82 terms, A to Z
UK startup glossary
Plain-English definitions of the funding, tax, company and visa terms UK founders meet in their first years. Every figure was checked against GOV.UK or another official source on 21 October 2026, and each term links to it.
New to all this? Start here for the five steps in order, or run the numbers with our free calculators.
A
Accelerator
Funding
A fixed-length programme, usually a few months long, that gives early-stage startups mentoring, workshops and introductions to investors, and sometimes a small investment in return for equity. Many end with a demo day where founders pitch to investors. Read the terms before you apply: the equity taken, the size of any investment and whether it comes as shares, an advance subscription agreement or a convertible loan all differ between programmes. Some university and corporate programmes take no equity at all.
Advance assurance
Tax and reliefs
An opinion from HMRC, given before you issue shares, that your company and the planned share issue look likely to qualify for SEIS or EIS. It is optional, but many angel investors ask to see it before they commit. You apply online with your business plan, recent accounts, articles of association and details of the planned investment. It covers only the conditions HMRC can check from what you send, so the relief still depends on meeting every rule when the shares are issued.
Advance subscription agreement (ASA)
Funding
An agreement where an investor pays now for shares the company will issue later, usually at the next priced round and often at a discount to that round's price. UK founders use ASAs because, unlike a SAFE or a convertible loan, a well-drafted ASA can keep SEIS and EIS relief open. HMRC's conditions: the money can never be refunded, the agreement cannot be varied, cancelled or assigned, it carries no interest, and it sets a longstop date by which the shares must be issued. For EIS, HMRC expects that date to be no more than six months after signing.
Sources: HMRC manual VCM12025: EIS advance subscription agreements; HMRC manual VCM33025: SEIS advance subscription agreements; Burges Salmon: BScale glossary of start-up terms
Read more: SEIS and EIS relief calculator
See also: SAFE (simple agreement for future equity), CLN, Conversion discount, Valuation cap
Angel investor
Funding
A person who invests their own money in early-stage companies, usually at pre-seed or seed stage, in exchange for shares. Angels invest alone or together in syndicates and networks, and many UK angels will only invest if the company qualifies for SEIS or EIS tax relief, so get advance assurance before you start talking to them. The best angels bring advice and introductions as well as money. Expect them to ask for basic investor rights in a shareholders' agreement.
Annual accounts
Running a company
The financial statements every limited company files with Companies House each year, even if it has not traded. A new company's first accounts are due 21 months after it was registered; after that, accounts are due 9 months after the end of the company's financial year. They are separate from the Company Tax Return sent to HMRC, which is due 12 months after the end of the accounting period. Small companies can file simpler accounts.
Source: GOV.UK: Prepare and file annual accounts
See also: Corporation Tax, Confirmation statement
Anti-dilution protection
Shares and equity
A clause that protects an investor if the company later raises money at a lower price per share (a down round). The investor receives extra shares, or a better conversion rate, so their stake loses less value. A full ratchet resets the investor's price to the new lower price, which is harsh on founders; a broad-based weighted average adjusts it only part of the way and is usually seen as the founder-friendly version. Check which one a term sheet proposes before you sign.
Articles of association
Running a company
The rulebook every UK company must have, setting out how decisions are made, how shares are issued and transferred, and what powers the directors have. Many startups begin with the government's model articles, then adopt new articles when they raise investment, adding protections such as pre-emption rights, drag-along and tag-along rights, leaver terms and liquidation preferences. Unlike a shareholders' agreement, the articles are filed at Companies House and anyone can read them.
B
Bootstrapping
Funding
Building a company with the founders' own money and the revenue it earns, instead of raising outside investment. Bootstrapped founders keep full ownership and control and answer to customers rather than investors, but growth is limited by cash flow. Many UK companies bootstrap to first revenue, then use a Start Up Loan, a grant or an angel round once they can show demand. It suits service businesses and products that sell from day one.
Source: Burges Salmon: BScale glossary of start-up terms
Read more: Find one person who will pay before you build
See also: Start Up Loans, Runway
British Business Bank
Government support
The UK government's economic development bank for smaller businesses. In most cases it does not lend to businesses directly: it backs banks, lenders and investment funds that do, including venture capital funds that invest in UK startups, and it runs the government-backed Start Up Loans programme. Its regional funds cover the nations and regions of the UK. Look for its name in fund announcements, because a fund it backs is often one that invests in early-stage companies.
