Tax Rises Signal a Shift

13/11/24

By:

Dallas Hughes

Why Now Is the Time to Consider EIS Investments. The UK government has signalled significant changes in taxation, targeting those earning from assets like shares and property.

The UK government has signalled significant changes in taxation, targeting those earning from assets like shares and property. Capital Gains Tax (CGT) is expected to rise from its current rate of up to 20%, while inheritance and gift tax rules could tighten, potentially affecting high-net-worth individuals and property owners.

Key Tax Changes on the Horizon

Capital Gains Tax Increase: Investors in shares and other assets face higher CGT rates, making it costlier to realize gains.
Inheritance Tax Reforms: While only about 5% of UK estates currently incur inheritance tax, planned changes could capture a broader base, adding complexity to estate planning.

These measures are part of Labour’s aim to redefine "working people" and focus tax increases on income from assets, leaving many investors in search of strategies to safeguard their wealth.

How EIS Can Offer a Solution

The Enterprise Investment Scheme (EIS) emerges as an ideal tool to counteract these upcoming tax hikes. Designed to encourage investments in small, high-potential businesses, EIS offers several tax advantages:

Capital Gains Deferral: Postpone paying CGT by reinvesting gains into EIS-eligible companies.
Inheritance Tax Relief: EIS shares are exempt from IHT if held for at least two years, making them a powerful estate planning tool.
Income Tax Relief: Receive 30% relief on EIS investments, up to £1 million annually (or £2 million for knowledge-intensive companies).
Tax-Free Growth: Profits from EIS shares are free of CGT after three years.

Why Act Now?

With tax increases imminent, acting sooner rather than later is crucial for investors looking to minimise their exposure. EIS investments provide a pathway to both mitigate rising taxes and support innovative UK startups—a win-win for high-net-worth individuals seeking tax efficiency and portfolio diversification.

Planning Ahead

Proactive tax planning and informed decisions are more important than ever in this evolving fiscal landscape. Exploring EIS opportunities now allows investors to position themselves strategically, balancing risk and reward while staying ahead of the impending tax shifts.