SAVE money with a Seed Enterprise Investment Scheme (SEIS).

Tax relief with SEIS.

The Seed Enterprise Investment Scheme is an unbelievably generous scheme that will at the very least save you thousands in tax relief!

So what exactly is SEIS? A SEIS is an investment. As investors, we all hope and pray that our investments do well – that goes without saying. Where an SEIS differs from almost all other investments is the minimising of loss. For example, if you are in the upper tax bracket and paying tax at 45% and you make an investment of £20, 000 and it fails completely, you only stand to lose £5500 due to the relief on tax.

This is why an SEIS is very attractive to investors and is perfect if you’re looking for tax relief.

Let’s break this down further…

SEIS offers tax breaks to investors into small start-up businesses. The reward for taking this risk is that you will effectively be purchasing shares at half-price. This can result in much higher returns and a growing UK economy. The Government introduced the SEIS as a way to promote new enterprise and boost economic growth in the UK.

SEIS benefits.

  • As an investor you can receive income tax relief of 50% on investments up to £100,000 per tax year in qualifying shares.
  • An investor has to be a director of the company, but not an employee.
  • Your stake in the company can be no larger than 30%.
  • SEIS tax relief applies only to recently incorporated companies.
  • The company must have 25 or less employees and gross assets of up to £200,000.

Scenarios of your SEIS.

We will keep these scenarios simple, they are just to demonstrate how an SEIS works and can make you money.

Each scenario will be for an investment of £20, 000 and will assume that you pay 45% tax and your capital gains tax is at 28%.

Scenario one: Your investment does really well and doubles in value.

Investment = £20,000
Income Tax Relief = £10,000 (you get 50% of your investment back as a tax bill reduction)
Profit from sale = £20,000
Capital Gains Tax = £Zero (if you have held the shares for three years)
Tax free return = £30,000

Scenario two: Three years have passed and your investment value is the same.

Investment = £20,000
Profit from sale = £Zero
Your gain = £10,000 reduction in your income tax bill.

Scenario three: Your investment folds and your shares have no value.

Investment = £20,000
Income Tax Relief = £10,000 (you get 50% of your investment back as a tax bill reduction)
At risk capital = £10,000
Loss relief = £4,500 (45% of at risk capital)
Your actual loss = £5,500 (£20,000 – [£10,000 + £4,500])

If you’re looking to invest in an SEIS, we can help and advise. Call us on: 0121 742 1904 or contact us to find out more.