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CGT (Capital Gains Tax) Freedom Example

CGT (Capital Gains Tax) Freedom Example

 

There is no CGT payable on gains in respect of Investments made in an EIS or SEIS Company (on which EIS / SEIS Income Tax Relief has been obtained and not withdrawn) where the Investments have been held until the later of 3 years from the date of subscription (EIS & SEIS), or from the date of commencement of the Company’s trade (EIS). EIS or SEIS Income Tax relief must be granted on shares in order to qualify for CGT Relief on disposal. If full Income Tax Relief is not retained, then partial CGT Relief on disposal may be available.

Example – A higher rate tax payer invests £100,000 in an EIS and an SEIS – each investment is sold for £160,000 after 3 years

EIS
SEIS
Gross Total Initial Investment
£100,000
£100,000
Less Income Tax Relief @ 30% or 50% (£30,000) (£50,000)
Net Cost of Investment £70,000 £50,000
Hypothethical Value of Investment after 3 years* £160,000 £160,000
Tax Free Gain £60,000 £60,000
Total Tax Free Return to Investor

(Tax free gain of £60,000 plus Income Tax relief)

£90,000 £110,000

*The hypothetical values are for illustration purposes only.

 

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