Tax Advice in the UK: How EIS Investments Can Help
At Allen & Atherton, our mission is to help people navigate the complex world of taxation and make the most of their money. Working with us means getting an experienced tax advice firm to guide you through the complexities of taxation law. Today, we’d like to discuss a relatively unknown but potentially lucrative tax planning tool: enterprise investment scheme (EIS) investments.
What are EIS investments?
EIS investments can be a great way for individuals to support new companies and receive generous tax relief in return. By investing in early stage companies, you can benefit from various types of income tax relief, such as reduced capital gains taxes on any profits made from your first £1 million worth of investments over the span of three years.
In order to qualify for these exciting tax breaks, the company you invest in must meet certain criteria such as being unquoted, meaning it is not listed on a recognised stock exchange or market, and having no more than £15 million in gross assets prior to receiving your investment. Additionally, it must have been trading for two years or less (and no more than five).
The Benefits
Investing in EIS offers many benefits. For example:
- Accessible: No matter your financial standing or expertise level; anyone can get involved depending on their risk appetite
- Generous tax reliefs: Investors may receive up to 30% income tax relief – so if you invested £10k you could save up to £3k off your income bill
- Tax deferral: Any capital gains realised during the 3 year period can be deferred until sale proceeds are received – this has a compounding effect if profits are reinvested
- Carry back losses: Losses against income tax bills may also be carried back one year instead of claiming on current year's liabilities
Not only do EIS offer investors great financial rewards—they also provide businesses with much needed funds for expansion that otherwise would not have been available. By investing in early stage companies you will help facilitate job creation and ultimately foster growth across local communities within the UK.
What Else Do I Need To Know?
- Shares held within EIS must remain held for at least three years before becoming eligible for Capital Gains Relief
- You may invest up to £2 million each year into eligible companies under Enterprise Investment Scheme rules – this amount could increase soon due an expected increase by government legislation
- During thanks time there might be delays when trying to reclaim or set off income or CGT against your personal liability – so plan accordingly should this need arise
Seeking Professional Help
As evidenced above there are plenty of advantages associated with taking advantage of EIS schemes—however they require careful consideration and research before making any decisions.. Everyone’s circumstances vary greatly, so seeking professional advice is paramount before embarking upon any major investment decision such as this one. Our team at Allen & Atherton remains available should you wish further information or seek our specialist services when considering how best to reach your financial ambitions and protect your wealth from taxation implications.