TAX-EFFICIENT

INVESTING FOR
HIGH EARNERS

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 ◆ Who Is This Guide For? ◆
This guide is for sophisticated and high net worth
investors.
You are a high net worth individual if you earn £100,000
or more a year or have at least £250,000 of assets, not
including your main home and your pension. You would
qualify, for instance, if you own £250,000 worth of shares
or a second home with equity of £250,000 or more.
A sophisticated investor is someone who has
sufficient experience, capital or net worth to engage
in more advanced investment opportunities. You are
a sophisticated investor if you have: worked in private
equity, been a director of a company with an annual
turnover of over £1 million, been a member of a business
angel organisation, or made more than one investment in
an unlisted company in the last two years.
IMPORTANT NOTE
This guide, like the service Wealth Club Limited offers, is not
advice or a personal recommendation. This is a quick summary
of a complex subject and does not cover every nuance. You
should not make – or refrain from making – any decision
based solely on the content of this guide. If you are unsure an
investment is right for you, please seek professional advice. We
have made every attempt to ensure the information in this guide
is correct and accurate (April 2021), but cannot guarantee it.
Wealth Club | Clubfinance Guide to tax-efficient investing | April 2021
Have a question? Do contact us
If you have questions on anything mentioned in this
guide, please do call us on 0117 929 0511. You’ll hear no
automatic menu options – you will get straight through to
someone who knows what they’re talking about.
You can also email enquiries@wealthclub.co.uk. We
don’t offer personal advice or recommendations; you
must always form your own opinion. What we aim to do
is lay out available information in a way that’s helpfully
clear, balanced and useful to you.
Wealth Club offers impartial information on tax-efficient
investments and allows you to apply online at www.
wealthclub.co.uk.
PLEASE REMEMBER, TAX BENEFITS DEPEND ON
CIRCUMSTANCES. TAX RULES CAN CHANGE. IF IN
DOUBT, PLEASE SEEK SPECIALIST TAX ADVICE.
© Wealth Club 2021. This financial promotion is issued by Wealth Club
Limited and is a marketing communication. Wealth Club Limited is authorised
and regulated by the Financial Conduct Authority, Register Number 725176.
Wealth Club Asset Management (trading as Clubfinance) is a wholly owned
subsidiary of Wealth Club Limited. The registered office for both firms is 20
Richmond Hill, Bristol, BS8 1BA, United Kingdom. Wealth Club has received a
contribution from Octopus Investments, the sponsor of this guide.
Page 2
 ◆ Introduction ◆
F
rom rom a company that has developed a rapid
diagnostic test for Covid-19 to one that delivers
ready-made ambient meals to the elderly; from
a video platform that allows doctors to treat patients
remotely to a business that provides charging points for
electric cars – these are examples of the millions of young,
innovative, job-creating businesses at the heart of the
UK’s economy.
Some would have never survived – let alone thrived –
but for the support of private investors, often backed by
the government through its Venture Capital Schemes:
Venture Capital Trusts (VCTs), and the Enterprise and
Seed Enterprise Investment Schemes (EIS and SEIS).
They were all set up to encourage investment in young
and dynamic British enterprise. The long-term reward for
doing so is the potential to back a winner if things work
out. The short-term reward for experienced investors is the
significant tax reliefs the government offers in exchange
for supporting high-risk younger businesses.
Wealth Club | Clubfinance Guide to tax-efficient investing | April 2021
Significant tax reliefs and growth potential
This guide explains and compares three tax-efficient
investment options: VCTs, EIS and SEIS. In addition, we
briefly describe how investing in some shares quoted on
AIM might help protect your assets from Inheritance Tax.
Each type of investment offers a different balance of
risks and rewards which could meet different investors’
requirements, such as tax-free income, growth, or a
mixture of both.
Compared to pensions and traditional ISAs, VCTs, EIS
and SEIS come with generous tax relief allowances.
Moreover, contribution rules are relatively simple.
However, these investments are not for everyone.
Please remember, they invest in small, often unquoted
companies, which are typically higher risk than large
or long-established businesses. So, they should only be
considered by those who have sufficient assets to fall back
on if things do not work out.
Page 3

Who might gain from VCTs, EIS, SEIS and IHT
planning?
