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Enterprise Incentive Scheme (EIS)

The Enterprise Incentive Scheme (EIS) is a tax relief scheme. It lets you save on tax by investing in startups and other early-stage businesses. For the startups – which represent younger and higher-risk investments – this gives them access to funds they may not ordinarily be able to land. 

EIS is one of the best tax-efficient investment schemes that’s available in the UK. 

Examples of similar tax relief schemes include:

  • Seed Enterprise Investment Scheme (SEIS)
  • Venture Capital Trust (VCT)
  • Social Investment Tax Relief (SITR)
  • Community Investment Tax Relief (CITR)
  • Individual Savings Accounts (ISA) 

What tax relief can I get if I invest in EIS-eligible startups?

  • 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, you don’t need to pay any CGT 
  • Loss relief: if the startup fails and you lose money, you can also claim relief on your loss. The amount you can claim depends on your Income Tax band: 20%, 40%, or 45%

How does the Enterprise Incentive Scheme work?

The EIS allows you to claim up to £1 million relief when you invest in qualifying startups. This goes up to £2 million when you invest in what HMRC describes as “knowledge-intensive” companies.

In order to claim, you need to file a Self Assessment and claim your Income Tax relief first. If you normally pay tax via PAYE (i.e. directly from your salary), you will need to register for Self Assessment by 5th October.

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