Small business funding to get boost from Osborne’s pension relief cuts

EIS Association has said investing in Enterprise Investment Schemes may become "a more attractive option" in light of summer Budget proposals

Funding for start-ups and small businesses could rise markedly following the chancellor’s Budget proposal to cut pensions tax relief for higher earners, the Enterprise Investment Scheme Association (EISA) has argued.

Sarah Wadham, director general of the industry trade body, has said there is the “possibility of investment flows increasing” into Enterprise Investment Schemes (EIS) and Seed Enterprise Investment Schemes (SEIS) given that Osborne has pledged to reduce tax relief on pension contributions for people earning over £150,000.

Wadham has said EIS and SEIS will pose “an even more attractive option” for those with larger salaries to reap the benefits of tax relief:

“EIS’s extensive package of legitimate government sanctioned tax reliefs – 30%/50% income tax relief, no CGT or IHT, loss relief and CGT deferral – arguably make EIS and SEIS one of the most attractive tax-efficient investments available.

“As such it is no surprise that there is growing interest from wealth managers, IFAs and tax planners, and their clients, in using EIS/SES, particularly over the past few years as tax relief on pensions has been regularly eroded.”

Wadham did emphasise that investing in businesses via EIS and SEIS shouldn’t be a decision made lightly:

“It should be remembered that the purpose of EIS is to provide start-up and expansion funding for smaller UK businesses, which are the backbone of the economy. EIS/SEIS are relatively high risk investments in smaller, unlisted companies which are not suitable for all everyone and investors should understand the risks before investing.”

Find out more about SEIS and EIS here.

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