You might wish to consider tax-efficient ways to invest
your money if you have high income or capital gains. This
includes if you’ve recently sold a business or buy-to-let
portfolio, or received a large lump sum on retirement or
redundancy.
Conventional tax shelters such as ISAs and pensions offer
limited scope. The annual pension allowance is currently
£40,000. But tapered restrictions on high earners come
into effect once your “adjusted” income in a year exceeds
£200,000. Then you would start to see your pension
allowance progressively reduced – the higher your
income, the lower your allowance. Ultimately, those
earning £312,000 or more could have a pension allowance
of just £4,000.
Meanwhile, the total amount you can put aside tax
efficiently in a pension over a lifetime is currently
£1,073,100 and, as was announced in the March 2021
Budget, it will stay at this level until 2026. Any excess
could be subject to a hefty 55% tax penalty.
High earners and the wealthy may also be affected by other
recent tax changes. For example, the dividend tax credit
has been abolished and many people receiving substantial
dividends in lieu of salary – which includes many business
owners – may pay more tax on this income.
Moreover, the rules keep changing.
Buy-to-let has worked well for many investors, but since
6 April 2020 landlords can no longer claim mortgage
interest relief.
Meanwhile, anyone earning between £100,000 and
£125,000 a year already suffers a marginal rate of income
tax of 60% because of the personal allowance clawback.
Then there’s inheritance tax, which has recently won
the dubious accolade of ‘most unfair tax’, being a tax on
At a glance: how do VCT, EIS and SEIS tax reliefs compare?
Allowance Income tax relief CGT relief/deferral
VCTs £200,000 up to 30% No
EIS £2,000,000 up to 30% Deferral
SEIS £100,000 up to 50% 50% relief
Please note tax rules can change and benefits depend on circumstances. To retain the tax relief, you must hold the investment for at least
five years (VCT) or three years (EIS and SEIS) and it must remain qualifying. EIS allowance includes knowledge intensive investments.
Wealth Club | Clubfinance Guide to tax-efficient investing | April 2021
money that has already been taxed, so to speak.
In 2019/20 it collected £5.1 billion. With the five-year
freeze on inheritance tax allowances announced in the
March 2021 Budget, that number is forecast to reach an
all-time high of £6.6 billion by 2026, when 36,000 are
expected to be caught.
As a result, high net worth individuals and experienced
investors seeking tax relief and willing to support younger
UK businesses could consider looking towards the
government-incentivised investment options described on
the following pages.
What are the main risks?
As with all investments, values and income can fall as well
as rise, so you may get back less than you invest. Because
these investments are in small, often unquoted companies,
this risk can be much greater with VCTs, EIS, SEIS and
IHT portfolios than with other stock market investments.
Small companies are more volatile and more likely to fail
than their larger counterparts.
In addition, as there is no recognised market, EIS and
SEIS investments are less liquid. They can be harder to
sell or realise.
Lastly, to retain all the tax reliefs available, you must hold
the investment for a minimum period and the companies
must remain qualifying. Otherwise, you may have to pay
back the tax relief you have received.
For these reasons, these are long-term investments only
for experienced investors who have no need for immediate
liquidity and are able to withstand a potential total loss.
You should make sure you are fully familiar with the risks
and rules if considering investing, and do so on the merits
of the investment, not for the tax advantages alone.
Remember, all the tax and product rules mentioned
here are correct at the time of writing but could change
in future. Tax benefits depend on circumstances.
Tax-free income Tax-free growth IHT relief Loss relief
Yes Yes No No
No Yes After 2 years Yes
No Yes After 2 years Yes
Page 4
 ◆ Venture Capital Trusts ◆
V
CTs are listed companies that specialise in
investing in small, dynamic, often unquoted
businesses. These tend to be young – usually
implying more risk than older, larger companies – but
have been selected for their rising-star potential.
Like investment trusts, VCTs are managed by professionals
who aim to mitigate the risk inherent in small companies
through diversification.
What this means is that a VCT looks to invest in a
relatively large number of promising companies – typically
30 to 70 – to reduce exposure to setbacks or failure at any
one company. The idea is to avoid having too many eggs
in one basket.
When investing in a VCT you acquire shares in the trust,
not in the individual companies. So, you get exposure to
the whole portfolio. This may also include larger and more
mature businesses, into which the VCT invested years ago.
