Enterprise Investment Schemes. Should you have one?

By Rachel Efetha, Chartered Financial Planner.

What are Enterprise Investment Schemes?

The Enterprise Investment Scheme (EIS) is a UK government initiative designed to encourage investment in small, early-stage companies by offering tax benefits to investors. Here’s a simple explanation of its key benefits:

1. Income Tax Relief: If you invest in an EIS-qualifying company, you can claim 30% income tax relief on your investment. For example, if you invest £10,000, you can get up to £3,000 back as a reduction on your income tax bill. The maximum investment you can claim relief on each tax year is £1 million, or up to £2 million if at least £1 million is invested in knowledge-intensive companies (companies focused on innovation, research, or technology).
2. Capital Gains Tax (CGT) Exemption: If you hold the EIS shares for at least three years and then sell them at a profit, you won’t have to pay any capital gains tax on the profit. This can be a big saving if the company does well and your shares significantly increase in value.
3. Loss Relief: If the company doesn’t do well and you lose money, you can offset your loss against either your income tax or capital gains tax bill, reducing the financial impact of a failed investment. This loss relief helps lower the risk of investing in early-stage companies.
4. Capital Gains Tax Deferral: If you sell an asset (like a property or shares) and make a capital gain, you can defer paying capital gains tax on that profit by investing it in an EIS-qualifying company. You’ll only have to pay the CGT when you sell the EIS shares, and if you still hold them at the time of your death, the CGT can be written off entirely.
5. Inheritance Tax Relief: EIS shares are usually eligible for Business Relief, meaning if you hold them for at least two years, they may be exempt from inheritance tax when passed on to beneficiaries.

Should I invest in an Enterprise Investment Scheme?

These benefits make the EIS a highly attractive option for investors willing to take a risk on smaller, potentially high-growth businesses. It offers a combination of tax reliefs that help both reduce risk and increase returns.

How Anstee & Co. can help you with  Enterprise Investment Schemes.

We are a firm of Independent Financial Advisers (IFAs). This means that the financial advice we provide to you is unbiased. Why not arrange a meeting to see how we can help you? The initial meeting is at our cost and is without obligation. Meetings can be arranged at a time and location that is convenient for you.

Our Head Office is located at:

• Kettering, Northamptonshire

Additionally, our financial advisers live and make use of meeting rooms in:

• Bedford, Bedfordshire
• Market Harborough, Leicestershire
• Northampton, Wellingborough and Thrapston in Northamptonshire.

Our expertise covers all aspects of financial planning including pensions, investments, and mortgages.

If you have any thoughts or comments on this article, “Enterprise Investment Schemes. Should I have one?”, then it would be great to hear your views.

Finally, the information contained in this article is for information purposes only and does not constitute financial advice. No action should be taken based on this information alone. Anstee & Co is authorised and regulated by the Financial Conduct Authority (FCA).”