Last updated: 28 September 2026
Innovate UK's Smart grants are closed. UKRI says "Smart grants are now closed for new applications as funding is being aligned to Innovate UK's new strategic direction." In September 2026, an early-stage UK software company looking for Innovate UK money has three main routes: themed grant competitions (two AI competitions for SMEs open in October 2026), the Growth Catalyst programme (New Innovators for early-stage firms and Investor Partnerships for firms raising equity), and Innovation Loans of £100,000 to £5 million for late-stage R&D. Grants in the current competitions cover up to 70% of eligible costs for micro and small businesses on feasibility and industrial research, so you fund the rest. Several current competitions do not allow subcontractors at all, and the ones that do expect UK subcontractors unless you can show why you cannot use one.
This is general information, not financial, tax or legal advice. Competition rules change from round to round, so the competition brief on the Innovation Funding Service is always the final word. Everything below is as the official sources gave it on 28 September 2026.
What happened to Innovate UK Smart grants
Smart was Innovate UK's open grant programme: any sector, any idea, as long as the project was innovative and led by a business.
The UKRI Smart grants guidance page now says the programme is closed for new applications. UKRI does not give a date on that page. Kreston Reeves, an accountancy firm, reported in March 2025 that Innovate UK "paused its Smart Grants programme" in January 2025.
UKRI published the Smart grants final impact evaluation on 14 July 2026. It says that between 2019/20 and 2024/25, Innovate UK committed £531 million to 1,688 R&D projects through Smart, and 51% of the companies funded were micro-businesses with fewer than 10 employees. Nothing on UKRI or the Innovation Funding Service says Smart is coming back.
How Innovate UK funds startups in 2026
On 19 March 2026, UKRI announced a new plan for Innovate UK. It will "focus on the highest potential companies", with "funding grants and loans calibrated to stage and risk, scaling from early-stage support through to increased backing". It also announced Velocity, a new account management service to "support high-potential businesses throughout their innovation journey, from first engagement with Innovate UK through to capital raising and beyond".
In practice, that means fewer any-idea grants and more competitions tied to specific technologies and Industrial Strategy sectors. The useful question is whether a competition open right now fits what you are building.
Innovate UK competitions open or opening now
The Innovation Funding Service listed these competitions relevant to early-stage software businesses when we checked on 28 September 2026. Most others listed were for sectors such as farming, batteries or energy networks, or only for research organisations or collaborations.
| Competition | Dates | Project size | Grant rate (micro or small) | Subcontractors |
|---|---|---|---|---|
| Frontier AI: SME Champions, Phase 1 | Opens 1 October 2026, closes 11 November 2026, 11am | £150,000 to £250,000 total eligible costs, 1 to 3 months | Up to 70% | Not allowed |
| Efficient, Structured and Controllable AI Systems | Opens 12 October 2026, closes 18 November 2026, 11am | £50,000 to £150,000 total eligible costs, 1 to 3 months | Up to 70% | Not allowed |
| Innovation Loans Expression of Interest | Opened 6 June 2026, no deadline | Loans of £100,000 to £5 million | Loan, not grant | See the loans section below |
Both AI competitions are for UK registered SMEs applying on their own, and both are aimed at novel AI and machine learning technology, so a standard app that calls an AI API is unlikely to fit. An earlier round, AI Champions: Frontier AI Phase 1 (March to April 2026), was described by Innovate UK Business Connect as the first stage of "a three-phase stage-gated funding pipeline", with phase 2 projects of up to 12 months and up to £1 million. It added that progression depends on "the launch of a separate Phase 2 competition", so treat phase 2 as possible, not promised.
UKRI's future funding opportunities page (updated 24 September 2026) also lists a "Frontier AI cross-cutting novel round 1" for October 2026, "Frontier AI research and development consortia" for December 2026, and "Life sciences: Investor Partnership" for April 2027. We have not seen the briefs for those yet, so we can't tell you their rules.
Growth Catalyst Early Stage: New Innovators
This is the closest thing to Smart for very early companies, but narrower. The last round, Growth Catalyst Early Stage: New Innovators, opened on 7 July 2025 and closed on 6 August 2025. Its rules were:
- A share of up to £10 million, for UK registered micro and small businesses.
