PTD0001 Investment-Brochure A4 V6 - Page 48

Ent er pr ise
In v es tment Scheme
(EIS) - Tax Benefits
The UK government set up the Enterprise Investment Scheme in 1994.
Today, it offers a number of tax breaks to investors who buy shares in
small, private companies:

You get income tax relief of 30 per cent. So if you invest £10,000
in a company that is eligible for EIS, you can knock £3,000 off your
income tax bill in the year that you invest.

You’ll pay no capital gains tax on any profits you make from an EIS
investment. So if you invest £10,000 and five years later sell your
shares for £20,000, you’ll get the full benefit of the £10,000 profit,
saving you at least £1,800.

If you make a loss on your investment, you can offset that loss
against income tax. So let’s say you lose your entire £10,000
investment. Because of income tax relief, your actual loss is only
£7,000 (£10,000-£3,000). So you can, if you choose, reduce your
taxable income for the year in which you disposed of the shares by
£7,000, resulting in a saving of £2,800 (40 per cent of £7,000) for
a higher-rate taxpayer. If you want to offset your loss against other
capital gains in the normal way, you can do this instead.

There’s no inheritance tax to pay on shares bought through EIS.

To be eligible for EIS relief, you generally have to hold the shares for
at least three years before selling them.


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