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investment in shares
How Best to Invest in
Stocks and Shares
SHARES
A means of investing in the shares of businesses not listed by the Stock Exchange and obtaining tax relief at 20% and the possibility of reducing a recent capital gains tax bill. Your money buys new unquoted or AIM shares in companies which are usually recently formed and don't have to meet the conditions for those traded on the Stock Exchange. Only a few shares may be available to the public; the rest are kept by the people who run the company. You should choose individual shares in at least 7 to 10 companies to spread your risk. Your money is tied up for at least 3 years.Enterprise
Who can invest Anyone 18 or over. The rules disqualifying investors who are 'connected' with the businesses are to be relaxed from 6 April 2012.
How worthwhile There is a high chance of failure. The 30% income tax relief is probably insufficient to make this scheme attractive to most people unless you can benefit from the capital gains tax concession. Consider instead Shares Venture Capital Trust which may be less risky; or Enterprise Investment Scheme if you are connected with the company.
Minimum £14,000-£20,000 for a portfolio of EIS shares bought for say £2,000 each in 7-10 companies. Lower amounts much riskier because of the lack of a diversified portfolio.
Maximum £200,000 for all investments each tax year for shares issued since 5 April 2004. You can invest more but the balance will only get capital gains tax relief, see tax below.
Suitable Lump sums.
Money back You should be able to sell the shares after you have held them for 3 years or more; if you invest in a fund there may be a delay after you have invested but before the shares are bought of about 6 months.
Interest None. By the time the shares start to pay dividends, you will normally want to sell. You hope to make a capital gain by selling for more than you paid.
Tax This is very complex but could be valuable, especially as you may be able to avoid capital gains tax on an existing recent gain as well as any gain on the Enterprise Investment shares. Details in the HM Customs & Revenue booklet. Note this will need to be updated for changes with effect frrom 6 April 2012.
Fees to pay The launch costs are equivalent to an initial fee of 3% to 7%.
Passbook None. Share certificate.
Children Unsuitable.
Risk Very high. Some shares usually go bust. It is hoped that the rest more than make up for this. As there is no trustee to look after your money, only invest in a scheme sponsored by an established financial body. You may be unable to sell the shares when you want.
How to invest Get advice from a magazine, newspaper, stockbroker or independent financial adviser on which Trust to choose. The Tax Shelter Report analyses new offers.
Where from The Enterprise Investment Association will send you a list of members.
Other types of direct investment
in shares
How Best to Invest in Stocks and
Shares
Last updated 1
December 2011.