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investment in shares
How Best to Invest in
Stocks and Shares
SHARES
A means of investing in the shares of start up companies and obtaining income tax relief at 50% for all investors (not just those who pay the 50% rate) and the possibility of reducing a capital gains tax bill on disposal of an asset in the 2012-13 tax year which is re-invested through a SEIS in the same tax year. Your money buys new unquoted shares in companies which are newly 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 likely to be tied up for at least 3 years.
Who can invest Anyone 18 or over. The schemes will be first launched after 6 April 2012.
How worthwhile There is a high chance of failure. The 50% income tax relief makes this scheme attractive to more people and especially attractive if you can benefit from the capital gains tax concession. Consider also Shares Venture Capital Trust which may be less risky but has lower tax relief. There is also Enterprise Investment Scheme which has lower tax relief and is likely to be replaced by Seed Enterprise Investment Scheme
Minimum £14,000-£20,000 for a portfolio of SEIS shares bought for say £2,000 each in 7-10 companies. Lower amounts much riskier because of the lack of a diversified portfolio.
Maximum £100,000 for all investments each tax year for shares issued after 5 April 2012.
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 (probably) any gain on the sale of the Seed Enterprise Investment shares. Full details have not yet been announced
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.