ScaleUp Institute: Essential Budget Highlights for Scaling Businesses

The long anticipated Budget has landed and an extract is provided below of all the relevant elements to the scaleup economy. 

The Government has made strides in creating a platform of longer term vision and stability for growth in this Budget and in the recent International Investment Summit.

The ScaleUp Institute has long evidenced the role economic development banks and sovereign wealth funds play in scaleup economies and those that were ahead of us internationally in 2013 in scaling businesses.

The commitments seen at the International Investment Summit, and today at the Budget, which are captured below, are therefore welcome:  

• Commitment to R&D; investment zones and local growth plans; 
• Expansion of key British Business Bank schemes, placing the British Business Bank’s core commercial activities on a permanent footing, including the expansion of a range of their existing programmes today alongside greater flexibility in their mandate and deployment of £50m to women led funds;
• The creation of the National Wealth Fund and British Growth Partnership to crowd in institutional funds and patient capital to our scaleup economy; 
• Commitment to a Small Business Strategy and modern Industrial Strategy.

Announcement:

• Small Business Strategy – A Small Business Strategy Command Paper will be published in 2025, setting out the Government’s vision for supporting small businesses, including “from boosting scale-ups”, across key policy areas such as “making it easier to access finance, opening up overseas and domestic markets, building business capabilities, and providing a strong business environment.”
• Industrial Strategy - The Budget confirmed long-term support for priority sectors ahead of the full modern Industrial Strategy’s publication in the Spring, including:
  • Committing £975 million in R&D funding for the aerospace sector over five years. Further details will follow in Phase 2 of the Spending Review.
  • Committing over £2 billion in R&D and Capital funding over 5 years to support the automotive sector, including the zero emissions vehicle manufacturing sector and supply chain. Further details will follow in Phase 2 of the spending Review.
  • Up to £520 million for a new Life Sciences Innovative Manufacturing Fund to drive growth and build resilience for future health emergencies.
  • Tax reliefs for the UK’s world-leading creative industries, which will provide £15 billion of support over the next 5 years.
• Cross-government Review of Technology Adoption for Growth, Innovation and Productivity – Chief Scientific Adviser, Professor Dame Angela McLean and National Technology Adviser, Dr Dave Smith, will lead a review on barriers to the adoption of transformative technologies that could enhance innovation and productivity, with a focus on the growth-driving sectors identified in the Industrial Strategy green paper. 
• Office for Value for Money - The Office for Value for Money will conduct an assessment of where and how to root out waste and inefficiency, undertaking value for money studies in specific high-risk areas of cross-departmental spending and scrutinising investment proposals to ensure they offer value for money.

• Private Intermittent Securities and Capital Exchange System Stamp Taxes on Shares Exemption – Progress on delivering the Private Intermittent Securities and Capital Exchange System (PISCES) will be maintained. PISCES transactions will be exempt from Stamp Duty and Stamp Duty Reserve Tax. 
• British ISA – The British ISA will not be progressed due to mixed responses to the consultation launched in March 2024.
• British Business Bank - The Budget confirmed the BBB’s £1bn in funding across 2024-25 and 2025-26, including over £250 million each year for small business loans programmes, including Start Up Loans and the Growth Guarantee Scheme and additional funding for three of the Bank’s equity programmes, the Life Sciences Investment Programme, Future Fund: Breakthrough and the Regional Angels Programme. 
  • In addition, the Budget confirmed that all large-scale financial transitions by Government should be delivered by expert institutions including the BBB, the National Wealth Fund, and UK Export Finance. 
  • The Budget also includes an announcement that in line with the ambition of the Invest in Women Taskforce the BBB will invest £50m in women-led funds through its existing programmes. 
  • This follows on from the announcement at the International Investment Summit of a new British Growth Partnership to be led by the BBB and the reforms to the BBB’s financial framework that will put its £7.9bn set of commercial programmes on a permanent footing. 

Investment

• Capital investment - Will increase by £13 billion next year, taking total departmental capital spending to £131 billion in 2025-26.
• Government R&D investment - Will be maintained with £20.4bn allocated in 2025-26.

Tax

• Enterprise Investment Scheme / Venture Capital Trust Scheme - The Budget reaffirmed the Government’s commitment to extending these schemes to 2035, part of a series of measures to make it easier for startups and scaleups to access external sources of financial support. 
• Capital Gains Tax Rates – The lower and higher main rates of Capital Gains Tax will increase to 18% and 24% respectively for disposals made on or after 30 October 2024. The rate for Business Asset Disposal Relief and Investors’ Relief will increase to 14% from 6 April 2025, and will increase again to match the lower main rate at 18% from 6 April 2026. The new rates will be legislated in Finance Bill 2024-25.
• Carried interest taxation reform – The way Carried interest is taxed will be reformed. From April 2026, all carried interest will be taxed within the income tax framework, with a 72.5% multiplier applied to qualifying carried interest that is brought within charge. As an interim step, the two Capital Gains Tax rates for carried interest will both increase to 32% from 6 April 2025. The government will also consult on introducing further conditions of access into the regime.
• Corporate Tax Roadmap - Published alongside the Budget, the Roadmap includes a commitment to cap the Corporation Tax Rate at 25%; maintain the Small Profits Rate and marginal relief at current rates and thresholds; and maintain key features as such as Full Expensing, the Annual Investment Allowance, R&D relief rates, and the Patent Box. 
• Advance tax certainty for major projects – A consultation will be launched in spring 2025 to develop a new process that will give investors in major projects increased tax certainty in advance.
• Plastic Packaging Tax rates – The Plastic Packaging Tax (PPT) rate for 2025-26 will rise in line with CPI inflation.

