The Treasury has confirmed the extension of key tax relief schemes for start-ups and investors, providing a significant boost to the UK’s start-up market.
The Enterprise Investment Scheme (EIS) and Venture Capital Trust (VCT) tax reliefs have been extended until April 2035.
This extension follows the sunset clause that required new legislation to keep these reliefs in place, a move previously planned by the last Government in Budget 2023.
Benefits of the schemes
These schemes were created to make it easier for people to invest in early-stage companies.
By offering generous tax reliefs, they’re designed to spark innovation, create jobs, and drive economic growth.
With the EIS, investors can enjoy up to 30 per cent upfront Income Tax relief and avoid Capital Gains Tax (CGT) on any profits from the sale of shares.
You can invest up to £1 million each year, or £2 million if you’re putting money into research and development-focused companies. It is important to note that shares need to be held for at least two years.
VCTs on the other hand, are listed on the UK stock exchange and let you invest up to £200,000 annually in new VCT shares, with tax-free dividends.
In the 2022-23 financial year alone, these schemes raised £2.9 billion, with 1,280 companies using EIS for the first time.
The extension is anticipated to help keep the momentum going, encouraging even more investment in high-risk, innovative businesses.
Advice for start-ups
If you’re a start-up or an investor, now is an opportune time to explore these tax relief schemes to maximise your financial benefits and support your business’s growth.
Make sure you stay up to date on the latest regulations and seek professional advice to make the most of these extended reliefs.
