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Bure Valley Group is an investment introducer platform 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. 

The Enterprise Investment Scheme (EIS) is a powerful way to invest in early-stage companies with high growth potential. EIS offers a range of tax-efficient “mechanisms”, such as capital gains tax (CGT) deferral, allowing investors to keep more of their hard-earned returns. 

However, EIS can be difficult to comprehend and utilise effectively, even for seasoned investors. Below, we explain the key features of EIS and how investors can leverage them to maximum effect. To learn more about our EIS projects and other early-stage opportunities, visit our portfolio page. For enquiries regarding our latest projects and funding, you can reach us via:

+44 160 334 0827

[email protected]


Tax-free growth

Investors are often frustrated by capital gains tax (CGT) eroding their returns. This tax is levied on the chargeable gains from selling an asset. For instance, if a landlord sells an additional property for more than he originally bought it, the profit will typically be subject to CGT.

One of the great advantages of EIS is that it allows investors to improve their tax-free returns. In 2023-24, an investor can claim CGT relief when releasing certain EIS shares (e.g. those which still qualify for the scheme and where the investor has also claimed Income Tax relief). 

If an investor holds EIS shares for at least three years before disposing of them, then CGT relief can also be available. An individual can invest up to £1m into EIS-qualifying companies each tax year, potentially allowing for a sizeable tax-efficient portfolio to be built up over time.

These features of EIS can be particularly valuable for investors who may have already maximised other “vehicles” such as their ISA allowance (£20,000 per tax year).


Deferral relief

Many investors were frustrated by the Chancellor’s decision to start reducing each individual’s tax-free CGT allowance in 2023. Previously, this stood at £12,300 per year but it now stands at £6,000. Later in 2024, it is expected to fall further to £3,000. This is where EIS can help.

By taking gains from non-EIS shares and investing them into EIS shares, an investor can shield these gains temporarily from capital gains tax. This is known as CGT “deferral relief” and the gains only become subject to tax when the investor sells the EIS shares.

This could allow an investor to time the disposal of EIS shares to maximise tax efficiency. For instance, this could be done when an investor moves from being a Higher Rate taxpayer to becoming a Basic Rate taxpayer (e.g. due to retiring). At this point, a lower rate of CGT could apply – potentially resulting in a lower taxable net gain.


EIS and inheritance tax

What kind of legacy do you hope to leave to your loved ones? For many investors, the threat of a large inheritance tax (IHT) bill looms large over their minds. Yet EIS contains rules which could allow certain investors to keep more wealth within the family and out of the hands of the taxman.

In 2023-24, EIS shares are exempt from IHT if an investor has held them for at least two years at the time of death. This feature of EIS can make it a valuable estate planning tool, especially for individuals who may have exhausted other IHT mitigation tools (e.g. the Residence Nil Rate Band, or RNRB, and annual tax-free gifts).

For instance, suppose an individual owns a £3m estate. Even with a lot of estate planning, much of the estate could still be liable to IHT since it exceeds many of the common thresholds. £500,000 could be passed to beneficiaries without IHT using the Nil Rate Band and RNRB. However, this still potentially leaves £2.5m subject to tax upon death.

This is where EIS could be very helpful. Suppose £1m is invested into EIS shares within a single tax year. The following tax year, the remaining amount is put into “knowledge-intensive” EIS companies. Assuming the investor lives another two years after making these investments, the full £3m estate could be free from IHT.

However, it is important to acknowledge the risks of such an approach. After all, EIS investments are typically higher in risk compared to many other investments (e.g. government bonds). An investor may not get back their original EIS investment and could even lose all of their money if their portfolio completely fails. Therefore, discuss your options with a financial adviser – ensuring that your investments are appropriately diversified and reflecting your attitude to risk and volatility.



Interested in finding out more about the exciting startup projects we have on offer to investors here at Bure Valley Group? 

Get in touch today to start a conversation with our team and discuss some of the great investment memorandums we have available here:

+44 160 334 0827

 [email protected]


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