UK Government Announces Support for SME Growth – Don’t Miss These Incentives!
- TBA
- Jul 2
- 4 min read
For those preparing to start a business, establishing a company in the United Kingdom is, in reality, a fairly straightforward process. Once your documents are ready and your application is submitted, you could have your own registered company within just 24 hours.
For most entrepreneurs, your business will likely fall under the category of a Small and Medium-sized Enterprise (SME).
In the UK, however, being classified as an SME is not merely a reference to your company’s size. It also means you may be eligible for a wide range of exclusive government support schemes and financial incentives.
In March 2025, the UK government officially launched a new Board of Trade aimed at coordinating policy, offering targeted support, and helping 5.5 million SMEs across the country expand their exports and achieve sustainable growth.
Let’s explore what qualifies as an SME, why SMEs are so important to the British economy, and what practical steps you can take if you’re planning to launch your own business.
What is an SME?
A business must meet both of the following criteria to be considered a Small or Medium-sized Enterprise (SME):
Fewer than 250 employees
Annual turnover not exceeding £44 million or a balance sheet total of no more than £38 million
This classification applies to all types of business structures, including limited companies, partnerships, and sole traders. Whether you run a coffee shop, a beauty salon, or an online design studio, as long as your business falls within these thresholds, you are likely to be considered an SME—and therefore eligible for a number of official benefits such as grant schemes, tax reliefs, and start-up subsidies designed to help your business grow.
Why are SMEs so vital to the UK?
As of early 2024, SMEs accounted for 99.9% of all UK businesses, with 99.2% of them classified as small enterprises (fewer than 50 employees). These companies collectively employ around 60% of the UK workforce and contribute approximately £2.8 trillion to the economy every year.
Despite being relatively modest in size, SMEs are the backbone of local communities, high streets, and digital marketplaces. Think of your favourite independent coffee shop, neighbourhood gym, or local restaurant—all are likely SMEs that shape our day-to-day lives and consumer experiences.
Recognising their vital role in employment and innovation, the UK government is continually expanding its support framework for SMEs, with the aim of fostering a more inclusive, agile, and resilient business environment.
Key government support for SMEs
To support this vibrant sector, the UK government has rolled out a wide range of funding initiatives, tax reliefs, and business support programmes specifically for SMEs. Some of the most accessible and impactful include:
1. Government funding and loan support
The British Business Bank, a government-owned development bank, offers tailored loan schemes, funding information, and business advisory services to SMEs across the country. It also helps businesses connect with regional support networks and tools.
2. Investment schemes and tax incentives
In addition to the British Business Bank, the government has introduced various schemes to promote SME financing, including:
Enterprise Investment Scheme (EIS) and Venture Capital Trusts (VCTs) – which offer income and capital gains tax reliefs to investors who fund SMEs.
Capital allowances and investment tax credits – particularly for projects focused on R&D or sustainability, allowing businesses to claim enhanced deductions.
3. Tax relief programmes
R&D tax relief for SMEs
From 2024, the previous SME and large company schemes were merged into a single programme. Under the new framework, SMEs can claim a 20% above-the-line credit, with an effective benefit of roughly 16.2%. In cases where R&D expenditure represents at least 30% of total costs, R&D-intensive SMEs may be eligible for a cash repayment of up to 27%.
Note that HMRC has introduced stricter compliance checks for R&D claims, including mandatory pre-notifications, detailed supporting documentation, and proper handling of subcontracted work.
Employment Allowance
From April 2025, the Employment Allowance (which reduces employer National Insurance contributions) has been increased from £5,000 to £10,500, and previous restrictions on who can apply have been lifted.
Business Rates Relief
Retail, hospitality, and leisure businesses can benefit from a 40% business rates discount for the 2025/26 tax year, with further reductions planned for 2026/27. Small businesses with properties valued at £12,000 or less may qualify for full exemption, while those between £12,001 and £15,000 are eligible for tapered relief.
Annual Investment Allowance
This scheme allows businesses to deduct the full value of eligible machinery and equipment purchases from taxable profits in the year of purchase—providing an immediate reduction in tax liability.
Ready to take the first step?
If you're thinking about launching a business in the UK, consider following these five key steps:
Define your business model and target customer base
Choose the appropriate legal structure (e.g. sole trader, limited company, partnership)
Register your company in the UK (TBA Accountants can assist with registration; for overseas founders, we also offer UK business address services)
Set up your financial infrastructure, including opening a business bank account and installing accounting software (we can help you manage filings and compliance so you can focus on growth)
Launch your operations and develop your marketing channels
Some advice from TB Accountants
From business planning and company formation to tax compliance and financial systems, we strongly recommend speaking with a professional adviser early in your journey.
This ensures your foundation is not only compliant but also scalable.
For individuals and businesses looking for UK taxation services, use our contact form to get in touch for more information.
Get in touch with us at info@tbgroupuk.com or for a free one-to-one consultation.
