Venture Capital update: Announcements in the Spring Budget 2024

Details of these announcements can be seen in our Article UK Budget 2024 | DWF Group.

There were two specific announcements made by the Chancellor that would be of specific interest to the Venture Capital industry. We have set out below details of these announcements and the benefits.

HNW and Sophisticated Investor changes

In very broad terms, the UK's regulatory regime generally prohibits investment solicited from third parties, absent significant oversight from an FCA-authorised body. The intention behind the restriction is to prevent unsophisticated consumers from making unwise investment decisions.

High net worth individuals (HNWIs) are exempted from the prohibition. The Spring Budget 2024 revised the definition of HNWIs, reducing the entry criteria and easing investment solicitation.

The threshold will be lowered from an annual salary requirement of £170,000 to £100,000 and the net assets condition will be reduced from not less than £430,000 to £250,000.

We referred to the impact that the increase to the thresholds from 31^st January 2024 could have on investors in venture capital, particularly female investors. Please see our recent article referring to the impact DEI in the venture capital market - challenges and opportunities | DWF Group.

The reversal of the increase in the thresholds is positive news and indicates the UK Government's interest and support for venture capital.

Pension funds

The Spring Budget 2024 expanded on the UK Government's intention to encourage pension funds to invest in UK equities, including start-ups. 

In last year's Mansion House speech, the Chancellor announced a commitment by nine of the UK's largest Defined Contribution (DC) pension schemes to increase their investment in UK unlisted equities. Since then additional DC schemes have agreed to sign up.  Each DC were asked to allocate at least 5% of assets in default funds to unlisted equities by 2030.

The Spring Budget 2024 confirmed that the UK Government and the Association of British Insurers are now close to completing a framework to monitor progress by the relevant schemes, although it's not yet clear when this will be finalised or published.

Specifically, the Spring Budget 2024 confirmed the Government's intention to introduce legislation requiring defined contribution pension funds to publicise their asset allocations – and, in particular, the allocation to UK equities.

An equivalent requirement will be introduced in relation to Local Government Pension Scheme funds in England and Wales.

Please see our Pensions Insights for March 2024 article which highlights the reforms for DC pension schemes Pensions Insights March 2024 | DWF Group.

This is good news for UK unlisted businesses seeking investment, with the Government encouraging investments in start-ups, with the hope that it will open up a new opportunities for companies to raise funds.

If you have any queries about any of the issues covered, or you require advice on a  the Spring Budget 2024, venture capital or pensions related matter, please do not hesitate to contact a member of our Venture Capital, Tax or Pensions teams.

DWF has a market leading venture and growth capital practice in the UK, supporting investors and companies across several sectors including financial services, technology, media and telecommunications, life sciences and healthcare and real estate and infrastructure. If you have queries on any of the issues covered in this article please contact one of our experts.