Burn rate
Growth and metrics
How fast a startup spends its cash, usually measured per month. Gross burn is everything you spend in a month; net burn is what you spend minus the cash that comes in, so it is the amount your bank balance actually falls by. Investors care most about net burn, because together with your cash balance it gives your runway. A company that brings net burn down to zero no longer depends on raising more money to survive.
Business Asset Disposal Relief (BADR)
Tax and reliefs
A Capital Gains Tax relief for people selling all or part of a business, or shares in a trading company where they work. The rate is 18% on qualifying gains made from 6 April 2026 (14% in the 2025 to 2026 tax year). For shares outside EMI, the company usually has to be your personal company, meaning you hold at least 5% of the shares and voting rights, for at least 2 years before the sale, so check the conditions long before an exit.
C
Cap table
Shares and equity
Short for capitalisation table: a list of everyone who owns shares in a company, or has rights to them, how many each holds and what percentage that is. A fully diluted cap table also counts share options, warrants and anything that converts into shares, such as ASAs and convertible loan notes. Investors check it in due diligence, and it should always match your register of members and your filings at Companies House. Model each new round on it before you agree terms.
Source: Burges Salmon: BScale glossary of start-up terms
Read more: Dilution calculator
See also: Fully diluted, Dilution, Option pool
Churn
Growth and metrics
The share of customers, or of recurring revenue, that a business loses over a period, usually a month. If you start a month with 200 paying customers and 6 cancel, monthly customer churn is 3%. Revenue churn can be offset by existing customers paying more; when that expansion is bigger than the losses, net revenue retention is above 100%. High churn usually means the product has not reached product-market fit yet.
Source: Andreessen Horowitz: 16 startup metrics
See also: MRR, LTV, Product-market fit
Cliff
Shares and equity
The period at the start of a vesting schedule before any shares or options vest. With the common four-year schedule and a one-year cliff, nothing vests if the person leaves within the first 12 months; at the 12-month mark a quarter vests at once, and the rest vests monthly or quarterly after that. A cliff protects the company, and the other founders, from someone who leaves early walking away with a large stake.
Source: Burges Salmon: BScale glossary of start-up terms
Read more: How to find a co-founder
See also: Vesting, Good leaver and bad leaver
Companies House
Running a company
The UK's registrar of companies, an executive agency of the government. You register a limited company with it (£100 online, usually done within 24 hours) and then file your confirmation statement, annual accounts and changes to directors, shareholders and your registered office. Most of what you file is public, so anyone can look up your company, its officers and its people with significant control on the register.
Companies House identity verification
Running a company
Since 18 November 2025, verifying your identity has been a legal requirement for company directors and people with significant control (PSCs). New companies give each director's personal code when they register. Existing directors give theirs with the company's next confirmation statement, during a 12-month transition period. You can verify online through GOV.UK One Login with photo ID, at a Post Office, or through an authorised agent, and you only need to do it once.
Confirmation statement
Running a company
A yearly filing that confirms the information Companies House holds about your company is correct, including its registered office, officers, shareholders and people with significant control. You must file at least once every 12 months, within 14 days of the end of your review period. It costs £50 online or £110 by post. Directors give their identity verification personal codes when filing. Not filing can lead to a fine of up to £5,000 and the company being struck off.
Conversion discount
Funding
The percentage off the next round's share price that an early investor gets when their ASA, SAFE or convertible loan note turns into shares. With a 20% discount and a round priced at £1 a share, the early investor's money converts at 80p a share, so it buys a quarter more shares than the same money in the new round. Where there is also a valuation cap, the investor normally gets whichever gives the lower price.
Source: Burges Salmon: BScale glossary of start-up terms
See also: ASA, Valuation cap, CLN
Convertible loan note (CLN)
Funding
A loan to a company that turns into shares later, usually at the next priced round, at a discount to that round's price and often subject to a valuation cap. Until it converts it is debt: it normally carries interest and has a maturity date when it must be repaid or converted. SEIS and EIS shares must be paid for in full, in cash, when they are issued, so shares received when a loan converts do not normally qualify. That is why UK angel rounds more often use an ASA.
