Budget 2016: Tax change will boost demand for EIS companies

CPI Raising Inflation Jun 22
Published: 16 Mar 2016 Updated: 21 Jan 2017

Budget 2016: Tax change will boost demand for EIS companies

Jason Hollands, Managing Director at Tilney Bestinvest highlights that tax changes following today’s Budget could prove beneficial to Enterprise Investment Schemes.

“While the big, headline grabbing story for investors in today's Budget is the turbo-charging of ISAs to an astonishing £20k a year and the new Lifetime ISA (a voluntary transition perhaps to the Chancellor's much mooted Pensions ISA) for young investors, the steep cuts to Capital Gains Tax, from 28% to 20% at the higher end, look set to prompt a stampede of interest in Enterprise Investment Schemes (EIS).

“This is because investment in EIS not only provides a 30% Income Tax credit, it also enables those who have incurred a capital gain to defer their capital gains tax liability by reinvesting their gain into EIS companies. The tax liability doesn't disappear but recrystallises when the shares are sold but it is then calculated at the prevailing CGT rates at that time. It is however important to stress that EISs are not risk-free. In particular they are illiquid investments and you must be prepared to hold them for at least three years.

“Importantly, this deferral feature can apply to gains incurred up to 36-months prior to subscribing for the EIS shares, so those who have realised a hefty gain over the last three years - for example on the sale of shares, now have an additional incentive to make use of EIS to defer that gain and reduce their tax liability when the gain recrystallises at the new, lower rates.”

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Important Information

The value of investments, and the income derived from them, can go down as well as up and you can get back less than you originally invested.

This article is not advice to invest or to use our services. If you are in doubt as to the suitability of an investment please contact one of our advisers.

EIS investments should be regarded as higher risk investments. They are only suitable for UK resident taxpayers who can tolerate higher risk and have a time horizon of greater than 3 years. Owing to the nature of their underlying assets, EIS investments are highly illiquid. Investors should be aware that they may have difficulty, or be unable to realise their shares at levels close to that that reflect the value of the underlying assets. Tax levels and reliefs may change and the availability of tax reliefs will depend on individual circumstances.

The above article is based on our interpretation of the Budget 2016 and related legislation; it is not intended as advice, and the impact of any changes to tax rates or allowances will depend on your personal circumstances.

Press contacts:

Jason Hollands
0207 189 9919 / 07768 661382

Gillian Kyle
0203 818 6846 / 07989 650 604

About Tilney Bestinvest

Tilney Bestinvest is a leading investment and financial planning firm that builds on a heritage of more than 150 years. We look after more than £9 billion of assets on our clients’ behalf and pride ourselves on offering the very highest levels of professional client service with transparent, competitive pricing across our entire range of solutions.

We offer a range of services for clients whether they would like to have their investments managed by us, require the support of a highly qualified adviser, prefer to make their own investment decisions or want to take more than one approach. We also have a nationwide team of expert financial planners to help clients with all aspects of financial planning, including retirement planning.

We have won numerous awards including Stockbroker of the Year, Execution-only Stockbroker of the Year and Self-select ISA Provider of the Year 2015, as voted by readers of the Financial Times and Investors Chronicle. We are pleased that our greatest source of new business is personal referrals from existing clients.

Headquartered in Mayfair, London, Tilney Bestinvest employs over 400 staff across our network of offices, giving us full UK coverage, and we combine our award-winning research and expertise to provide a personalised service to clients whatever their investment needs.

The Tilney Bestinvest Group of Companies comprises the firms Bestinvest (Brokers) Ltd (Reg. No. 2830297), Tilney Investment Management (Reg. No. 02010520), Bestinvest (Consultants) Ltd (Reg. No. 1550116) and HW Financial Services Ltd (Reg. No. 02030706) all of which are authorised and regulated by the Financial Conduct Authority. Registered office: 6 Chesterfield Gardens, Mayfair, W1J 5BQ.

For further information, please visit: www.tilneybestinvest.co.uk


This release was previously published on Tilney Smith & Williamson prior to the launch of Evelyn Partners.