In theory, as VCTs are listed companies, their shares can
be bought and sold on the London Stock Exchange. In
practice, trading in VCT shares is not particularly active,
Wealth Club | Clubfinance Guide to tax-efficient investing | April 2021
so shares tend to be valued at a discount to their Net Asset
Value (NAV) and may be difficult to sell. As a result, if
you did want to sell, it is likely you may be offered a price
which is less than the value of the underlying assets.
Any income from VCTs is usually paid out as tax-
free dividends. Some VCTs target a tax-free dividend
of around 5% a year but they can be higher or lower.
Dividends are variable and not guaranteed.
VCT highlights
♦ Income tax relief of up to 30%: a £10,000 investment
could provide a £3,000 saving on that year’s income
tax bill, as long as the amount of income tax you claim
does not exceed the amount of income tax due. You
could invest up to £200,000 this tax year and receive
an income tax rebate of up to £60,000.
♦ Tax-free dividends: VCTs aim to pay tax-free income
– so if you receive a cheque for £1,000, you keep
£1,000. Whereas, if you received a £1,000 dividend
from a non-VCT share, the highest earners could be
left with as little as £619 after paying tax. Dividends
are variable and not guaranteed.
Page 5
♦ Tax-free growth: in addition to tax-free dividends, if
you realise any capital gain – that is, if you sell your
VCT shares at a profit – this would also be tax free.
♦ Minimum holding period of five years, otherwise
HMRC will claim back any tax reliefs. The company
must also maintain its VCT status.
Different kinds of VCTs
1. Generalist VCTs invest in a wide range of small,
usually unquoted companies in different sectors –
from retail to healthcare and technology. The idea
is to diminish risk by diversifying, so if one sector
suffers setbacks, another might shine. This is the most
common form of VCT.
2. AIM VCTs invest in new shares issued by AIM-
quoted companies. The Alternative Index Market
(AIM) was set up by the London Stock Exchange
in 1995 to provide a market for companies which do
not wish to – or cannot – meet the more demanding
and expensive listing requirements of the main stock
market. These are not necessarily small or startup
companies, although many will be. AIM VCTs
typically target tax-free growth as well as income.
3. Specialist VCTs focus on one sector, such as media or
healthcare. The lack of any sector diversification means
they may be more risky than other VCTs.
How might I buy VCT shares?
VCTs are listed companies and their shares are traded on
the stock market. They raise funds periodically by issuing
new shares through an offer for subscription. Investors can
apply through a broker such as Wealth Club.
New shares are normally eligible for the initial 30%
income tax relief.
VCT offers are close ended and available until the
fundraising target or a set deadline (typically the end of
the tax year) is met, whichever is sooner.
Some VCT offers remain open from the beginning of the
tax year. This could be of particular interest to investors
seeking tax-free income: investing at the start rather
than the end of the tax year could add months of tax-free
dividend payments. In addition, when you invest early
you could benefit from applying the tax relief directly
through an adjustment to your tax code, instead of paying
your income tax and later claiming a rebate.
Compare VCTs, EIS and SEIS side by side on page 11 »
Wealth Club | Clubfinance Guide to tax-efficient investing | April 2021
It is also possible to buy existing VCT shares on the
secondary market, usually at a discount. These would not
qualify for any income tax relief, so there is no minimum
holding period. However, you could still benefit from tax-
free growth and tax-free dividends.
The annual maximum of £200,000 you can invest in VCT
shares applies to both new issues and secondary purchases.
How do I claim VCT tax reliefs?
You would do this when you file your tax return. This will
result in a lower income tax bill or a refund if you’ve paid
the tax already. You don’t need to declare any tax-free
dividends you receive.
VCT fees and charges
VCT costs vary widely and it is important to read the Key
Information Document (KID) of each VCT carefully.
There are broadly three types of cost.
Initial fees typically range between 2% and 5.5%. Annual
management fees are usually around 2%, but total ongoing
costs are often nearer 3% after other charges such as
accountancy and administrative fees are included.
There may also be a performance fee if a VCT does better
than a pre-defined benchmark (hurdle), as set out in the
relevant VCT’s offer documents.
It may be possible to save on the initial fees by investing
through a non-advisory broker such as Wealth Club.
Further savings might be obtained by ‘early bird’ investors
who invest before certain fixed dates. There may also be
a loyalty discount for existing shareholders of the VCT.