Corporation Tax
Tax and reliefs
The tax a UK limited company pays on its profits. The main rate is 25% on profits over £250,000; the small profits rate of 19% applies to profits of £50,000 or less, and marginal relief tapers between the two. The thresholds are reduced for short accounting periods and for associated companies. A company with taxable profits of up to £1.5 million pays 9 months and 1 day after the end of its accounting period.
Sources: GOV.UK: Corporation Tax rates; GOV.UK: Pay Corporation Tax
See also: Annual accounts, R&D tax relief
Customer acquisition cost (CAC)
Growth and metrics
What it costs, on average, to win one new customer: sales and marketing spending over a period divided by the new customers won in that period. Include salaries, tools and agency fees as well as advertising, or the figure will flatter you, and track paid and organic customers separately. Customer acquisition cost matters most next to lifetime value, because together they show whether each new customer makes or loses money.
D
Dilution
Shares and equity
The fall in an existing shareholder's percentage ownership when a company issues new shares, for a funding round, an option pool top-up or when ASAs and loan notes convert. Your number of shares stays the same while the total goes up. Dilution is not a loss in itself: if the new money raises the value of the company, a smaller share can be worth more. Model each round before you agree terms, including the option pool the investor asks for.
Down round
Funding
A funding round at a lower price per share than the company's previous round. It dilutes existing shareholders more than a round at a higher price would, can trigger investors' anti-dilution protection, and can reduce the value of staff share options and morale. Founders sometimes avoid one with bridge money from existing investors, but a down round that funds a credible plan is usually better than running out of cash.
Source: Burges Salmon: BScale glossary of start-up terms
Read more: AI startups that raised millions and failed
See also: Anti-dilution protection, Runway
Drag-along rights
Shares and equity
A right in the articles or shareholders' agreement that lets the holders of a set majority of shares force the remaining shareholders to sell, on the same terms, when they accept an offer for the whole company. It stops a small shareholder from blocking a sale. Check the threshold and that everyone is dragged on the same price and terms. Separately, the Companies Act lets a buyer who reaches 90% acceptance in a takeover offer buy out the rest.
Due diligence
Funding
The checks an investor or buyer makes before committing: company records, cap table, contracts, intellectual property, employment terms, accounts, tax and any disputes. Early-stage checks are lighter, but even angels will ask for your articles, cap table, IP assignments from founders and contractors, and recent bank statements. Keeping a tidy folder of these documents from day one shortens your round and avoids surprises late in a deal.
Source: Burges Salmon: BScale glossary of start-up terms
Read more: Protecting intellectual property in a UK startup
See also: Cap table, Term sheet
E
EIS deferral relief
Tax and reliefs
Lets an investor put off paying Capital Gains Tax on a gain from selling another asset by reinvesting the gain in EIS shares. The investment must be made between one year before and three years after the gain. The tax is deferred, not cancelled: it becomes due when the EIS shares are sold or the relief is withdrawn. It can apply to any amount invested, and is available even when income tax relief is not, for example because the investor is connected with the company.
Source: GOV.UK: Tax relief for investors using venture capital schemes
Read more: SEIS and EIS relief calculator
See also: EIS, SEIS reinvestment relief
Endorsing body
Visas
An organisation approved by the Home Office to assess business ideas for the Innovator Founder visa. It checks that your idea is new, innovative and viable with potential to grow, and if it agrees it issues an endorsement letter for your visa application. Endorsement costs £1,000, and founders who get the visa pay £500 for each meeting with the endorsing body, held after 12 and 24 months. The approved list is published on GOV.UK and changes, so check it before you apply.
Enhanced R&D intensive support (ERIS)
Tax and reliefs
The R&D tax relief for loss-making small and medium-sized companies that spend heavily on research and development. For accounting periods starting on or after 1 April 2024, a company qualifies if its relevant R&D spending is at least 30% of its total spending. It can deduct an extra 86% of its qualifying costs (186% in total) and exchange the resulting loss for a payable tax credit worth up to 14.5% of the surrenderable loss.
Source: GOV.UK: R&D tax relief, the merged scheme and ERIS
See also: R&D tax relief, Corporation Tax
Enterprise Investment Scheme (EIS)
Tax and reliefs
A scheme that gives investors in qualifying UK companies 30% income tax relief on up to £1 million a year (£2 million if at least £1 million goes into knowledge-intensive companies), provided they hold the shares for at least 3 years. Gains on the shares are then free of Capital Gains Tax, and other gains can be deferred. Most companies can raise up to £10 million in any 12 months and £24 million in total, and need gross assets of no more than £30 million before the issue and fewer than 250 full-time employees.