- Total project costs of £25,000 to £50,000, and "total project costs must equal your grant funding request", so the grant covered 100% of eligible costs.
- Projects of 3 to 6 months, in one or more of five technologies: artificial intelligence, semiconductors, advanced connectivity, quantum and engineering biology.
- Businesses that had already received direct Innovate UK funding were not eligible, apart from Young Innovators, Innovate UK Business Growth or Catapult funding.
- Tailored business support from Innovate UK Business Growth came with the grant.
That round is closed, and we found no new New Innovators round open or listed as upcoming on UKRI or the Innovation Funding Service in September 2026. If you are an AI startup that has never had Innovate UK money, it is the one to watch for.
Investor Partnerships: grants alongside equity
Investor Partnerships pair an Innovate UK grant with investment from an approved investor partner. UKRI's Investor Partnerships page (updated 22 September 2026) says there were "two competitions in 2025 to 2026" with "up to £130 million" committed, and "further competitions subject to confirmation".
The most recent general round, Growth Catalyst Investor Partnerships Round 2, closed on 3 February 2026. Its rules show how the scheme works:
| Project type | Grant size | Grant rate, micro or small | Grant rate, medium | Minimum investor-led investment |
|---|---|---|---|---|
| Feasibility study | £50,000 to £300,000 | Up to 70% | Up to 60% | At least equal to the grant |
| Industrial research | £100,000 to £1 million | Up to 70% | Up to 60% | At least equal to the grant |
| Experimental development | £250,000 to £2 million | Up to 45% | Up to 35% | At least twice the grant |
You cannot apply cold. The brief says you must "establish a relationship and a strong level of investment traction with one of our approved investor partners before" applying, and the investor partner submits an expression of interest to Innovate UK. Projects had to fit one of the Industrial Strategy sectors, which include digital and technologies. It suits a company already raising a round, not an idea-stage founder.
Grant rates and match funding
In the current competitions, the grant does not cover the whole project. The rate depends on your company size and the type of research:
- Feasibility studies and industrial research: up to 70% for micro or small businesses, up to 60% for medium-sized businesses and up to 50% for large ones (Frontier AI and Efficient AI briefs).
- Experimental development, closer to market: up to 45% for micro or small and up to 35% for medium (Investor Partnerships Round 2).
- New Innovators was the exception, at 100% of eligible costs up to £50,000.
The rest is your match funding, and it has to come from somewhere: founder money, SEIS or EIS investment, revenue, or an investor. On a £150,000 Frontier AI project, a 70% grant is £105,000, so your company has to find the other £45,000. Check how and when the grant is paid in your grant offer, and plan your cash flow around it.
There is also a cap. Innovate UK's funding rules say that for organisations applying under Minimal Financial Assistance (MFA), the total award "is up to a maximum of £315,000 over a rolling three financial year period", and this "includes cumulation of grants under the EC's de minimis regulation". The New Innovators round was awarded as MFA.
Subcontractors and offshore development partners
This section matters to us directly. DevForge is a studio based in India, so a UK founder who wanted to use us on a grant-funded project would be using an overseas subcontractor. Here is what the rules say, word for word.
Some competitions do not allow subcontractors at all
Both AI competitions opening in October 2026 say: "Subcontractors are not allowed in this competition." Both also say: "Any organisation receiving funding must carry out its project work in the UK, intend to exploit the results in the UK, and spend most of the funding within the UK." So no outside development firm, UK or overseas, can go in the grant budget.
Where subcontractors are allowed, overseas needs a case, and cost is not enough
The Investor Partnerships Round 2 brief says:
"Subcontractors are allowed in this competition. Subcontractors can be from anywhere in the UK and you must select them through your usual procurement process. You can use subcontractors from overseas but must make the case in your application as to why you cannot use subcontractors from the UK. You must provide a detailed rationale, evidence of the potential UK contractors you approached and the reasons why they were unable to work with you. We will not accept a cheaper cost as a sufficient reason to use an overseas subcontractor."
The New Innovators brief had the same requirement: you had to show "evidence of the potential UK contractors you approached and the reasons why they were unable to work with you".
