Mortgage & Property

New Insurance Professional

Family Office Bulletin

Mortgage Property

Insurance Professional

Family Office

Yesterdays budget reinforces the case for EIS

The Hambro Perks Growth EIS Fund

Yesterday’s budget took robust economic measures but leaves many Brits with impending tax liabilities – here’s how EIS can help.

Richard Roberts, Director, Investor Relations, Oxford Capital outlines four ways yesterdays budget reinforced the case for EIS. 

 EIS can reduce income tax liabilities 
While the 0% income tax nil-rate band will receive a small increase from April 2021 (from £12,500 to £12,570) and the higher rate threshold from £50,000 to £50,270, it will then be frozen until April 2026.  Therefore higher rate earners will pay more tax year on year as they receive pay increases from employers or their own businesses.  Through investing in an EIS portfolio, investors can claim back 30% of the amount invested into EIS-qualifying companies against income tax paid, either in the year of investment or carried back against the previous year.

EIS as a retirement planning alternative
The pensions lifetime allowance, having originally been expected to increase annually with CPI, has been frozen at £1,073,000 for the remainder of this Parliament. CPI is currently at historically low levels. However, if CPI returns to normal levels of 3-4% over the remaining years of this parliament, it will create an issue for pension savers nearing their lifetime allowances. Typically, an increase of 3-4% in the lifetime allowance would enable a pension saver to utilise most of their annual allowance. However, with the lifetime allowance being frozen, those at or near the lifetime allowance may want to look at alternative forms of retirement planning. This is where an EIS, with its associated tax reliefs, may complement their existing retirement planning.

Re-invest Capital Gains
The chancellor has frozen the Capital Gains Tax Annual Exempt Amount (AEA) until April 2026. Assets can grow in value, year-on-year, and with the AEA frozen for the next 5 years, those looking to sell an asset may find themselves having to pay more CGT. One great feature of an EIS investment is the ability to invest that capital gain, which will defer the requirement to pay it indefinitely.

Extracting business profits tax-efficiently
It was announced that Corporate Tax will increase for larger businesses from April 2023.  Profit extraction in a tax-efficient manner is a challenge for a number of businesses but investing in the EIS scheme, with its up-front tax relief can be a great solution.  Particularly for those already maxing-out their pension contributions directly from their businesses.

This Week’s Most Read

IFA Magazine

Keep updated on the most important financial events 

Make sure you are an informed

wealth professional..

Adblock Blocker

We have detected that you are using

adblocking plugin in your browser. 

IFA Magazine