Government Announces Tax Relief for Investors in Small UK Businesses

The European Commission has recently given the green light to the UK government’s measures aimed at increasing tax relief for people who invest in fast growing small firms. The measures, first announced in the annual budget speech in Spring, will now come into effect, as part of the Government’s plans to create employment.

Changes include:

  • Lifting income-tax relief from 20% to 30% for investors who provide equity finance to smaller firms.
  • The amount on which an investor can get tax relief will also be doubled to £1 million.
  • An investor who buys shares in a firm that qualifies for the scheme will now be able to set 30% of the cost of the investment against their income-tax bill.
  • Holding onto the shares for three years will mean that any gain on the investment is free from Capital Gains Tax.
  • The higher threshold will take effect from April 2012 and tax relief will be backdated to April 2011.

George Osborne has said that the UK Government wants to make the UK “the best place to start, finance and grow a business,” He added: “these changes will give a bigger tax break to those who take risks for growth and jobs in Britain.”

The treasury has estimated that while these smaller high-growth firms account for only 6% of businesses employing 10 people or more, they have in fact provided more than half the new jobs created in the last three years.