Why do prospect investors suddenly want to invest before the end of the tax year?
You’ve probably noticed that there is an increase in the appetite from your investors to invest in your company before the end of the tax year (on 5th April). The reason is that your prospective investors are desperate to close deals that ensure their SEIS/EIS tax relief in the current year!
In case you are not seeing an increase in their appetite, then this article will help you understand the benefits around investing by the end of the tax year, and how you can help your investors get the most out of SEIS/EIS tax relief before the end of the tax year by using Instant Investment.
SEIS/EIS allowance in this tax year and the previous one:
SEIS and EIS were created to incentivise investors to invest in early stage companies.
The two schemes are similar, but have some important differences.
SEIS is focused on very early-stage companies, and allows an individual to invest up to £100,000 per tax year and to receive a 50% tax break in return.
EIS, on the other hand, focuses on medium sized startups. It allows an individual to invest up to £1 million per tax year and to receive a 30% tax break in return.
Important to know that SEIS and EIS allowance (£100K and £1M respectively), can be claimed for this tax year AND the preceding tax year (known as carry-back).
So, if for example; your investor invested £50,000 SEIS/EIS in this tax year (2019-20 tax year), they can claim income tax relief against their tax for this tax year or they can carry back to the previous tax year (2017-2018). Now many investors would be happy to offset their investment against their tax in the previous year – now, they only have until April 5th to do that.
The Instant Investment way:
At SeedLegals, we make it very simple for companies to raise capital quickly near the end of a financial year via Instant Investment. We get rid of the stress, expense, and time-suck of traditional funding rounds. Startups can take investment, in just a few clicks.
How do I know if to use Instant Investment?
These are some good questions to ask yourself to see if you should look at Instant Investment now.
If your answer is ‘yes’ to any of the questions below, you might benefit from Instant Investment, in any doubt – please speak to our experts clicking the chat bulb, we’d love to help!
Are there investors who still want to invest after you’ve recently closed your round? Could their background/ connections/ involvement be beneficial to you now as opposed to in a later round?
Could the company benefit from a cash injection to accelerate growth, but you don’t have time to go through a traditional fundraise?
Did you close a round early as some investors had taken longer than expected to decide, but they are now willing to invest?
What’s stopping you from benefiting from your Instant Investment?
As with all SeedLegals products our team is on hand to help every step of the way. Hit the chat button in the corner to let us help you action this.
Alternatively, you can book a full demo here!