The Enterprise Investment Scheme (EIS) and Seed Enterprise Investment Schemes (SEIS) remain favoured investment choices for many reasons.
Investors turn to these schemes because early stage startups which may go on to be the next Uber or Airbnb represent a potentially significant return on investment; because they are innovative, and impactful, using the latest technologies to address social and environmental issues; and because of the array of significant tax benefits the schemes provide.
You can review the tax benefits available to investors through these schemes in the images below.
Tax reliefs available to EIS shareholders
Tax reliefs available to SEIS shareholders
Key considerations for maximising EIS benefits
Deployment timelines
For most S/EIS funds, transferring your capital into the fund is straightforward and more or less immediate. The challenge lies in deploying these funds into eligible startups. The time frame for deployment varies by fund, ranging from several weeks to as long as 15 months, depending on the portfolio’s size. Typically, deployment takes at least 12 months, with exceptions for smaller portfolios that complete this process faster.
Why is deployment time important? Only after your capital is allocated to specific companies will you receive the EIS share certificates necessary to claim tax relief. Waiting until the final weeks of a tax year to invest often means certificates will not be issued in time for that tax year’s filings.
Leveraging the carryback option
One of the most attractive features of EIS is the 30% income tax relief on your invested amount. This relief can be applied to the tax year in which the shares are issued or carried back to the previous tax year.
For instance, if you wish to apply carryback relief to the 2022/23 tax year when filing in January 2024, your shares must have been issued in the 2023/24 tax year. Investments made too late in the 2023/24 tax year may result in shares being issued in 2024/25, making you ineligible to carry back relief to 2022/23.
To optimise this benefit, invest as early as possible in the tax year. Investing as far in advance of April 2025 as possible increases the likelihood of receiving share certificates for the 2024/25 tax year, which can then be used to claim relief in your 2023/24 filings. Note, certificates issued between January and March 2025 can also be claimed against taxes you’ve already filed for that year by submitting a correction to HMRC.
Flexible tax planning
S/EIS investments offer unique flexibility to mitigate tax liabilities. By planning your investments strategically, you can manage income tax spikes effectively. Early-year investments allow faster application of tax relief, particularly advantageous for those expecting substantial bonuses or income variations.
Practical steps to get started
Assess your tax position
Understanding your expected tax liability is crucial. For those on PAYE, this may be straightforward. However, additional income from rentals, royalties, or interest may complicate calculations. The UK government provides a useful tool for estimating income tax at gov.uk. Align investments with tax relief goals
EIS allows you to claim relief on investments up to £1,000,000 (£2,000,000 if investing in Knowledge Intensive Companies), with potential tax reliefs of up to £300,000 (£600,000 for Knowledge Intensive investments). Account for fund fees, which typically reduce expected relief by around 10%. For example, a £10,000 investment might yield approximately £2,700 in relief after fees.
Be prepared for the long term
Startup investing requires patience. Failures are more frequent and occur earlier than successes. Secure your EIS certificates, claim tax relief, and prepare for a lengthy investment horizon. With a sound strategy and some luck, your portfolio’s successes can outweigh its failures, delivering returns alongside tax advantages. Additionally, you’ll contribute to economic growth by supporting innovation and job creation.
Why early investments matter
Early investments enhance your ability to leverage tax reliefs for the upcoming January filing. The Access EIS Fund, for instance, builds large, diversified portfolios of over 50 companies, co-investing with established angel investors using a data-driven approach. If you’re considering EIS investments, contact us at 01223 478 558 or visit our website to explore the benefits of starting early in the tax year.
The Carbon13 SEIS Fund
Our latest investment opportunity is an SEIS fund focused on returns with purpose, building and backing early-stage businesses addressing Earth’s vital life support systems.
This fund, Carbon13's 7th SEIS fund portfolio, will invest in pre-seed companies that are expected to be eligible for SEIS, and enable investors to claim a suite of tax reliefs such as 50% income tax relief on up to £200,000 invested, and 50% exemption from capital gains that arise in the same year. Tax reliefs are subject to status and change.
Click the button below to view the fund and make an investment.
The Access EIS Fund
Our fund co-invests with proven angel investors to build large portfolios of hand-picked companies for our investors. It’s a high risk investment, and we can’t guarantee that every startup will be a unicorn, but we’re confident that our approach is the smartest on the market. Even better, we can show you the data to prove it.
If you’re interested and would like to find out the benefits of investing towards the start of the tax year, you can call us on 01223 478 558 and we'll be happy to answer any questions you might have.
Or, if you're ready to get started, click the button below:
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Read our fund brochure for everything you need to know about Access, from the specifics of our innovative co-investment model to our fees, and how to invest.
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