Tax-efficient incentives to invest in entrepreneurship and start-ups were introduced in the 1990s and have been hugely lucrative for wealthy investors in recent years — although the rules have been tightened of late to prevent abuse.
There are two vehicles to invest in: venture capital trusts (VCTs) and the Enterprise Investment Scheme (EIS). VCTs were introduced by the Conservatives in 1995 as a way of providing funding for early stage private companies with the potential for long-term growth. These companies often have unproven business models, and as a result have a high failure rate. VCTs therefore tend to spread these investments across a range of businesses to mitigate risk.
The benefits of a VCT include 30% income tax relief on an investment of up to £200,000 (assuming it is held for five years). In addition, any capital gains and dividends received are free from tax.
EIS shares were introduced in 1994 and allow you to claim back up to 30% of the value of an investment as income tax relief. Again, these are investments in early-stage companies. There is no minimum, but most investment managers will expect you to put in at least £10,000, which would save you £3,000 in income tax. You can purchase a maximum of £1m worth of EIS shares in a year. Dividends are taxed but not capital gains — and you can write off losses against other taxes.
The average VCT has been lucrative for investors, delivering a 140% total return over the past decade. About £250m has been invested in VCTs so far this year — up 4% on 12 months ago.
Quote Of The Day
“People come into your life and people leave it…you just have to trust that life has a road mapped out for you.”
Orlando Bloom
Alternative Quote Of The Day
“Me and my wife haven’t got any savings. Well, we do, but they’re all tied up in Boots points.”
Gareth Richards
Suffering From A Tax Conscience
Ministers and officials ate £3 million worth of biscuits in a year and spent £45 million on taxis to move prisoners and staff around the country.
More than £20 billion is lost through public sector fraud and £15 billion on duplicated procurement across Whitehall departments and councils.
The Home Office spent £427,000 on rubber bullets that the police are not even allowed to use.
Crawley Council spent £5,070 on 12,200 hot drinks from vending machines for employees, when the equivalent number of tea bags would have cost £200.
Today’s National Day
NATIONAL ASK A STUPID QUESTION DAY!
PUBLISHERS NOTICE
Dear Streetwise Customer,
If I could show you how to stake £30 in order to WIN £80… knowing that with just a few clicks of your mouse you could AUTOMATICALLY get back your initial £30 if the result didn’t go your way… would you give it a go?
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Kind Regards
John Harrison
Publisher
P.S With the new football season now under way, there couldn’t be a better time to start cashing in on this.