Enterprise Management Incentives (EMI)
Shares and equity
The UK's tax-advantaged share option scheme for smaller companies. From 6 April 2026 most companies can use it if they have gross assets of £120 million or less and fewer than 500 full-time employees, with up to £6 million of unexercised options in total. Each employee can be granted options over shares worth up to £250,000 in a 3-year period and must work at least 25 hours a week, or 75% of their working time, for the company. If the exercise price is at least the market value at grant, there is no Income Tax or National Insurance when they buy the shares.
Equity crowdfunding
Funding
Raising money from many people, each investing a small amount in return for shares, through an online platform authorised by the Financial Conduct Authority. Many UK campaigns are set up so investors can claim SEIS or EIS relief. It can turn customers into shareholders and supporters, but a campaign takes real work and every investor joins your cap table, often through a nominee. The FCA warns investors that if the company fails they could lose all the money they invested.
Source: FCA: Understanding crowdfunding
Exit
Funding
The event that turns shares into cash: usually a sale of the company to another business, or a listing on a stock exchange (an initial public offering). Early-stage investors make their return at exit, so they will want a credible story about who might buy the company one day. Liquidation preferences decide who is paid first from the sale price, and drag-along and tag-along rights decide how shareholders sell together.
F
Founder-market fit
Growth and metrics
How well a founding team's experience, knowledge and contacts suit the market it is going after. A founder who has worked in an industry for years knows its problems, buyers and language, which makes early sales and investor conversations easier and mistakes cheaper. At pre-seed, when there is little traction to judge, investors often weigh founder-market fit heavily. You can build it by working in the market, interviewing customers and recruiting a co-founder who knows it.
Source: Chris Dixon: Founder/market fit (2011)
Read more: Founder-market fit: what it is, How to find a co-founder
See also: Product-market fit, Pre-seed
Fully diluted
Shares and equity
Counting every share that exists or could exist: issued shares plus share options (granted and still in the pool), warrants and anything that converts into shares, such as ASAs and convertible loan notes. Valuations and ownership percentages in a term sheet are normally quoted on a fully diluted basis, so a founder who holds 60% of the issued shares may hold noticeably less of the fully diluted total.
Source: Burges Salmon: BScale glossary of start-up terms
Read more: Dilution calculator
See also: Cap table, Pre-money valuation, Option pool
G
Global Talent visa
Visas
A visa for leaders or potential leaders in academia or research, arts and culture, or digital technology. Most applicants first need an endorsement from the body for their field; winners of certain prestigious prizes can apply directly. It costs £766 (£561 at the endorsement stage and £205 for the visa), plus the healthcare surcharge. You can stay for up to 5 years at a time and extend as often as you need, with no limit on your total stay.
Source: GOV.UK: Global Talent visa
See also: Innovator Founder visa, Immigration health surcharge
Good leaver and bad leaver
Shares and equity
Terms in the articles or shareholders' agreement that decide what happens to a founder's or employee's shares when they leave. A good leaver (for example someone who leaves through ill health) usually keeps vested shares or sells them at market value. A bad leaver (for example someone who resigns early or is dismissed for misconduct) may have to sell some or all shares back at their nominal value or cost. The definitions are negotiable and matter a great deal to founders.
Graduate visa
Visas
Lets international students who complete an eligible UK degree stay and work after their course. It lasts 2 years if you apply on or before 31 December 2026 and 18 months if you apply from 1 January 2027 (3 years after a PhD). You apply from inside the UK while on a Student visa; the fee is £937 plus the healthcare surcharge of £1,035 a year. You can be self-employed, which makes it a common route for student founders, but it cannot be extended.
Source: GOV.UK: Graduate visa
Read more: Starting a business as a student: what is allowed and when
See also: Student visa, Innovator Founder visa, HPI
H
High Potential Individual visa (HPI)
Visas
A visa for people who were awarded a qualification by an eligible top-ranked university outside the UK in the last 5 years. It lasts 2 years (3 after a PhD), needs no job offer, and cannot be extended, although you can switch to another visa. You cannot apply if you have already had a Graduate visa. Costs include the £880 application fee, £252 for Ecctis to check your qualification and the healthcare surcharge, and applications each year are capped.
