With all eyes on the upcoming election, and with the UK having entered recession at the end of 2023, discussion leading up to today’s budget was largely concerned with whether voters were likely to prefer tax cuts or public services more.
As it turned out, a number of tax cuts were on the agenda, along with some encouraging changes that are likely to benefit small businesses. We've listed some of them below:
A complete reversal of recent changes to sophisticated investor income thresholds following outcry from the tech and investment community, meaning the threshold to qualify as a high-net-worth angel investor will remain at £100,000.
Announcement of a plan for HMRC to establish an expert advisory panel to support the administration of R&D reliefs for small businesses.
Abolition of non-domicile tax status, which allows foreign nationals living in Britain to avoid paying tax on overseas earnings.
Confirmation that the Mansion House pension reforms – which will see pension providers allocate assets to unlisted equities – will require pension funds to disclose publicly the amount they invest in UK businesses, compared to the amount invested overseas.
Capital gains tax: A cut of 4% to the higher rate for residential property, reducing it from 28% to 24%. While positive for homeowners, this is not a huge reduction.
National Insurance: A 2% cut so the average worker will pay 8% instead of 10%.
The VAT registration threshold for SMEs will rise from £85,000 to £90,000, which is definitely a positive for the long term viability of startups.
The Chancellor also announced a new British Business ISA, which would focus investment on British businesses.
The VAT registration threshold for SMEs will rise from £85,000 to £90,000, which is definitely a positive for the long term viability of startups.
Capital gains tax
If you were waiting for the tax rate to fall before you sold your residential property, the 4% cut is better than nothing but the new rate of 24% is still considerable. Investing in EIS allows investors to benefit from capital gains deferral, and treat a gain equal to the amount they invest in EIS qualifying businesses as having arisen at a later time.
In practice, the gain can be deferred for as long as you hang on to your EIS shares, and even if you sell them, it can be deferred again by investing again.
Tax benefits via EIS
Investors in the Enterprise Investment Scheme gain access to a suite of reliefs on taxes including income tax, capital gains tax, and exemption of EIS shares from inheritance tax. To find out more about the tax reliefs available to EIS investors, see our recent article.
Where to start?
If you’re interested in finding out more about investing in EIS, a good place to start is by finding a fund that suits you. You can use the link below to schedule a call with us, and we’ll talk your through our approach to EIS investing.
Our approach to EIS investing is based on three years of analysis of the UK startup market. We found that, as a whole, the market sees consistent annual growth of around 25-31%.
Our fund model is built to gain access to this growth by co-investing with leading angel investors who have demonstrated they can outperform the market, and by building our investors large portfolios of 50+ companies to optimise return potential. Our approach has made us one of the UK’s most active funds – according to Beauhurst, we were the second most active fund in the London region in 2022 – and our 2020 and 2021 cohorts have seen growth of over 40% to date.
If you’d like to find out more about us, and our fund – The Access EIS Fund – our website will give you more information about our innovative approach to EIS.
Find out more about how the Access EIS Fund can work for you. You can click the button below to schedule a call, or call us on 01223 478 558 and we'll be happy to answer any questions you might have.
What is Access EIS?
Read our fund brochure for everything you need to know about the Access EIS Fund, from the specifics of our innovative co-investment model to our fees, and how to invest.
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