tax cuts, both commercial and personal, will provide confidence and unleash the entrepreneurship we know exists across the UK and which the Chancellor has referred to so often.”
“Businesses across the UK will enthusiastically welcome the Chancellor’s pledge to focus on economic growth and accelerate the development of new infrastructure,” said Sivon Haviland, director general of the British Chambers of Commerce.
Here are the main UK tech micro-budget announcements – and what the industry thinks about the actions.
The corporate tax increase has been cancelled
Former Chancellor Rishi Sunak had planned to raise the corporate tax to 25% in April next year. The move has been reversed, meaning the rate will remain at 19% – the lowest level among the G7 countries.
Startups welcomed the move and said it would allow them to keep much-needed cash during the downturn.
The rollback of corporate tax and an increase in NI, said Ravi Anand, managing director of alternative lender Thincats, “releasses working capital at a critical time and will encourage investment.”
Katie Gallagher, Managing Director of Manchester Digital and Head of UK Tech Cluster Group, said: “The tech and digital businesses we represent welcome a reversal of the increase in corporate tax and an increase in National Insurance; as well as a reduction in income tax. In particular, this will give start-ups and early stage companies a boost. To ensure she is given every chance of success.”
Sahel Sethi, co-director of financial wellbeing platform Maji.io, said: “We welcome tax cuts for both employees and employers in the current environment, and with the government focused on growth, it is great to see increased incentives. We now need to hope that we all get Boost growth before government finances deteriorate or markets lose confidence in the economy.”
Increase SEIS and guarantee EIS
Kwarteng has increased the amount companies can raise with its Seed Enterprise Investment Scheme (SEIS) up to £250,000 – an increase of two-thirds. The total assets limit will also be increased to £350,000 and the age limit for eligible companies will be raised.
Launched in 2012, SEIS aims to encourage investments in early-stage startups by providing tax breaks for projects considered riskier bets.
The move has been widely welcomed by UK technology investors. Sarah Barber, CEO of Jenson Funding Partners, called the measures “a huge boon to the fast-growing business.”
Barber, who set up one of the UK’s first SEIS funds, added that “so far it seems like successive governments have been sleeping” on the SEIS information system.
Stephen Page, founder and CEO of SFC Capital, which has been campaigning to reform the SEIS information system, said the previous cap was “quickly outpaced by the impact of the growth he himself was driving on early-stage corporate financing needs.”
Similarly, the government said it “remains supportive of the Institutional Investment Scheme (EIS) and Venture Capital Funds (VCT) and sees value in expanding them in the future.”
Both initiatives provide tax breaks for corporations and venture capital firms. There has been uncertainty about the future of EIS, which has an “expiration clause” that will expire in 2025 unless it is renewed.
“In a statement with a very welcome focus on growth and the future of economic success in the UK, the chancellor has given UK startups a major boost by securing the future of the EIS scheme, which provides £1.7 billion annually to fund some Investors, “Companies with the highest growth rates in the UK.”
“Besides funding, fast-growing businesses and their investors need one thing above all else – a consistent landscape of support. By providing clarity around this vital source of funding, UK startups have a much clearer path to growth over the coming years. Economic turmoil, the impact of this assertion cannot be underestimated.”
Barber added: “Entrepreneurs must now spend less time raising money, and more time doing what they do best – building business. This is a fantastic commitment from the new government for UK businesses.”
Pension investment reform
The mini-budget has announced plans to roll out draft regulations to reform the pension cost cap, which will give pension schemes more flexibility to invest in innovative UK companies.
“Today’s budget was supposed to be ‘small’, but for high-growth technology companies in the UK it was a pivotal moment,” said Murray Wright, chief executive of Parkwalk Advisors. After years of debate, we welcome the government’s decision to open up investments in UK assets and innovative high-growth companies by accelerating pension reform.
“This will help support the UK, which is a leader in creating intellectual property in tomorrow’s sectors including artificial intelligence, life sciences, clean tech, medical technology, and quantum computing.”
IR35 تغييرات changes canceled
IR35, the UK’s work-outside payroll rules that aim to tackle tax evasion by contractors and freelancers, has been widely criticized by companies since it was reformed in 2021.
It is now scheduled to be canceled entirely from April next year. The government has since said, “Workers who provide their services through an intermediary will again be responsible for determining their employment status and paying the appropriate amount of taxes and National Insurance contributions.”
Rescinding the IR35 changes will “remove the friction and confusion that has prevented companies and the public sector from harnessing the full value of contractors in past years,” said YunoJuno CEO Ronar Ristrup.
Ristrup added: “With companies approaching challenging times with unprecedented speed of change, the ability to easily tap into a flexible workforce of highly skilled professionals will be key to their ability to adapt.”
Ritam Gandhi, Founder of Studio Graphene added: “The government can look to pair its short-term aid with long-term support for ambitious tech startups, by encouraging more young people to participate in digital skills training to address a pressing skills gap that can hamper the growth of Industry “.
Low tax investment areas
The government is in discussions with 38 local authorities to establish investment zones. These areas will have lower taxes, more flexible planning rules, and other tax incentives.
“We will reduce corporate taxes in designated tax locations for 10 years,” Kwarteng said. There will be accelerated tax credits for structures and buildings and 100% tax credits on qualified investments in plant and machinery, on the purchase of land and buildings for new commercial or residential developments.
“There will be absolutely no stamp duty to pay on newly occupied commercial premises. There will be absolutely no labor rates to be paid, and if a business hires a new employee at a tax location, then on the first £50,000 they earn, the employer will pay no national insurance Absolutely “.
The policy could see the government’s target areas in need of investment in a more realistic move of the previous administration’s major “compromise” policy.
Manchester Digital’s Gallagher “initially welcomes the concept of new low-tax investment zones” but has called on the government to “work alongside existing tech regional ecosystems that truly understand the local economy and where investment is essential to truly prospering”.
Ross Shaw CBE, founder of Tech London Advocates and Global Tech Advocates, said: “It is hoped that the proposals to liberalize planning rules, accelerate development and strengthen tax relief in private investment zones across the UK will provide attractive regional incentives for tech companies across the country.
“These are concrete steps towards ‘upgrading’ promised areas across the country that should also have a share in London’s success. However, it would be a mistake to overlook a pessimistic economic situation – the government will need to listen and cooperate with the private sector to make it work. This is really true.”
Julian David, chief executive of trade association techUK, said investment zones “provide a real opportunity for growth if they can help boost local digital capacity”.
David added: “Ultimately, it is productivity growth over the long term that will put the UK economy back on track. The government needs to urgently work with industry to detail these plans to provide clarity to companies looking to invest.”
Technology and science competition worth 500 million pounds
The mini-budget also revealed a competition to provide up to £500 million to support funds that support science and technology work. The government said the Long-Term Investment in Technology and Science (LIFTS) competition will “unlock billions of pounds of additional investment in the UK’s expansion over time”.
SFC Capital said: “We also very much hope that a significant portion of the new £500m capital will be allocated to high-tech and rapidly growing upstream investments rather than later-stage venture capital. This is where intervention is most needed. As we explained in our last two annual reports on the state of investment in the establishment stage.
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