Tax breaks for start-ups extended to 2035

The Treasury has confirmed the extension of the Enterprise Investment Scheme (EIS) and Venture Capital Trust (VCT) tax reliefs to April 2035

The tax breaks for start-ups and entrepreneurs have a sunset clause, which required new legislation to extend the reliefs to 2035, a move which had been planned by the last government in Budget 2023.

The schemes will now run until 5 April 2035 and are designed to encourage investment into new or young companies through tax-relief incentives, encouraging innovation, creating jobs and stimulating economic growth.

Both schemes offer incentives to investors of up to 30% upfront income tax relief and an exemption from capital gains tax (CGT) on any profits made after the sale of shares.

The EIS offers tax relief to individuals that invest in new shares in qualifying companies with investors able to invest up to £1m, or £2m if the shares are in knowledge-intensive companies, which focus on research and development (R&D). Shares have to be held for at least two years.

VCTs are companies listed on the UK’s stock exchange that invest in early-stage trading companies on behalf of people, enabling individuals to invest up to £200,000 per year in new VCT shares with dividends paid tax-free.

The two schemes raised £2.9bn of funds in 2022-23 and 1,280 companies used EIS for the first time over this period.

The extension, announced in a written ministerial statement in the Commons, will provide the confidence to continue investment into high-risk, early-stage businesses in the UK, supporting long-term growth and the development of their companies.

Exchequer secretary to the Treasury, James Murray, said: ‘Startups and entrepreneurs are a driving force for greater investment, more jobs, and economic growth in the UK.

‘By extending these schemes for 10 years, we are providing the stability and support they need to help us make every part of Britain better off.’

The move was welcomed by business leaders as an important contributor to driving growth.

British Venture Capital Association (BVCA) chief executive Michael Moore said: ‘It is excellent news that the government is moving so quickly. This means that investors can now focus on what they do best, investing, safe in the knowledge that these schemes now have the long-term security needed to drive investor confidence.

‘The BVCA has long advocated for this move as these schemes play a vital role in supporting early-stage companies that have the highest growth potential and crowding in further investment through the growth cycle.’

Richard Stone, chief executive of the Association of Investment Companies, said: ‘VCTs invest in the UK’s most exciting early-stage companies. They help entrepreneurs transform their businesses.

‘Extending the VCT scheme until 2035 will allow the sector to raise further capital and invest with confidence. This will ensure VCTs can help the government secure its ambitions to grow the economy, support innovation and create jobs.’

The extension is now in force after the regulations were updated through a statutory instrument under Finance Act 2024, Section 11 (Extension of Enterprise Investment Scheme Relief and Venture Capital Trusts Relief) (Appointed Day) Regulations 2024 (SI 2024/897).

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