SEIS Explained

We’ve broken down Seed Enterprise Investment Scheme (SEIS) tax reliefs in an easy-to-digest way that you can share directly with your clients.

What is SEIS?

The SEIS is a UK government initiative designed to encourage investment in early-stage startups. If you’re an investor looking to support new businesses, SEIS can offer tax breaks that make it more appealing than ever ahead of the Budget Announcement.

Key Tax Reliefs

1. Income Tax Relief: When you invest in an SEIS-qualifying company, you can claim back 50% of your investment against your income tax. So, if you invest £10,000, you can reduce your income tax bill by £5,000. That’s a nice immediate benefit!
2. Tax Free Growth: If you sell your shares in the SEIS company after holding them for at least three years, you won’t have to pay any CGT on the profits you make. This is huge since startups can potentially grow a lot in value.
3. Capital Gains Tax Exemption: If you’ve made a gain in the current or previous tax years then you may be able to access Capital Gains tax relief on 50% of your investment (after claiming 50% Income Tax Relief). The amount you can claim matches your Capital Gains Tax rate, for example, your client might claim 24% of half the amount they invest in an SEIS.
4. Loss Relief: If the company doesn’t work out and you end up making a loss, you can offset that loss against your income tax. So, if you invest £10,000 and lose it all, you can claim relief on that £5,000 (after £5,000 Income Tax Relief is claimed). This can make your capital exposure as little as 38% of the amount invested.
5. Inheritance Tax (IHT) Relief: Shares in SEIS companies are generally exempt from IHT if you hold them for at least two years and at the point of death. This means that if you pass away, the value of those shares won’t count towards your estate for tax purposes.

Why Consider SEIS Ahead of Budget Announcements?

In a Nutshell: SEIS tax reliefs are a fantastic way to mitigate access to the potential returns of Venture Capital while also accessing tax benefits. With budget announcements around the corner, staying informed about these reliefs allows you to make savvy investment decisions for your clients in reaction to potential changes announced. So, if you’re an adviser or an investor, keep an eye on SEIS—it could make a significant difference to your financial strategy!