I
Immigration health surcharge
Visas
A fee most visa applicants pay upfront for access to the NHS during their stay. It is £1,035 for each year of the visa for most applicants, including work, graduate and founder routes, and £776 a year for students, their dependants and applicants under 18. It is paid as part of the visa application and can add thousands of pounds to the cost of a multi-year visa, so include it in your budget.
Immigration Skills Charge
Visas
A charge employers pay for each worker they sponsor, on top of the sponsor licence fee. For the first 12 months it is £480 for small or charitable sponsors and £1,320 for medium or large sponsors, then £240 or £660 for each further 6 months. You are usually a small sponsor if at least two of these apply: turnover of £15 million or less, total assets of £7.5 million or less, 50 employees or fewer.
Source: GOV.UK: Immigration Skills Charge
Read more: What it costs to hire a Skilled Worker
See also: Sponsor licence, Skilled Worker visa
Innovate UK
Government support
The UK's national innovation agency, part of UK Research and Innovation (UKRI). It backs innovative businesses, with a focus on deep tech companies in the UK's priority sectors, through funding competitions, expert support and connections. Open competitions are listed on the Innovation Funding Service, each with its own eligibility rules, deadline and share of project costs it will pay. Applications are scored against the competition's criteria, so plan the project and the budget in detail.
Innovator Founder visa
Visas
The main UK visa for people who want to set up and run an innovative business. You need an endorsement from an approved endorsing body, at least £1,270 in savings held for 28 days and English at the required level. The visa costs £1,357 from outside the UK or £1,693 from inside, plus the healthcare surcharge and endorsement fees. It lasts 3 years, can be extended, and can lead to settlement after 3 years. You may also take skilled work outside your business.
K
Knowledge-intensive company
Tax and reliefs
A company carrying out a lot of research, development or innovation, which gets higher EIS limits: it can raise up to £20 million in any 12 months and £40 million in its lifetime, and can take EIS investment within 10 years of its first commercial sale (or of turnover passing £200,000). It needs fewer than 500 full-time employees, must spend set shares of its operating costs on R&D, and must either be creating intellectual property or have enough research staff with a relevant Masters or higher degree.
Source: GOV.UK: Raise money for a knowledge intensive company
See also: EIS, R&D tax relief
L
Lead investor
Funding
The investor who sets the terms of a round, usually by issuing the term sheet, and who often puts in the largest amount. A lead makes it easier for others to commit, because they can rely on the lead's checks and negotiation. Many rounds stall until a lead is found, so in early conversations work out which investors can lead a round of your size and which will only follow.
Source: Burges Salmon: BScale glossary of start-up terms
Read more: Approaching your first investor
See also: Term sheet, Angel investor
Lifetime value (LTV)
Growth and metrics
An estimate of the profit a customer brings in over the whole time they stay with you. A simple version for subscriptions is the monthly contribution margin per customer multiplied by the average customer lifetime in months, which is one divided by monthly churn. Comparing lifetime value with customer acquisition cost shows whether growth pays for itself; if winning a customer costs more than they will ever bring in, faster growth loses money faster.
Limited company
Running a company
A business that is a legal person separate from its owners, owned by shareholders and run by directors (often the same people in a startup). Shareholders' liability is limited to what they paid, or still owe, for their shares. Registering online with Companies House costs £100. A limited company pays Corporation Tax and files accounts and a confirmation statement every year. It is the structure investors need, because they invest by buying shares.
Liquidation preference
Shares and equity
A right for investors, usually holders of preference shares, to get their money back (or a multiple of it) before ordinary shareholders when the company is sold or wound up. With a 1x non-participating preference, the investor takes either their money back or their percentage share of the proceeds, whichever is higher. A participating preference lets them take their money back and then share in what is left as well, which costs founders more in a modest sale.
Source: Burges Salmon: BScale glossary of start-up terms
See also: Preference shares, Exit, Term sheet
M
Making Tax Digital (MTD)
Tax and reliefs
HMRC's programme that moves tax records and returns online, using software that works with HMRC's systems. For Income Tax, sole traders and landlords with qualifying income over £50,000 have had to use it since 6 April 2026; the threshold falls to £30,000 from 6 April 2027 and £20,000 from 6 April 2028. Limited companies are not in scope for Income Tax, but a student founder trading as a sole trader could be once their income passes the threshold.
