The UK government Enterprise Investment Scheme offers a number of tax breaks to investors buying shares in small, private companies:
- Investors get income tax relief of 30 per cent. (40 per cent for a higher-rate taxpayer).
- Investing £100,000 in a company that is eligible for EIS, saves £30,000 off your income tax bill in the year of the investment.
- (£40,000 for a higher-rate taxpayer).
- Investors pay no capital gains tax on any profits made from an EIS investment. So £100,000 invested and five years later
- selling the shares for £200,000, investors get the full benefit of the £100,000 profit (plus the tax initially saved), and also saving at least £18,000.
- There’s no inheritance tax to pay on shares bought through EIS.
- To be eligible for EIS relief, investors generally have to hold the shares for at least three years before selling.
Further information is available on the HMRC website https://www.gov.uk/guidance/venture-capital-schemes-tax-relief-for-investors