An overview of our early stage investors academy

An overview of SEIS and EIS tax reliefs




2 min read

Banks tend not to lend to startups because of the level of risk involved so, in an effort to encourage private investors to fill the gap vacated by traditional sources of finance, the government has developed two very generous tax relief offerings.

These are called the Enterprise Investment Scheme (EIS) and the Seed Enterprise Investment Scheme (SEIS).

While EIS has been around in various forms since the 1980s, the SEIS programme was introduced in 2012 in an effort to better support very early stage businesses with raising their first round of funding.

A breakdown of the different tax reliefs on offer can be found below. 

Tax reliefs available through SEIS

Investors can claim relief on up to £150,000 invested through SEIS per year. All shares must be held for a minimum of three years or the tax relief will be clawed back.

  • Individual income tax relief of 50% of the amount invested with the potential to split the relief between the tax year of your investment and the previous tax year
     
  • Capital Gains exemption on earnings realised on shares held for a minimum of three years.
     
  • Capital Gains Relief of up to 50% of the profits if you sell before the three year holding period and reinvest the profit into SEIS companies. 

  • Inheritance Tax exemption on shares held for a minimum of two years

  • Loss relief: should the company fail investors receive additional relief equivalent to their tax bracket multiplied by the 'at risk capital
'Tax reliefs available through EIS

Investors can claim relief on up to £1,000,000 invested through EIS per year. All shares must be held for a minimum of three years or the reliefs will be clawed back. 

  • Income tax relief of 30% of your investment. This can be used in the year of investment or carried back one-year prior

  • Capital Gains exemption on earnings realised on shares held for a minimum of three years. 

  • Capital Gains deferral on gains realised on the disposal of any asset which is reinvested in an EIS eligible company

  • Inheritance Tax exemption on shares held for a minimum of two years

  • Loss relief: should the company fail investors receive additional relief equivalent to their tax bracket multiplied by the 'at risk' capital

These are just the basics so if you’d like to read the full details about SEIS and EIS you can do so by visiting our dedicated Seed Enterprise Investment Scheme page or our dedicated Enterprise Investment Scheme page.

 

Risk Warning: Tax relief depends on an individual's circumstances and may change in the future. In addition, the availability of tax relief depends on the company invested in maintaining its qualifying status.


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