Tax Relief for Individuals

The rate of Income Tax relief depends on the scheme. EIS offers relief of up to 30%, SEIS up to 50% and VCTs 30% on new shares. Relief is claimed through your Self Assessment return, and it can only reduce the Income Tax you actually owe, so you need to be a UK taxpayer with enough tax liability to benefit. We can help you check how much relief you could use before you invest.

Under EIS you can invest up to £1 million a year, or £2 million if the excess is invested in knowledge-intensive companies. SEIS and VCTs are each limited to £200,000 a year. Investing above these limits means the extra amount does not qualify for relief. We can help you plan your investments so you stay within the annual limits.

If you dispose of your shares before the minimum holding period, which is usually three years, the relief may be withdrawn. This can mean repaying the Income Tax relief you claimed and paying Capital Gains Tax on the disposal. Before selling, it is worth checking how the holding period applies to your investment. We can review your position and explain the implications.

The EIS gives Income Tax relief and Capital Gains Tax benefits on investments in certain unquoted trading companies. It also allows CGT deferral when you reinvest gains into qualifying shares. Because the shares are in early-stage or higher-risk companies, it is important to understand both the benefits and the risks before investing. We can explain how EIS fits your circumstances.

The SEIS is a junior version of the EIS designed for very early-stage companies. It offers a higher rate of Income Tax relief, up to 50%, but has a lower annual investment limit of £200,000. Reinvestment relief under SEIS can exempt 50% of a qualifying gain that is reinvested in SEIS shares. The right scheme depends on the stage of the company and your investment goals.

VCTs are managed funds that invest in smaller, higher-risk unquoted companies. Individuals aged 18 or over who subscribe for new VCT shares can claim Income Tax relief at 30%, up to £200,000 a year. Instead of investing directly in a single company, a VCT spreads your investment across several businesses. We can help you understand how VCT relief works and what records you need.

For EIS and SEIS, the company must be a qualifying unquoted trading company, and you generally cannot hold more than 30% of the shares or be an employee of the company. For all schemes you must be a UK taxpayer, stay within annual limits and hold the shares for the minimum period. Checking eligibility before you invest helps avoid your relief being refused or withdrawn.

The company issues an EIS3 or SEIS3 certificate, or a VCT certificate, which you use to claim Income Tax relief through your Self Assessment return. Claims are normally due within five years of the end of the tax year of investment. Keep your certificates safely, as you will need them to support the claim. We can prepare your return and make sure the relief is claimed correctly.