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Enterprise Incentive Scheme (EIS)

The Enterprise Incentive Scheme (also called EIS) is a tax relief scheme that lets you save on tax by investing in startups and other early-stage businesses.

EIS is one of the best tax-efficient investment schemes that are available in the UK – others are SEIS, VCT, SITR, CITR, ISAs, etc.

The tax reliefs that you can get from investing in EIS-eligible startups are:

  • Income Tax relief: you can claim 30% of your investment back from HMRC – as soon as April of the next tax year
  • Capital Gains Tax relief: if you hold the shares for 3 years, you don’t pay any CGT if you sell them for a profit
  • Capital Gains Tax deferral: if you sell the shares for a profit but reinvest all that profit in another EIS, then you don’t need to pay any CGT either
  • Loss relief: if the startup fails and you lose money, you can also claim relief on your loss (depends on your Income Tax band, for example 20%, 40%, or 45%).

The most important thing you need to remember is that you need to file a Self Assessment and claim your Income Tax relief first – otherwise you’re not eligible for the other reliefs, either.

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