Minimum viable product (MVP)
Growth and metrics
The simplest version of a product that lets you test your riskiest assumption with real customers for the least effort. It might be a landing page, a service you run by hand behind the scenes or a basic app. The point is learning: build, measure what customers actually do, then decide whether to carry on or change course. An MVP that nobody pays for has still done its job if it saves you months of building the wrong thing.
Monthly recurring revenue (MRR)
Growth and metrics
The predictable revenue a subscription business earns each month from its active customers, leaving out one-off fees. Multiplied by 12 it gives annual recurring revenue (ARR). Investors track how fast it grows month on month, and split it into new, expansion, contraction and churned revenue to see what drives the growth. Count only contracted recurring amounts: a one-off set-up fee or an unpaid pilot is not recurring revenue.
O
Option pool
Shares and equity
Shares set aside for future share options for employees, advisers and directors. Investors usually ask for a pool to be created or topped up before they invest and counted in the pre-money valuation, so the dilution from it falls on the existing shareholders rather than on the new investor. Size the pool to your real hiring plan for the period until the next round, and model it before you accept a term sheet.
Source: Burges Salmon: BScale glossary of start-up terms
Read more: Dilution calculator, Hiring your first five team members
See also: EMI, Dilution, Pre-money valuation
P
Post-money valuation
Funding
The value of a company straight after a funding round: the pre-money valuation plus the new money raised. An investor's stake is their investment divided by the post-money valuation, so £500,000 into a company worth £2.5 million post-money buys 20%. Always check whether a figure in a term sheet or an investor email is pre-money or post-money, because the same number used either way gives a different result.
Source: Burges Salmon: BScale glossary of start-up terms
Read more: Dilution calculator
See also: Pre-money valuation, Dilution
Pre-emption rights
Shares and equity
The right of existing shareholders to be offered new shares in proportion to their current holding before the company issues them to anyone else, so they can avoid dilution. Under the Companies Act 2006 this applies to new ordinary shares issued for cash, unless the articles or a special resolution turn it off for an issue, which is common in funding rounds. Articles may also give pre-emption rights on transfers, so a shareholder must offer shares to the others first.
Pre-money valuation
Funding
The value of a company agreed just before new investment. It is usually the price per share for the round multiplied by the fully diluted number of shares that already exist, including any option pool top-up the investor asks for. If you raise £500,000 at a £2 million pre-money valuation, the post-money valuation is £2.5 million and the investor owns 20%.
Source: Burges Salmon: BScale glossary of start-up terms
Read more: Dilution calculator
See also: Post-money valuation, Option pool, Fully diluted
Pre-seed
Funding
The earliest outside funding, used to prove the idea: build a first version, find early customers and form the team. Money often comes from the founders' savings, friends and family, angels investing under SEIS, accelerators and grants. UK pre-seed rounds are often raised on an advance subscription agreement or as a small priced round with SEIS relief. There is no fixed size, and where pre-seed ends and seed begins varies from investor to investor.
Source: Burges Salmon: BScale glossary of start-up terms
Read more: A UK pre-seed round in practice: Affinity Labs, UK startup funding data
See also: Seed round, SEIS, ASA, Angel investor
Pro rata rights
Shares and equity
An investor's right to invest in later rounds so they can keep the same percentage of the company, for example buying 10% of a new round if they own 10% now. They usually come from pre-emption rights in the articles or a side letter. Pro rata rights are valuable to investors in companies that do well, and founders sometimes limit them to larger investors so later rounds still have room for new backers.
Product-market fit
Growth and metrics
The point at which a product clearly meets a strong need in a market big enough to support a business. Signs include customers buying without heavy persuasion, low churn, referrals and usage that keeps growing. Before product-market fit, the job is to find it; after it, the job is to scale. The investor Marc Andreessen popularised the term in 2007, arguing it is the only thing that matters for a startup.
PSC register
Running a company
The register of people with significant control (PSCs) that every UK company must keep and report to Companies House. A PSC is usually anyone who holds more than 25% of the shares or voting rights, can appoint or remove a majority of the directors, or has significant influence or control over the company. Each PSC must verify their identity with Companies House. Update it whenever control changes, including after a funding round.
