How to get a rebate on your Income Tax Bill – Tax Efficient Investing

Did you know that there are HMRC approved investment schemes that allow you to claim a rebate on UK income tax that you have paid?

Although they come with higher than usual risks attached, both Venture Capital Trusts (VCTs) and Enterprise Investment Schemes (EIS) schemes offer substantial tax rebates; and in this article, we will concentrate specifically on the Income Tax rebate you can receive.

Click here to download our Tax Efficient Investing Guide.

What is a VCT or EIS?

VCTs and EISs are HMRC approved investment schemes that encourage investment into early stage and small UK companies. In return for the higher level of risk you take, you receive (amongst other things) a rebate against income tax you have paid.

VCTs and EISs have different rules, however the treatment from an income tax point of view is similar.

You get an income tax rebate equalling 30% of the amount you invest into a VCT or EIS.

For example, if you invested £12,000 into a VCT, you would receive a £3,600 rebate.
Please note: You can only rebate against income tax paid. Using the above example, to claim a £3,600 rebate, you must have paid at least £3,600 in income tax.

Frequently Asked Questions

How do I choose which VCTs or EISs to invest into?There are several options each suited to different types of investors. Unless you are a very sophisticated or institutional investor self-selection is not recommended. Speak to Carlile Alexander Private Wealth for advice on your options.

Are VCT or EIS investment right for me?
Without a better understanding of your financial situation it is impossible to tell. Speak to Carlile Alexander Private Wealth and we can outline whether VCT or EIS investments are right for you.

What are the risks of VCTs and EISs?
Investment risk: The risk that the companies invested in may fail, reducing the value of your EIS or VCT to zero.
Liquidity: EIS and VCT investments can be illiquid so they can be difficult to sell should you need access to your cash.
Loss of tax relief: If you sell your EIS and VCT investments within their minimum holding period the tax relief will be withdrawn. Also bear in mind that tax rules and regulations may change.

Important: EIS and VCT investment are high risk and only recommended for sophisticated investors. The information provided here must only be considered as a guide and not as advice. Please contact us for specific advice on your own individual situation.