The Enterprise Investment Scheme (EIS) is a well-established part of the UK tax and investment landscape. To date it has invested over 18 billion pounds into start ups and emerging businesses, helping businesses grow for over twenty years.
Investing in start-ups and early-stage businesses does involve risks such as illiquidity, lack of dividends and loss of investment and should be done only as part of a diversified portfolio.
The EIS and Seed Investment Scheme (SEIS), for those who have used up their pension and ISA limits, to invest up to £100,000 a year against start-ups, is aimed at investors who fully understand the risks of investing in early-stage businesses.
The EIS is regarded as one of the best investment schemes in the UK with generous tax benefits.
We have outlined some of the reasons to invest in the EIS this tax year:
Tax relief
EIS tax relief is worth 30% and it’s the same no matter how much you invest, up to £1m in a tax year.
Loss relief
You can save up to 60% of the initial investment between EIS’s tax relief measures.
Higher tax relief for knowledge-intensive businesses
By investing in “knowledge-intensive” businesses, you can get twice the standard allowance and could benefit from up to £600,000 in income tax relief by investing £1 million in a tax year.
Unlimited capital gains deferral
It’s possible to defer 100% capital gains tax liabilities from other investments to EIS for the life of the investment.
Avoid inheritance tax
If you invest in an EIS-qualifying company, you can be exempted from inheritance tax as long as the EIS shares held at the time of death have been owned for at least two years.
Flexibility on income tax relief
The 30% income tax relief can be claimed for the year of investment or the previous tax year.
Spread the risk
You can invest up to £1 million in EIS-qualified companies and can benefit not only from all the relevant tax reliefs on every investment, but you have the opportunity to expand your gains and reduce your vulnerability to risk.
See also our blog – Watch out for The Enterprise Investment Scheme in 2022 which evaluated why the EIS could be worth investing in for your retirement.
It’s a well-established scheme and has a range of tax benefits.
Do you need advice on investing in the EIS?
Feel free to talk to one of our financial advice experts for further advice on whether investing in the EIS is right for you.