Starting a business costs money; that’s no secret. But something that’s lesser-known is the amount of funding that’s available to them, courtesy of the UK government. 

In this handy guide, we’ll look at the advantages of grants compared to other kinds of funding, like loans, then we’ll detail some of the best government grants available for startup businesses, such as:

  • The national lottery heritage fund.
  • Innovate UK.
  • Research and development tax reliefs.
  • The Prince’s trust.
  • UnLtd.
  • The new enterprise allowance (NEA).
  • The national apprenticeship service.
  • The kickstart scheme.

Grants vs loans: What’s the difference?

When you’re exploring funding options for your startup, grants aren’t your only option. You might also consider seeking out loans for a cash infusion. 

The main difference between a grant and a loan is that loans need to be repaid, often with interest, whereas you won’t be expected to repay grants. If you’re unable to make loan repayments, it could lead to additional charges and affect your credit score, making it difficult to secure other funding in the future. 

Some grants will only be offered if you invest an equal amount of your own money in the business. For example, they might offer to match an investment. So, while it’s not exactly a free gift, it’s still less risky than taking a loan. 

The national lottery heritage fund

The national lottery heritage fund is available to any business. But, in particular, they focus on ideas that boost local economies, encourage skills development, support wellbeing, and create jobs. 

Innovate UK 

Innovate UK grants funding to UK businesses in order to drive productivity and economic growth. They can help your business develop and realise its potential by:

  • Connecting you to partners, customers, and investors that can turn ideas into commercially successful products.
  • Funding business and research collaborations to accelerate innovation.

Research and development (R&D) tax reliefs 

The UK government offers tax relief on science and technology projects that work to develop a specific field. It can’t be given for advancements in social sciences, like economics, or purely theoretical fields, like maths. 

To qualify for R&D relief, you need to explain how your project:

  • Looked for an advance in science and technology.
  • Had to overcome uncertainty.
  • Tried to overcome this uncertainty.
  • Couldn’t be easily worked out by a professional in the field.

The Prince’s trust

The Prince’s Trust runs an enterprise programme aiming to support young people between 18 and 30 who want to start their own businesses.

The programme gives young entrepreneurs access to the skills, training, and mentoring needed for success, as well as a chance to apply for low-interest startup loans between £500 and £25,000 at a rate of 6.2% APR (Annual Percentage Rate). 


UnLtd offers grants, advice, and mentoring social entrepreneurs and social businesses. 

In terms of grants, they offer different awards from £500 to £15,000, and they pledge to award around half of all their grants to social entrepreneurs who come from a disabled and/or Black, Asian or minority ethnic background.

The new enterprise allowance (NEA)

The NEA is designed to help unemployed people become self-employed. To qualify for the allowance, you must be over 18 and either meet one of the following criteria:

  • You or your partner get Universal Credit, Jobseeker’s Allowance, or Employment and Support Allowance.
  • You get Income Support and you’re a lone parent, sick or disabled.

If you’re accepted, you’ll be assigned a mentor who’ll give you support to help you set up your business and start trading. If your mentor approves your business plan, you could get an allowance of up to £1,274 over 26 weeks. 

It’s important to remember, the new enterprise allowance applications are closing on 1 January 2022. If you’d like to apply, you need to discuss it with your jobcentre by 31 December 2021.

The kickstart scheme

The Kickstart Scheme provides funding to employers as an incentive to hire 16 to 24-year-olds on Universal Credit who are at risk of long term unemployment. Though it’s available for any business, it’s a particularly useful way to reduce the cost of hiring your first employees

If you’re accepted, the government will supply you with enough money to cover:

  • 100% of the National Minimum Wage (or the National Living Wage depending on the age of the participant) for 25 hours per week for a total of 6 months.
  • Associated employer National Insurance contributions.
  • Minimum automatic enrolment pension contributions.

Employers can apply for funding until midday on 17 December 2021.

Other UK small business grants

You can find other kinds of grants and funding if you search HMRC’s business finance and support page. Aside from that, there are also different organisations that can provide funding for small businesses based in each specific area of the UK.  

Manage your startup costs with a simple app 

Money can be tight in the early days of a business, and running out of cash is one of the most common reasons startups fail. For that reason, it’s essential that startup businesses carefully monitor their cash flow. 

Cash flow means the cash that’s moving in and out of your business account, so tracking it can give you a clear picture of your business’ financial health. The Countingup business current account comes with accounting software, and it’s the only business account that shows cash flow insights in real-time with no data lag. 

With Countingup, you’ll have access to accurate, up-to-date cash flow insights from one simple app, as well as these other amazing features:

  • Invoicing on the go: create and send unlimited customised invoices to clients straight from your phone.
  • Receipt capture tool: simply photograph the receipts with your phone to scan them into the system.
  • Automatic expense categorisation: Countingup automatically sorts your expenses into HMRC-approved categories, making it easy to stay organised.
  • Tax estimates: the app generates monthly tax estimates, so you know exactly how much to set aside.
  • Accountant access: if you work with an accountant, you can give them instant access to your financial data by emailing them an invite. Simple, seamless and safe!

Sign up for a Countingup business account today for a three-month free trial.