R
R&D tax relief
Tax and reliefs
Corporation Tax relief for companies that spend money on qualifying research and development in science or technology. For accounting periods starting on or after 1 April 2024, most companies claim under the merged scheme, an R&D expenditure credit worth 20% of qualifying costs, which is itself taxable. Loss-making small and medium-sized companies whose R&D is at least 30% of their total spending can claim enhanced R&D intensive support (ERIS) instead. Keep records of the technical uncertainty you worked on.
Registered office address
Running a company
Your company's official address, shown on the public register, where Companies House and HMRC send letters. It must be a physical address in the same UK nation the company is registered in, and it must be appropriate: someone acting for the company will see post sent there, and senders can get proof of delivery. A PO box can no longer be used. Many founders use an accountant's or a service address to keep their home address off the register.
Runway
Growth and metrics
How many months a startup can keep going before the money runs out at its current rate of spending: cash in the bank divided by monthly net burn. £300,000 in the bank and a net burn of £25,000 a month gives 12 months of runway. Start raising well before it runs low, because rounds often take months to close and investors are more cautious with a company that has only weeks of cash left.
S
SAFE (simple agreement for future equity)
Funding
A short agreement created by Y Combinator for US startups: the investor pays now and receives shares at a later priced round, usually with a valuation cap or a discount. It is not a loan. A standard SAFE has no longstop date and can pay money back to the investor if the company is dissolved, so it does not meet HMRC's conditions for an advance subscription agreement and puts SEIS and EIS relief at risk. That is why UK founders raising from angels usually use an ASA instead.
Seed Enterprise Investment Scheme (SEIS)
Tax and reliefs
A scheme that gives investors in very young UK companies 50% income tax relief on up to £200,000 a year, provided they keep the shares for at least 3 years. Gains on the shares are then free of Capital Gains Tax. A company can raise up to £250,000 under SEIS in its lifetime if it has gross assets of no more than £350,000, fewer than 25 full-time equivalent employees and a trade that is not more than 3 years old, and it must spend the money within 3 years.
Seed round
Funding
The round after pre-seed, used to find product-market fit and build the team that will grow the business. Seed investors in the UK include angels and angel networks, seed funds and the early-stage teams of venture capital firms, and it is often the first priced round with a full term sheet and shareholders' agreement. Round sizes vary widely by sector and city; Bizztor's UK funding data shows recent rounds by stage.
Source: Burges Salmon: BScale glossary of start-up terms
Read more: A UK seed round in practice: Stride, UK startup funding data
See also: Pre-seed, Term sheet, VC
SEIS reinvestment relief
Tax and reliefs
A Capital Gains Tax relief for investors who use a gain from selling another asset to buy SEIS shares. Half of the reinvested amount is exempt from tax, on up to £200,000 invested, so the most gain that can be exempted is £100,000. The investor must also get SEIS income tax relief on the same shares, and the relief can be withdrawn if the shares are sold within the 3-year holding period.
Source: GOV.UK: Tax relief for investors using venture capital schemes
Read more: SEIS and EIS relief calculator
See also: SEIS, EIS deferral relief
SIC code
Running a company
A Standard Industrial Classification code describes what a company does, such as software development or management consultancy. You choose at least one when you register a company with Companies House and confirm them in each confirmation statement. They are used for official statistics and by banks, insurers and investors to see what a business does at a glance, so pick the codes that best match your actual trade and update them if it changes.
Skilled Worker visa
Visas
The main UK work visa for people with a job offer from an employer that holds a sponsor licence. The job has to meet skill and salary requirements, and the employer assigns a certificate of sponsorship and pays the Immigration Skills Charge. For a startup, hiring on this route means getting a sponsor licence first and budgeting for the licence fee, the skills charge and the time it takes to stay compliant.
Sole trader
Running a company
The simplest way to run a business in the UK: you and the business are legally the same, you keep the profits after tax and you are personally responsible for its debts. You register for Self Assessment and pay Income Tax and National Insurance on your profits. It suits freelancing or testing an idea cheaply, but you cannot sell shares, so founders planning to raise investment set up a limited company. Student visa holders cannot be self-employed.
Sources: GOV.UK: Set up as a sole trader; GOV.UK: Student visa
Read more: Starting a business as a student: what is allowed and when
See also: Limited company, MTD, Student visa
Sponsor licence
Visas
Permission from the Home Office that a UK employer needs before it can hire most workers from overseas, including on the Skilled Worker visa. The fee for a Worker licence is £611 for small or charitable sponsors and £1,682 for medium or large sponsors, and the employer then pays the Immigration Skills Charge for each worker it sponsors. Licence holders must keep records, report changes and meet their sponsor duties, or risk losing the licence.
