How business grants work in the UK

A grant is money you do not repay

A grant is funding from a government body, council or other organisation that you keep, as long as you spend it on what you said you would and meet the conditions. That is the difference from a loan, which you repay, and from investment, where you give up a share of the business.

Who gives them

UK-wide schemes come from government departments and agencies such as Innovate UK. Scotland, Wales and Northern Ireland run their own. Many of the grants a small business can realistically win are local: run by a council or a growth hub for businesses in one area, and often worth a few hundred to a few thousand pounds.

The usual conditions

Most grants pay for a specific thing, such as equipment, training or an energy improvement, not general running costs. Many cover only part of the cost and expect you to pay the rest, which is called match funding. Many pay in arrears: you spend first and claim the money back with receipts.

Public grants also count towards a limit on how much subsidy one business can receive. Under the Subsidy Control Act the general allowance is £315,000 over three financial years, and funders ask you to declare what you have had.

Grant income is normally counted as income of the business for tax. Ask your accountant how a particular grant should be treated.

How they are awarded

Some are first come, first served until the money runs out. Others are competitions scored against published criteria, where only the strongest applications are funded. The funder’s guidance says which it is, and it changes how early and how carefully you should apply.