Bure Valley Group is an investment brokerage business which links successful investors with exciting, innovative UK startups seeking funding. This content is for information purposes only and should not be taken as financial or investment advice.
You could be forgiven for believing the UK economy is in a dire state, especially in light of the challenges posed by Brexit. Yet Britain is in a strong position as it launches into 2020, and startups (including EIS opportunities) look set to benefit. In January, for instance, the IMF published its projection that the UK economy would grow at 1.4% in 2020 and 1% in 2021.
This closely mirrors the British government’s own projections published on the 19th February, which anticipates 1.2% in 2020 and an additional growth of 1.4% in 2021. Of course, such figures are weak when compared with historic UK growth rates, yet they beat the projections for major economies such as Germany and Japan. Undeniably business confidence is rising, with both the Confederation of British Industry (CBI) and Institute of Directors (IoD) stating that the UK economy is poised to boom – especially in the SME sector – if the Chancellor gets the budget right in March.
Implications for EIS opportunities
For EIS investors and those interested in EIS opportunities, this should come as welcome news. Much of the new-found business confidence in 2020 can be attributed to renewed UK political stability, following the landslide Conservative majority achieved in the December 2019 election (bringing more certainty to Brexit policy). There are also reports that UK wages are on the rise, with ONS figures finally showing average UK weekly wages exceeding pre-Financial Crisis levels (i.e. March 2008). Weekly pay, in other words, now stands at around £512; the highest rate in nearly 12 years, after inflation.
All of this points to strong conditions for EIS opportunities and startups to thrive. Here at Bure Valley Group, this certainly correlates with many of the exciting EIS projects which are active in our portfolio at the moment. The women’s labour market is showing particularly promising signs, with women in employment now at a record high of 15.16 million (up from 13.80 million in 2019).
Eyes will now be on Rishi Sunak, the new Chancellor of the Exchequer, and the budget looming on the 11th of March. The Conservative manifesto made little mention of EIS in December 2019, but Sunak is widely seen as “pro-SME” in light of a past paper he wrote which called for the creation of a bond investment exchange for small businesses. The idea here would be to allow ordinary investors to trade bonds like shares, generating fresh capital for SMEs. Certainly, we at Bure Valley Group will be watching this closely and invite you to subscribe to our newsletter to get the latest updates on this important subject!
How EIS investors can prepare for 2020
Whatever happens with EIS in 2020, investors should not abandon the fundamental principles of investing wisely (e.g. diversify appropriately, be mindful of your risk tolerance etc.). However, it seems quite certain that Brexit is likely to dominate UK market performance. This could make 2020 a good time to consider buying some promising bonds in the UK on the cheap, and to also consider diversifying your portfolio with compelling EIS investment opportunities.
As a reminder, here are just some of the reasons to think about including EIS in your portfolio:
- EIS income tax relief. In 2019-20, you are allowed to claim up to 30% of the value of your EIS investment against your income tax bill. So, if you invest £20,000 in an EIS opportunity you could save £6,000 on your income tax bill.
- EIS capital gains tax (CGT) relief. One of the great benefits of EIS shares is that they are exempt from CGT if you hold them for at least three years, before selling them at a profit. You can also make use of “deferral relief”, which means you do not have to pay CGT until later if you dispose of an asset.
- EIS loss relief. Suppose you invest in an EIS-qualifying company and it fails, losing you money. Under the EIS system in 2019-20, you can claim loss relief at your highest rate of income tax. So, if you’re an additional rate taxpayer you could claim back 45% of the original value of your EIS investment. When this is combined with your income tax relief, this significantly reduces your at-risk capital. For instance, suppose you invest £100,000 in an EIS opportunity and the company tragically fails. As a first step, you could claim back 30% of this amount against your income tax bill (£30,000). The remaining £70,000 can be subject to loss relief. If you’re an additional rate taxpayer, this would equate to 45% on the £70,000 (i.e. £31,500). In other words, the at-risk capital in this particular example would be £38,500.
There is much to be positive about EIS investing in 2020. Moreover, there are many exciting EIS opportunities on offer here at Bure Valley Group which we would love to share with you.
If you are a successful investor and would like to know more about the exclusive property loan note opportunities we offer here at Bure Valley Group, then we’d love to hear from you. Get in touch today to start a conversation with a member of our friendly team, and to discuss some of the great investment memorandums we have available:
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