Investments in the Seed Enterprise Investment Scheme (SEIS) have significantly increased following the general election, driven by fears of forthcoming tax hikes.
The Seed Enterprise Investment Scheme (SEIS), a government-backed initiative offering tax reliefs for investors in UK start-ups, has experienced a notable surge in investments since the general election. According to data from Broker Wealth Club, there has been a 188 per cent year-on-year increase in new money flows into the scheme between the election on 4 July and the end of August.
The research further reveals that the number of investors utilising the scheme has approximately tripled during this period. Introduced in 2012, the SEIS aims to stimulate private investment into early-stage, higher-risk businesses by providing tax reliefs to seasoned investors. This recent surge in investments coincides with growing concerns over potential tax hikes in October’s Budget.
Wealth Club has described the SEIS as “probably the most tax efficient vehicle available”, particularly as Labour is reportedly considering an increase in capital gains tax. Through the SEIS, investors can receive up to 50 per cent income tax relief and 50 per cent capital gains tax relief, with any profits also being tax-free.
However, the rise in investments can also be attributed to an improving outlook for venture investors. As economic sentiment begins to recover following two challenging years marked by plummeting valuations and fundraising difficulties, investors are increasingly attracted to opportunities in young companies.
Alex Davies, founder and chief executive of Wealth Club, commented, “Since the election, everyone has been expecting tax rises, with wealthier investors likely to bear the brunt. Many are feeling twitchy, and SEIS is a hugely tax efficient way to invest for those prepared to take the extra risk. At the same time, we’ve been in the doldrums for a couple of years, but one good thing to come out of it is vastly improved valuations.”
He added, “If this trend continues, it may be the start of a virtuous cycle: better sentiment leads to more investment in young companies, which create a disproportionate number of jobs and economic growth, which in turn improves investor sentiment, leading to more investment. It’s what the country needs.”
Additionally, the government recently announced an extension of the wider Enterprise Investment Scheme and the Venture Capital Trust scheme by a decade, until April 2035.
Overall, the notable increase in investments into the SEIS highlights the ongoing concerns over potential tax rises and the improving economic sentiment among venture investors.
