The UK can be an attractive place to launch a business as there are a variety of tax incentives and grants available for new or innovative startups. Startups are inherently risky as they have yet to prove their value. Likewise, finding investors willing to put money into a high-risk business can be challenging. Fortunately, the UK government has established several tax incentives to encourage investors to put their funds into high-risk startups. We explain available incentives for setting up a business in the UK. <\/p>\n\n\n\n
The EIS scheme allows qualifying investors who are tax resident in the UK to reduce their income tax bill by 30% of the amount they invest in an eligible startup. <\/p>\n\n\n\n
Investors can claim relief on qualifying investments of up to \u00a31 million per tax year (which equates to a tax saving of \u00a3300,000). This limit increases to \u00a32 million if at least half of that is investment in knowledge-intensive companies. In addition, when selling EIS-qualifying shares after holding them for three years, no capital gains tax is payable. There is also reinvestment relief available and an exemption from inheritance tax in certain circumstances.<\/p>\n<\/div>\n\n\n\n
Both the investor and the company issuing the shares must meet various criteria for EIS relief to apply. In particular, the investor:<\/p>\n\n\n\n
Likewise, the company issuing the shares must:<\/p>\n\n\n\n
Companies can raise \u00a35 million each year in investment, which qualifies for tax relief such as EIS. This threshold also includes SEIS and VCT investment. Companies also have a lifetime limit of \u00a312 million. These limits increase to \u00a310 million and \u00a320 million, respectively, for knowledge-intensive companies. <\/p>\n\n\n\n
The SEIS scheme<\/a> is similar to EIS but is designed for even earlier-stage companies, with the following criteria:<\/p>\n\n\n\n Typically, investors view these smaller businesses as higher risk than the slightly more advanced EIS-qualifying companies. Accordingly, the income tax relief is even more generous. The SEIS scheme allows qualifying investors who are tax residents in the UK to reduce their income tax bill by 50% of the amount they invest in an eligible startup.\u00a0<\/p>\n\n\n\n Investors can claim relief on qualifying investments of up to \u00a3250,000 per tax year. This equates to a tax saving of \u00a3125,000. From 6 April 2023, the annual limit increased from \u00a3150,000. The same capital gains tax and inheritance exemptions that apply to EIS investments also apply to SEIS investments.<\/p>\n<\/div>\n\n\n\n Companies can raise up to \u00a3250,000 through SEIS investments. If a company qualifies for SEIS relief as well as EIS relief, it should maximise its SEIS-qualifying investments before issuing EIS shares.<\/p>\n\n\n\n\n\n Continue reading this article below the form\n <\/i>\n<\/a>\n\n