Start Up Loans
Government support
A government-backed scheme that lends £500 to £25,000 to people starting or growing a UK business that has been trading for less than 5 years. It is an unsecured personal loan with a fixed interest rate of 7.5% a year for new loans, repaid over 1 to 5 years, with no application or early repayment fees. You need to be 18 or over, live in the UK and pass a credit check, and successful applicants get up to 12 months of free mentoring.
Source: GOV.UK: Apply for a Start Up Loan
Read more: Start Up Loan calculator
See also: British Business Bank, Bootstrapping
Student visa
Visas
The visa for international students on a further or higher education course in the UK. It limits the hours you can work during term and does not allow self-employment, so a student cannot trade as a sole trader. The rules on working for a company you own are strict, so read the conditions on your visa and get advice before you start trading. Many student founders build and test an idea while studying and launch on the Graduate visa.
T
Tag-along rights
Shares and equity
A right that protects minority shareholders when a majority holder sells: if a buyer agrees to purchase a set share of the company, the minority can insist on selling their shares too, at the same price and on the same terms. It means founders, employees or early investors with small stakes are not left behind with a new controlling owner they did not choose.
Source: Burges Salmon: BScale glossary of start-up terms
See also: Drag-along rights, Exit
Term sheet
Funding
A short document setting out the main terms of an investment before the full legal documents are drafted: the amount, valuation, type of share, option pool, board seats, investor consents, liquidation preference, anti-dilution, and vesting and leaver terms. Most of it is not legally binding, apart from clauses such as confidentiality and exclusivity, but terms are hard to change later, so negotiate the points that matter at this stage, with a lawyer.
U
Unicorn
Funding
A privately owned startup valued at $1 billion or more. The investor Aileen Lee coined the term in 2013, when such companies were rare. A unicorn valuation is set by the price investors paid in a funding round; it is not the same as profit or cash in the bank, and later rounds or an exit can value the company higher or lower.
Source: TechCrunch: Welcome to the unicorn club (2013)
Read more: UK fintech unicorns to watch
See also: Post-money valuation, VC, Exit
V
Valuation cap
Funding
In an ASA, SAFE or convertible loan note, the highest valuation at which the early money will convert into shares. If the next round is priced above the cap, the early investor converts at the cap price instead and gets more shares than new investors for the same money; if it is priced below, the round price or the discount applies. It rewards early investors for backing the company before anyone else.
VAT threshold
Tax and reliefs
The turnover at which a business must register for VAT: when its taxable turnover for the last 12 months goes over £90,000, or when it expects to go over £90,000 in the next 30 days alone. You can register voluntarily below the threshold, which some startups do to reclaim VAT on their costs when they sell mainly to other VAT-registered businesses. Once registered you charge VAT on your sales and file VAT returns.
Source: GOV.UK: Register for VAT
See also: Corporation Tax, MTD
Venture capital (VC)
Funding
Investment from professional funds into young companies that could grow very large, in exchange for shares. A VC firm raises money from institutions and wealthy individuals, invests it over a few years, and aims to return it several times over, mostly through a small number of very successful exits. That is why VCs look for companies that could become very large, and are less interested in steady, modest growth.
Venture capital trust (VCT)
Tax and reliefs
A company listed on the stock market that invests in small, unlisted UK companies. Investors who buy new VCT shares get 20% income tax relief on up to £200,000 a year if they keep them for 5 years, and pay no Income Tax on VCT dividends. For a startup, VCT money counts towards the same funding limits as EIS, so a VCT investment reduces how much EIS money you can raise later.
Vesting
Shares and equity
The process by which someone earns their shares or options over time, so they keep the full amount only if they stay. Founders' shares often vest over four years with a one-year cliff; because the shares are already issued, this is reverse vesting, and the company can buy back unvested shares if a founder leaves. Investors usually ask for founder vesting at the first priced round, and agreeing it between co-founders early avoids painful splits later.
Source: Burges Salmon: BScale glossary of start-up terms
Read more: How to find a co-founder
See also: Cliff, Good leaver and bad leaver, EMI
These definitions are a general guide, not tax, legal, financial or immigration advice. Rules and fees change: check the linked official page, and take advice from a qualified professional before you act.