Tax year end to-do list
Don't invest unless you’re prepared to lose all the money you invest. This is a high-risk investment and you are unlikely to be protected if something goes wrong. Take 2 mins to learn more.
Estimated reading time: 2 min
Due to the potential for losses, the Financial Conduct Authority (FCA) considers this investment to be high risk.
What are the key risks?
- You could lose all the money you invest
- If the business you invest in fails, you are likely to lose 100% of the money you invested. Most start-up businesses fail.
- You are unlikely to be protected if something goes wrong
- Protection from the Financial Services Compensation Scheme (FSCS), in relation to claims against failed regulated firms, does not cover poor investment performance. Try the FSCS investment protection checker here.
- Protection from the Financial Ombudsman Service (FOS) does not cover poor investment performance. If you have a complaint against an FCA-regulated firm, FOS may be able to consider it. Learn more about FOS protection here.
- You won’t get your money back quickly
- Even if the business you invest in is successful, it may take several years to get your money back. You are unlikely to be able to sell your investment early.
- The most likely way to get your money back is if the business is bought by another business or lists its shares on an exchange such as the London Stock Exchange. These events are not common.
- If you are investing in a start-up business, you should not expect to get your money back through dividends. Start-up businesses rarely pay these.
- Don’t put all your eggs in one basket
- Putting all your money into a single business or type of investment for example, is risky. Spreading your money across different investments makes you less dependent on any one to do well.
- A good rule of thumb is not to invest more than 10% of your money in high-risk investments.
- The value of your investment can be reduced
- The percentage of the business that you own will decrease if the business issues more shares. This could mean that the value of your investment reduces, depending on how much the business grows. Most start-up businesses issue multiple rounds of shares.
- These new shares could have additional rights that your shares don’t have, such as the right to receive a fixed dividend, which could further reduce your chances of getting a return on your investment.
If you are interested in learning more about how to protect yourself, visit the FCA’s website here.
The most recent Budget introduced an eye-watering £40 billion of tax rises by 2029/30 – the largest hike in a generation.
Much of that burden is falling on “those with the broadest shoulders”: the ever-growing number of higher- and top-rate taxpayers, caught by tax rises, threshold freezes and allowance cuts.
Against this backdrop, the generous tax reliefs available when investing in British startups through VCT, EIS and SEIS (Venture Capital Trusts and the Enterprise and Seed Enterprise Investment Schemes) may look increasingly attractive to experienced investors comfortable with the significant risks.
If you plan to invest and save tax this tax year (or, in some cases, even claim back tax already paid last year), there is still time. Remember: the end of the tax year is on 5 April, but investment deadlines are earlier.
Important: The information on this website is for experienced investors. It is not a personal recommendation to invest. If you’re unsure, please seek advice. Investments are for the long term. They are high risk and illiquid and can fall as well as rise in value: you could lose all the money you invest
How do VCT, EIS and SEIS tax reliefs compare at a glance?
The below is a brief outline based on current rules: there are detailed conditions and rules you should consider carefully before investing. If unsure, seek advice. These are high-risk investments and you should invest on the merits of the investment, not for the tax advantages alone.
| VCT | EIS | SEIS | |
|---|---|---|---|
| Maximum investment per tax year | £200,000 | £2,000,000* | £200,000 |
| Carry back | no | available | available |
| Income tax relief | up to 30% | up to 30% | up to 50% |
| CGT relief/deferral | no | deferral | up to 50% |
| Tax-free dividends | yes | no | no |
| Tax-free growth | yes | yes | yes |
| IHT relief** | no | yes | yes |
| Loss relief | no | yes | yes |
* Provided anything over £1 million is invested in Knowledge Intensive companies.
** From 6 April 2026 100% IHT relief on EIS and SEIS private companies will be limited to the first £1 million of qualifying assets (including private companies and agricultural property), with the remainder eligible for 50% IHT relief (an effective IHT rate of 20%). Any qualifying S/EIS companies quoted on AIM will be eligible for 50% IHT relief (an effective IHT rate of 20%).
Tax rules can change and benefits depend on circumstances.
