Osborne’s Pension Relief Cuts to Result in Boost to Small Businesses Funding
Enterprise Investment Schemes could become more “attractive” for high earners following the chancellor’s summer Budget announcements
The Enterprise Investment Scheme Association (EISA) says that UK small businesses may witness a rapid increase in funding, as a result of the chancellor’s Budget proposal to cut high earners’ pensions tax relief.
Osborne’s plans to reduce tax relief on pensions for people earning over £150,000 could generate a marked increase in start-up investment as money is directed into Enterprise Investment Schemes (EIS) and Seed Enterprise Investment Schemes (SEIS), argued EISA’s director general Sarah Wadham.
According to Wadham, the EIS and SEIS’ government-certified tax reliefs will become “even more attractive” for the high earners who will lose their benefits as pension tax relief is cut.
Wadham did, however, highlight the need for potential investees to considering their funding decisions carefully.
“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.”
“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.”
For more information on SEIS and EIS, check out Startups.co.uk’s advice article here.