The general costs guidance says the same
Innovate UK's costs guidance for non-academic organisations (updated 28 August 2026) says you can claim for "work carried out by third-party organisations that are not part of your project team", and: "Where subcontractors are non-UK based, please justify why you are unable to use a UK alternative."
Our honest view: for most early-stage software projects, a UK competition is not the right money to pay an offshore studio with, and we would not advise you to try to argue around the rules. One option is to keep the grant-funded R&D with your own UK team, as the briefs require, and fund work outside the grant project from other money. If you plan to use SEIS or EIS money for that, read our SEIS and EIS guide, because gov.uk does not clearly address paying overseas contractors from those schemes either.
Innovate UK Innovation Loans
The Innovation Loans expression of interest opened on 6 June 2026 and has no deadline. The headline terms:
- Loans of £100,000 to £5 million, for UK registered SMEs.
- Interest of 3.7% a year on drawn amounts during the project, plus deferred interest, then 7.4% a year on the outstanding balance during repayment.
- A project period of up to 5 years and a repayment period of up to 5 years, but no more than 7 years in total.
- A debenture is required, but no personal guarantees.
- For "highly innovative late stage research and development (R&D) projects" at the experimental development stage.
- You must be unable to get alternative finance on suitable terms, and the work must be done in and exploited from the UK.
Only single businesses can borrow. For eligible costs, UKRI's loans guidance points to the same non-academic costs guidance, which includes the rule on justifying non-UK subcontractors. This is not MVP money.
Innovate UK Business Growth
Innovate UK Business Growth (formerly Innovate UK EDGE) gives one-to-one support from innovation and growth specialists, on intellectual property, funding and investment readiness, and new markets. gov.uk lists it for businesses of up to 250 employees, including start-ups.
The catch in 2026: the Innovate UK Business Connect page says the service continues for existing and committed clients, including grant winners whose competition includes Business Growth support, but "new requests into the service, outside of the above, have been paused as part of the current planning cycle." So for most founders in September 2026, the way in is through a competition that bundles it, as New Innovators did.
How grants fit with SEIS, EIS and R&D tax relief
These are separate schemes, and you can often use more than one.
R&D tax relief
For accounting periods starting on or after 1 April 2024, the merged R&D expenditure credit scheme and enhanced R&D intensive support (ERIS) replaced the old SME and RDEC schemes. The gov.uk guidance gives the merged credit at 20%. ERIS, for loss-making companies whose R&D is at least 30% of total spend, gives an extra 86% deduction and a payable credit of up to 14.5%.
On grants, a gov.uk policy paper says the old subsidised expenditure rules were not carried into the merged scheme, "meaning that where a company receives a grant covering part of the costs of their R&D (for example), the amount of relief available will not be reduced."
On overseas work, HMRC's manual (CIRD150500, updated 25 August 2026) says contractor payments "for R&D undertaken overseas" are excluded unless the conditions needed for the R&D are not present in the UK, are present where the work is done, and it would be "wholly unreasonable" to replicate them in the UK. Cost and the availability of workers are disregarded. So offshore development usually does not count towards R&D tax relief either.
SEIS and EIS
SEIS and EIS give tax relief to your investors, not grants to your company, so they are a natural source of the match funding a grant needs. Our SEIS and EIS guide covers the limits and advance assurance. One point to raise with your adviser: HMRC's manual (VCM2040) describes SEIS as "a de minimis State aid", and Innovate UK's MFA cap counts de minimis grants. We found no gov.uk or UKRI guidance setting out how a SEIS raise and an Innovate UK MFA grant interact for the same company, so ask before you apply for both.
Other UK start-up funding routes
Start Up Loans
Start Up Loans are run by the British Business Bank. Innovate UK Business Connect describes a Start Up Loan as "a government-backed personal loan" of £500 to £25,000 per person, up to £100,000 per business, at 7.5% fixed interest over 1 to 5 years, with 12 months of free mentoring. It is unsecured, and you need to be 18 or over, live in the UK with the right to work, and have a UK business trading for up to 60 months. It is a loan to you personally, not to your company. Check the current rate on the Start Up Loans site before you apply.
Regional grants and support
Local funding changes often and differs by area. Two places to look:
- Find a grant, the government's search service for grants.
