For UK investors, the Enterprise Investment Scheme (EIS) and Seed EIS (SEIS) provide one of the most beneficial angel tax relief schemes in the world. Details should be checked online at the government website or with your financial advisor, but currently these include significant up front tax relief (30-50%), tax relief on losses at your highest tax rate, no Capital Gains Tax (CGT) on successful investments and CGT relief currently on existing gains transferred into angel investment.
To put it another way, most UK tax-paying angels investing in qualifying companies, if successful, will get to keep all of the gains without tax and if unsuccessful are likely to have over half of such an investment returned by the tax man. While tax relief is never a good reason for making an investment, these benefits are very helpful in mitigating the high risks involved in angel investing.
It should be noted however that both EIS schemes apply to capital growth (not dividend income) and also require the use of plain shares i.e. not preference shares. Please note also, not all the companies that apply to Angels 5K for investment qualify under the Enterprise Investment Scheme but, if they don’t, this will be made clear at the time.