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Spondoo Accounting

What are the tax benefits for investors under the Seed Enterprise Investment Scheme (SEIS) and Enterprise Investment Scheme (EIS)? 

July 18, 2022

Income Tax Relief 

The income tax relief benefits vary between the 2 schemes: 

  • Seed Enterprise Investment Scheme (SEIS) is made for very early-stage companies. Under this scheme, an individual can invest up to £100,000 per tax year. In return, the UK government will give them a 50% tax break either the current or previous tax year.  
  • Enterprise Investment Scheme (EIS) is aimed at slightly later-stage businesses like medium-sized start-ups. Under EIS, an individual can invest up to £1 million per tax year. In return, the government offers them a 30% tax break. 

Capital Gains Tax 

Both EIS and SEIS allow investors to benefit from a Captial Gains Tax exemption on any gains made in the value of their shares. There are required to hold on to the shares for a minimum of 3 years before they sell to benefit from this exemption. 

Inheritance Tax 

Like Captial Gains Tax, an EIS or SEIS investor will benefit from an exemption from inheritance tax, providing the shares are held for at least 2 years. 

Loss Relief 

If your investment losses money or is entirely worthless, you can claim with income tax or capital gains tax loss relief. 

Your Initial Capital @ Risk 

It is of course sensible to review your investment and only commit money that you are ready to lose, however, the generous tax incentives for investors can dramatically reduce the capital at risk. 

This is illustrated in the example below that details a £20,000 investment for investors at each income tax threshold 

When you make a loss on your investment SEIS  EIS 
 Basic Rate Tax Payer Higher Rate Tax Payer Additional Rate Tax Payer  Basic Rate Tax Payer Higher Rate Tax Payer Additional Rate Tax Payer 
Example: Investor highest Tax Band 20% 40% 45%  20% 40% 45% 
Example: Investment Amount £20,000.00 £20,000.00 £20,000.00  £20,000.00 £20,000.00 £20,000.00 
        
Income Tax Relief in the tax year you make the investment (or 1 tax year prior) 50% 50% 50%  30% 30% 30% 
£10,000.00 £10,000.00 £10,000.00  £6,000.00 £6,000.00 £6,000.00 
        
Income Tax Loss Relief £4,000.00 £8,000.00 £9,000.00  £4,000.00 £8,000.00 £9,000.00 
Capital Gains Tax Loss Relief        
        
Net Investment Lost when your shares go to Zero £6,000.00 £2,000.00 £1,000.00  £10,000.00 £6,000.00 £5,000.00 
        
Percentage of your initial investment at risk 30.00% 10.00% 5.00%  50.00% 30.00% 25.00% 

 

Spondoo’s Services for SEIS & EIS investors

If you need advice, tax planning or compliance services, speak to our personal tax team for more details 

Spondoo’s Services for Companies setting up EIS & SEIS

If you want to register your business for SEIS or EIS under HMRC’s advanced assurance scheme – click here.

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Information provided on the site is merely guidance that may change in line with UK law and regulations. Users must not consider this to be financial advice or their sole resource when making any financial decision. Spondoo is a trading name for Accounting SQL Limited, authorised & license accounting firm under the Institute of Financial Accountants.

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