- Your local Growth Hub. gov.uk says Growth Hubs across England are run by a Mayoral Combined Authority or local authority and help with start-up and growth, access to finance, and innovation. You can find yours at growthhubfinder.co.uk.
We have not listed specific regional grants, because we could not verify which are open in September 2026.
Key takeaways
- Smart grants are closed. Innovate UK now funds through themed competitions, Growth Catalyst and Innovation Loans.
- Two AI competitions for SMEs open in October 2026 at up to 70% for micro and small businesses. Neither allows subcontractors.
- Where subcontractors are allowed, overseas ones need evidence that UK suppliers could not do the work, and "a cheaper cost" is not accepted.
- A grant does not reduce relief under the merged R&D scheme, but overseas contractor costs are generally excluded.
Frequently asked questions
Are Innovate UK Smart grants still open in 2026?
No. UKRI says Smart grants "are now closed for new applications", and we found no Smart competition on the Innovation Funding Service in September 2026.
What Innovate UK funding is there for startups in 2026?
Themed competitions (two AI competitions for SMEs open in October 2026), Growth Catalyst (New Innovators and Investor Partnerships) and Innovation Loans. What is open changes month to month, so check the Innovation Funding Service.
How much does an Innovate UK grant cover?
In current competitions, up to 70% of eligible costs for micro and small businesses on feasibility and industrial research, and up to 45% on experimental development. The last New Innovators round covered 100%, up to £50,000.
Can I use an offshore developer on an Innovate UK grant?
Only if the competition allows subcontractors, and only with evidence that the UK suppliers you approached could not do the work. Innovate UK "will not accept a cheaper cost as a sufficient reason". The October 2026 AI competitions allow no subcontractors at all.
Can I get an Innovate UK grant and SEIS?
Nothing we found rules it out, and SEIS investment can be one source of match funding. But HMRC describes SEIS as de minimis aid, and Innovate UK's MFA cap counts de minimis grants, so check the combination with your adviser.
Does an Innovate UK grant reduce my R&D tax relief?
Not under the merged scheme, for accounting periods from 1 April 2024. gov.uk says a grant covering part of your R&D costs means relief "will not be reduced". Overseas contractor costs are generally excluded either way.
Are there start up business grants in the UK?
We found no general, open start-up grant from government in 2026. Innovate UK grants are competitive and for innovation projects. Try Find a grant and your local Growth Hub. A Start Up Loan is a loan, not a grant.
How much can I borrow with an Innovate UK loan?
£100,000 to £5 million, for late-stage R&D, at 3.7% during the project and 7.4% during repayment, for UK SMEs that cannot get other finance on suitable terms.
This is general information, not financial, tax or legal advice. Always check the current competition brief and speak to a registered adviser.
How DevForge can help
DevForge is a founder-led studio that takes products from idea to MVP in 4 to 8 weeks, and you keep 100% of the code and IP. We sign an NDA before the first session, and our hours in India overlap with the UK morning. We are an overseas team, so we are upfront about the rules above: if a competition bars subcontractors or expects UK suppliers, we are not the right fit for the grant-funded part of your project, and we will say so.
Where we can help is the product around it, funded from other money, and a clear phase 1 plan you can show investors. You can see an AI recruiting platform we built for a UK client, read about our AI development for UK startups and MVP development for UK founders, see our guide to technical co-founder versus agency, or visit our UK page. Book a free 30-minute call.