1. Invest in a VCT – up to 30% income tax relief and tax-free dividends
A VCT is in many ways similar to an investment trust. It is a company listed on the London Stock Exchange that raises money and uses it to invest in young, innovative and often privately-owned companies.
When you invest, you could receive:
- Up to 30% income tax relief – save up to £60,000 on your income tax bill when you invest in newly issued VCT shares
- Generous allowance – invest up to £200,000 per tax year
- Tax-free dividends – no need to declare VCT dividends on your tax return and they won’t use up your dividend allowance, which is currently £500
- Tax-free growth – no CGT on gains
Note: VCT dividends are variable and not guaranteed.
2. Invest in EIS – save up to 30% income tax plus defer capital gains made elsewhere
The EIS (Enterprise Investment Scheme) incentivises investment in small and usually privately owned or AIM-quoted companies. You can invest directly in individual companies or in an EIS fund, where the fund manager makes the investment decisions.
When you invest, you could receive:
- Up to 30% income tax relief – up to £3,000 saving on a £10,000 investment
- Carry back – potential to use the income tax relief against a previous year's tax bill
- Very generous allowance – up to £1 million per tax year (or £2 million if at least £1 million is in knowledge-intensive companies)
- Tax-free growth
- Capital gains deferral – defer capital gains from other investments, potentially indefinitely
- Loss relief – offset any future losses against your income
- Inheritance tax relief – potentially pass on your investment free of IHT
3. Invest in SEIS – save up to 50% income tax and capital gains tax
The Seed Enterprise Investment Scheme (SEIS) is designed to complement the EIS. SEIS companies are even smaller and younger than EIS ones, hence riskier. Accordingly, SEIS tax reliefs are more generous.
When you invest, you could receive:
- Up to 50% income tax relief – up to £50,000 saving on a £100,000 investment
- Carry back – potential to use the income tax relief against a previous year’s tax bill
- Generous allowance – £200,000 per tax year
- Tax-free growth
- Up to 50% capital gains reinvestment relief – halve the CGT due on gains from elsewhere
- Loss relief – offset any future losses against your income
- Inheritance tax relief – potentially pass on your investment free of IHT
How to get back tax you’ve already paid with EIS and SEIS carry back
EIS and SEIS investments offer a “carry back” facility. You can elect for all or part of your EIS/SEIS shares acquired in one tax year to be treated as though they had been acquired the previous tax year.
So, for instance, if you invest in an EIS or SEIS offer that plans to deploy your funds before 5 April 2025, you can use the income tax relief (up to 30% with EIS and up to 50% with SEIS):
- to save on your income tax bill for 2024/25
- to get back tax you’ve already paid for 2023/24
You can only do this if you have sufficient EIS or SEIS allowance in the tax year to which you’re carrying back.
There’s still time to apply EIS and SEIS relief to your 2023/24 income tax bill
Some of the EIS funds, EIS single companies and SEIS funds available on our website are targeting deployment within this tax year – not guaranteed. Tax rules can change and benefits depend on circumstances. Please be aware of the deadlines.
Free factsheet: VCTs, EIS and SEIS tax reliefs compared
This short and simple factsheet explains and compares side-by-side the current tax treatment of these three government-endorsed schemes. Get the free factsheet and find out:
- What VCTs, EIS and SEIS are, in a nutshell
- Their risks and benefits
- How you could claim up to 30-50% income tax and other tax reliefs
- How you might be able to claim back some of last year’s tax
- How you might receive tax-free dividends
Wealth Club aims to make it easier for experienced investors to find information on – and apply for – investments. You should base your investment decision on the offer documents and ensure you have read and fully understand them before investing. The information on this webpage is a marketing communication. It is not advice or a personal or research recommendation to buy any of the investments mentioned, nor does it include any opinion as to the present or future value or price of these investments. It does not satisfy legal requirements promoting investment research independence and is thus not subject to prohibitions on dealing ahead of its dissemination.
Alex Davies
Chief Executive
Alex was a board director at Hargreaves Lansdown, where he worked for 15 years. He was responsible for building Hargreaves Lansdown into the biggest direct-to-consumer SIPP provider in the UK with more than 150,000 clients and over £12 billion under management. He is a keen investor with a portfolio of shares, funds, student property, EIS and VCT investments.