Tax reliefs 

• Inheritance tax: agricultural property relief and business property relief – These inheritance tax reliefs will be reformed from 6 April 2026. In addition to existing nil-rate bands and exemptions, the current 100% rates of relief will continue for the first £1 million of combined agricultural and business property. The rate of relief will be 50% thereafter, and in all circumstances for quoted shares designated as “not listed” on the markets of recognised stock exchanges, such as AIM.
• Capital Gains Tax: Investors’ Relief lifetime limit – The lifetime limit for Investors’ Relief will be reduced to £1 million for all qualifying disposals made on or after 30 October 2024, matching the lifetime limit for Business Asset Disposal Relief. This will be legislated in Finance Bill 2024-25.
• Business Asset Disposal Relief - Will remain at 10% this year, before rising to 14% on 6 April 2025 and 18% from 6 April 2026-27.
• Research & development tax reliefs: improving administration – Widening the use of advance clearances in research & development reliefs will be discussed with stakeholders, with the intention to consult on lead options in spring 2025.
• Audio-Visual Expenditure Credit: Additional tax relief for visual effects – From 1 April 2025, film and high-end TV productions will be able to claim an enhanced 39% rate of Audio-Visual Expenditure Credit on their UK visual effects costs. UK visual effects costs will be exempt from the Audio-Visual Expenditure Credit’s 80% cap on qualifying expenditure. Costs incurred from 1 January 2025 will be eligible. 
• Independent Film Tax Credit – From 1 April 2025, UK films with budgets under £15 million and a UK lead writer or director will be able to claim an enhanced 53% rate of Audio-Visual Expenditure Credit, known as the Independent Film Tax Credit. Expenditure incurred from after 1 April 2024 on films that began principal photography on or after 1 April 2024 is eligible.

R&D/Innovation

• Made Smarter – Funding for the Made Smarter Adoption programme will double to £16 million in 2025-26.
• Innovation Accelerator Programme - The Innovation Accelerator Programme in Glasgow, Manchester, and the West Midlands will be extended.
• Digital Adoption Taskforce – The SME Digital Adoption Taskforce will be extended and will produce an interim report early in 2025 with practical steps and recommendations to enhance SME adoption of digital technology
• Digital adoption pilots – The Department for Business and Trade will shortly announce details on a £4 million pilots package to encourage tech adoption for SMEs.
• DIgital infrastructure - £500 million will be invested in Project Gigabit and the Shared Rural Network next year.

Investment Zones / Land

• Freeports and Investment Zones – Funding was confirmed for Investment Zones and Freeports across the UK, including the approval of the East Midlands Investment Zone, and confirming that five new customs sites will be designated in existing Freeports shortly. 
• East West Rail consultation - The East West Rail consultation, the next step in the project, which will be launched by the Secretary of State for Transport in November 2024.
• Housing - A new housing package will include £500 million in new funding for the Affordable Homes Programme, increasing it to £3.1 billion

Devolution

• Regional growth strategy – The government will set out next steps on its strategy for regional growth, across investment, devolution and local growth funding reform.
• English Devolution White Paper – This will set out plans to widen devolution to more areas and deepen the powers of existing mayors and their combined authorities. 
• Granting borrowing powers for newly established Mayoral Combined (County) Authorities – Legislation will be passed to provide the North East Combined Authority; East Midlands Combined County Authority; and York and North Yorkshire Combined Authority with borrowing powers across the full range of their functions.
• Integrated settlements for Mayoral Combined Authorities – Integrated settlements will be implemented for Greater Manchester and West Midlands Combined Authorities from the start of the 2025-26 financial year, and for Liverpool City Region Combined Authority and the North East, South Yorkshire and West Yorkshire Mayoral Combined Authorities from the start of the 2026-27 financial year.

Physical

• Business rates: retail, hospitality and leisure relief – For 2025-26, eligible retail, hospitality and leisure (RHL) properties in England will receive 40% relief on their business rates liability. RHL properties will be eligible to receive support up to a cash cap of £110,000 per business.
• Business rates: multipliers – For 2025-26, the small business multiplier in England will be frozen at 49.9p via secondary legislation. The standard multiplier will be uprated by the September 2024 CPI rate to 55.5p.
• Business rates: sectoral multipliers – Permanently lower multipliers for Retail, Hospitality and Leisure (RHL) properties from 2026-27 will be implemented, paid for by a higher multiplier for properties with Rateable Values above £500,000.
• Business rates reform – A discussion paper has been published setting the direction of travel for transforming the business rates system and inviting industry to a dialogue about future reforms.
• Business rates: Disclosure Consultation Summary of Responses – The Valuation Office Agency (VOA) is publishing a response to the March 2023 Consultation on Disclosure, which sets out the next steps on increasing the transparency of business rates valuations by disclosing more information.