Sources
- UKRI, "Smart grants funding guidance", https://www.ukri.org/councils/innovate-uk/guidance-for-applicants/guidance-for-specific-funds/smart-innovation-funding-guidance/, read 28 September 2026
- UKRI, "Smart grants impact evaluation final report", https://www.ukri.org/publications/smart-grants-impact-evaluation-final-report/, published 14 July 2026
- Kreston Reeves, "What's next for Innovate UK's Smart Grants", https://www.krestonreeves.com/news/whats-next-for-uk-smart-grants/, 20 March 2025
- UKRI news, "New plan to help the next generation of tech businesses thrive", https://www.ukri.org/news/new-plan-to-help-the-next-generation-of-tech-businesses-thrive/, 19 March 2026
- Innovation Funding Service, competition search, https://apply-for-innovation-funding.service.gov.uk/competition/search, read 28 September 2026
- Innovation Funding Service, "Frontier AI: SME Champions, Phase 1", https://apply-for-innovation-funding.service.gov.uk/competition/2584/overview/4c7afb5d-4572-4ef2-9507-73ef2dec8ec8
- Innovate UK Business Connect, "AI Champions: Frontier AI Phase 1" (March to April 2026 round), https://iuk-business-connect.org.uk/opportunities/ai-champions-frontier-ai-phase-1/
- Innovation Funding Service, "Efficient, Structured and Controllable AI Systems", https://apply-for-innovation-funding.service.gov.uk/competition/2582/overview/9fdb47a5-011c-4c47-ac5e-c426e295fe89
- Innovation Funding Service, "Growth Catalyst Early Stage: New Innovators", https://apply-for-innovation-funding.service.gov.uk/competition/2220/overview/bcfd2780-f307-4434-be32-46889a239024, July to August 2025
- Innovation Funding Service, "Innovate UK Growth Catalyst – Investor Partnerships Round 2", https://apply-for-innovation-funding.service.gov.uk/competition/2360/overview/37d8f6e1-5600-4e9e-bbfc-11bc320f8808, December 2025 to February 2026
- UKRI, "Investor partnerships Industrial Strategy", https://www.ukri.org/what-we-do/browse-our-areas-of-investment-and-support/investor-partnerships-industrial-strategy/, updated 22 September 2026
- UKRI, "Future research and innovation funding opportunities", https://www.ukri.org/apply-for-funding/future-research-and-innovation-funding-opportunities/, updated 24 September 2026
- UKRI, Innovate UK "Funding rules", https://www.ukri.org/councils/innovate-uk/guidance-for-applicants/general-guidance/funding-rules/, updated 12 May 2026
- UKRI, "Costs guidance for non-academic organisations", https://www.ukri.org/councils/innovate-uk/guidance-for-applicants/costs-we-fund/costs-guidance-for-non-academic-organisations/, updated 28 August 2026
- Innovation Funding Service, "Innovation Loans Expression of Interest", https://apply-for-innovation-funding.service.gov.uk/competition/2505/overview/8ef63f10-ea07-4ffd-9812-e944542751b6, opened 6 June 2026
- UKRI, Innovation Loans "Costs we fund", https://www.ukri.org/councils/innovate-uk/guidance-for-applicants/guidance-for-specific-funds/innovation-loans/costs-we-fund/
- gov.uk, "Innovate UK Business Growth", https://www.gov.uk/business-finance-support/innovate-uk-business-growth
- Innovate UK Business Connect, "Scale your company with Innovate UK Business Growth", https://iuk-business-connect.org.uk/business-growth/, read 28 September 2026
- gov.uk (HMRC), "Research and Development (R&D) tax relief: the merged R&D expenditure credit scheme and enhanced R&D intensive support", https://www.gov.uk/guidance/research-and-development-rd-tax-relief-the-merged-scheme-and-enhanced-rd-intensive-support, updated 8 January 2026
- gov.uk policy paper, "Research and Development Tax Relief: the merged scheme R&D expenditure credit (RDEC)", https://www.gov.uk/government/publications/research-and-development-rd-tax-relief-reform/research-and-development-tax-relief-the-merged-scheme-rd-expenditure-credit-rdec
- HMRC Corporate Intangibles Research and Development Manual, CIRD150500, https://www.gov.uk/hmrc-internal-manuals/corporate-intangibles-research-and-development-manual/cird150500, updated 25 August 2026
- HMRC Venture Capital Schemes Manual, VCM2040, https://www.gov.uk/hmrc-internal-manuals/venture-capital-schemes-manual/vcm2040, updated 30 July 2026
- Innovate UK Business Connect, "British Business Bank Start-up Loans", https://iuk-business-connect.org.uk/opportunities/british-business-bank-start-up-loans/, read 28 September 2026
- gov.uk, "Find a grant", https://www.find-government-grants.service.gov.uk/
- gov.uk, "Director information hub: regional support for companies in England", https://www.gov.uk/guidance/director-information-hub-regional-support-for-companies-in-england, updated 14 May 2024
