A pre-election income tax cut is reportedly being planned by chancellor Rishi Sunak, with the chancellor ordering Treasury officials to draw up options for cutting levies including income tax – with treasury sources reporting that the chancellor is considering reducing the 20p on the pound basic rate of income tax by 2p and scrapping the 45p upper rate altogether.

There are, however, other options for tax cuts that could provide a boost to the UK economy and the creation of jobs, namely the Enterprise Investment Scheme. Since its inception in 1993, the Enterprise Investment Scheme has raised over £24 billion in funds for almost 33,000 companies. This trend continued into 2020 with a total of £1.9 billion of investment being raised by 4,215 companies. With over 6 million SMEs in the UK, making up 99.9% of private sector businesses, EIS is an essential tool to accelerate the country’s SME landscape. Providing such pivotal support to the backbone of the economy, if the EIS scheme were given greater muscle to assist startups and scale-ups to traverse the challenges posed by the post-Covid economic arena, it could provide for a boost for the UK economy as a whole.

Luke Davis, CEO of IWCapital, discusses the outlook of the festive period for small businesses:

“With the news emerging that Rishi Sunak is considering options to reduce income tax, the Enterprise Investment Scheme could make a fantastic option for expansion. The EIS provides SMEs with a platform to successfully expedite their growth trajectory, and often empowers business owners to innovate, expanding its scope could provide a big jump in investment for one of the most innovative sections of the UK economy.

“The EIS can be said to offer a win-win situation for both investors and small businesses – providing SMEs with much-needed investment to provide them with a platform to grow, whilst providing investors with tax reliefs to incentivise this investment. Small businesses and SMEs throughout the UK have benefitted enormously from the EIS in the last 25 years, fuelling growth and job creation at an impressive scale.. SMEs are becoming so inventive and versatile with their companies and making sure they are at the forefront of the UK business scene. SMEs are an indispensable part of the UK economy and the outlook for the festive period is a reward for their constant hard work.”