Angel Investors:
The chancellor, Jeremy Hunt, has confirmed that he is reversing changes to angel investor rules that raised the income threshold to qualify as a high-net-worth individual.
The rule change also raised the income requirement to receive investment protections under the Financial Promotion Order from £100,000 to £170,000.
The Treasury faced a very significant backlash from the high tech growth sector due to its potential to cut off thousands of angel investors from supporting small businesses who were predominantly women, minority backgrounds and those based outside of London.
The Treasury indicated that it would reverse the policy, saying it will “legislate to reinstate the previous eligibility criteria to qualify as a high net worth or sophisticated investor, and will also carry out further work to review the scope of the exemptions”.
Research and Development (R&D):
A funding package of £360m – split between the state and industry – will be deployed to support British R&D and manufacturing.
Which includes £92m for life science manufacturing facilities looking at drug development and diagnosis as well as £200m for clean aviation technology development and almost £73m for electric vehicle development.
However, there was nothing on structural reform of the R&D tax credit scheme, which startups had been hoping for. The Chancellor has in the past made significant cuts to the popular scheme before later undoing some of those changes.
Instead, there was commitment for HMRC to establish an “expert advisory panel” to support them in a bid to improve how the R&D tax credit scheme is administered.
Pension funds:
The government has been exploring ways to increase investment of the billions of pounds held by pension funds towards the UK’s startup and high-growth companies.
Building on the Mansion House Reforms that were announced last year with a handful of pre-briefed measures which includes a requirement for pension funds to publicly disclose how much they invest in UK businesses compared with those overseas.
Pension funds will also be required to publicly compare performance data against competition drawing on the superior performance of, for example, Australian Superannuation funds, while poorly performing UK pension schemes will be prohibited from taking on new business from employers.
Hunt also announced “British ISA” geared towards funnelling retail investment into UK companies. This will be an additional £5,000 annual investment allowance.
Spinouts:
Universities will be asked to report on their spinout policies by the end of May 2024. It follows the publication of the Treasury-commissioned report into university spinouts last year, which recommended universities reduce the enormous stakes in startups created by their faculty and students, substantially decreasing the incentives for their founders.
Artificial Intelligence (AI):
The UK’s commitment to AI funding has yet to show signs of slowing down with Hunt announcing a £100m funding package over the next five years for the Alan Turing Institute, the National AI and Data Science Research body.
A £7.4m AI upskilling fund for SMEs has been announced as part of a new SME Digital Adoption Taskforce. AI also features heavily as part of the chancellor’s plan to improve public services, with additional funding planned to increase the number of AI experts in the public sector to increase its efficiency.
To summarise, the key headline points of the budget are as follows:
Tax and Income Support:
• National Insurance, a payroll tax, cut by 2p in the pound for employees and the self-employed
• Non-dom tax regime, for UK residents whose permanent home is overseas, to be replaced with new rules from April 2025
• Full child benefits to be paid to households where highest-earning parent earns up to £60,000, limit is £50,000 currently
• Partial child benefit to be paid where highest earner earns up to £80,000
• £5,000 “British ISA” tax allowance for individual savers to invest in UK-listed companies
• Longer repayment period for people on benefits taking out emergency budgeting loans from the government
• £90 fee to obtain a debt relief order scrapped
• Government fund for people struggling with cost of living pressures to continue for another six months
Cigarettes and Booze:
• Freeze on alcohol duty, which had been due to end in August, to continue until February 2025
• New tax on vaping products to start in October 2026, following a consultation
• Existing tax on tobacco to increase, to maintain the “financial incentive to choose vaping over smoking”
Transport and Energy:
• Fuel duty frozen again, with the 5p cut in fuel duty on petrol and diesel, due to end later this month, kept for another year
• £160m deal for UK government to purchase site of planned Wylfa nuclear site in north Wales
• “Windfall” tax on the profits of energy firms, which had been scheduled to end in March 2028, extended until 2029
• Air passenger duty, the tax paid on flights, to go up for business class tickets
Housing:
• Higher rate of tax paid on profits from selling property cut from 28% to 24%
• Tax breaks for owners of holiday let properties scrapped
Economy:
• Office for Budget Responsibility predicts UK economy to grow by 0.8% this year and 1.9% next year
• Growth of 2% predicted for 2026, with 1.8% in 2027 and 1.7% in 2028
• UK’s inflation rate forecast to fall below 2% target “in just a few months’ time”
• Underlying debt, excluding Bank of England debt, forecast to be 91.7% of GDP this year, rising to 92.8% next year
• Overall day-to-day government spending to grow by 1% in real terms over next five years
Business and Investment:
• Threshold at which small businesses must register to pay VAT raised from £85,000 to £90,000 from April
• Tax reliefs for touring and orchestral productions, which had to been due to end in March 2025, made permanent
• Covid-era government loan scheme for small businesses extended until March 2026
Other Measures:
• £1m for a memorial to honour Muslims who fought for Britain during World War One and Two
• A new tax credit for independent UK films with a budget of less than £15m
(Source: UK Government/UKTN/BBC)