Did you know that it is possible for angel investors, who are actively seeking to utilise their SEIS/EIS tax deductions, to also carry back their EIS/SEIS income tax relief to the previous tax year.
The Chancellor recently announced that there would be no changes to SEIS, EIS, VCT or IHT Business Relief investments. It is therefore more important than ever to have a diversified investment portfolio to ensure you have maximum exposure to higher returns, tax efficient investing in a risk controlled environment.
Tax incentives provide a huge opportunity for both the crowdfunding platforms and investors alike. There are considerable tax advantages for investing in start-ups and it is important that investors have considered this as part of their overall tax planning. The Enterprise Investment Scheme (EIS) and the Seed Enterprise Investment Scheme (SEIS) are two of a number of UK government initiatives which encourage innovation by granting private investors a significant tax break when investing in early stage, ‘high-risk’ companies.
SEIS is focused on very early-stage companies, and allows an individual to invest up to £100,000 per tax year and to receive a 50% tax break in return. The investor will also benefit from a capital gains tax exemption on any profits that arise from the sale of shares after three years.
EIS, on the other hand, focuses on medium sized startups. It allows an individual to invest up to £1 million per tax year and to receive a 30% tax break in return. As with SEIS, the investor will also pay no capital gains tax on any profit arising from the sale of the shares after three years.
With both SEIS and EIS, there is no inheritance tax to pay on shares held for at least two years. Finally, if shares are eventually sold at a loss, the investor may offset the loss against their capital gains tax.
To find out more about SEIS/EIS tax relief in our Guide to Investing, please click here.