What if I want to sell my VCTs?
VCTs are less liquid than other stock market investments,
such as unit trusts. They can be sold on the open stock
market, but normally at a share price lower than the value
of their underlying assets (the portfolio of companies).
This is described as trading at a discount to NAV. That
said, VCT managers tend to periodically offer to buy
shares back at a better price than available on the open
market – typically at a 5% to 10% discount to NAV.
For more information
Visit www.wealthclub.co.uk/vcts-explained for more
information, free factsheets, video guides and VCT
manager interviews. You can also call 0117 929 0511 or
email enquiries@wealthclub.co.uk and we’ll be happy to
answer your questions, knowledgeably.
Page 6
 ◆ Enterprise Investment Scheme ◆
E
IS investments focus on the same type of companies
as VCTs, but you invest directly in the companies,
resulting in less diversification. For this reason,
EIS are riskier than VCTs, and to reflect this the tax reliefs
are more generous.
One way to mitigate risk is to access EIS opportunities
through a managed EIS portfolio. You would have access
to typically 5-8 companies and be a direct shareholder of
those EIS-qualifying companies. If you invest in single-
company EIS offers, you have no diversification unless
you invest in a range of single company offers.
Generally, EIS-qualifying companies must have gross
assets of less than £15 million and fewer than 250
employees. Knowledge-intensive companies enjoy
preferential terms (see opposite).
EIS highlights
♦ Income tax relief of up to 30%: a £10,000 investment
could provide a £3,000 saving on that year’s income
tax bill. To claim this, you must have sufficient income
tax liability and hold the shares for at least three years.
Wealth Club | Clubfinance Guide to tax-efficient investing | April 2021
What are ‘knowledge-intensive’ companies?
Companies considered ‘knowledge intensive’ benefit
from a special treatment under EIS.
Broadly speaking, these are young and innovative
businesses that are heavily investing in Research &
Development (R&D) and are developing intellectual
property. An example might be a company which is
developing a new drug or treatment.
HMRC sets specific requirements for a company to fall
within this category. It must have skilled workers and
significant R&D or running costs supporting innovation.
To acknowledge this, HMRC allows such companies to
receive more funding under EIS, and over a longer period
of time.
Individual investors can invest up to £2 million in EIS in
any single tax year, provided anything over £1 million is
invested in knowledge-intensive companies.
In March 2020, specific knowledge-intensive approved
EIS funds received the final go-ahead from the Chancellor.
They could make tax planning easier for EIS investors –
see overleaf.
Page 7
♦ Carry back: you can elect for your EIS shares acquired
in one tax year to be treated as though they had been
acquired in the previous tax year. This in effect lets you
apply the relief to a previous year’s tax bill, provided you
have unused EIS allowance for that year. This way, you
could claim back tax you’ve already paid.
♦ Tax-free growth (disposal relief): you pay no capital
gains tax (CGT) when selling EIS shares, if you have
held them for at least three years, claimed income tax
relief on them and the companies still qualify.
♦ Capital gains tax deferral relief: if you have realised
a taxable gain and invest that gain in an EIS-qualifying
investment, you can defer the gain for as long as the
money stays invested and EIS conditions are not
breached. You can defer gains of any size, made
up to three years before and one year after the EIS
investment, even if you have already paid the tax.
Once you get your money out, you will have to pay
CGT at the prevailing rate. Alternatively, you could
invest into another EIS and continue to defer the gain.
♦ Inheritance tax relief: EIS investments can qualify
for Business Property Relief (BPR) and become IHT
free after they have been held for two years, provided
the investor still holds the shares and the company is
still EIS-qualifying on death.
♦ Loss relief: any EIS investments realised at a loss can
be offset against the same or previous year’s income
tax (instead of against CGT, the only option for most
investments). So an additional-rate taxpayer could
effectively reduce a total loss of £1 to as little as 38.5p,
after all tax reliefs.
Maximum loss of as little as 38.5% – an example
Initial investment
Income tax relief
Value of investment on exit
Loss relief (45% taxpayer)
Gain/Loss after all tax reliefs
How might I buy EIS investments?
Unlike VCTs, EIS investments are not traded on the stock
market. Typically, you invest through a broker, such as
Wealth Club.
There are many EIS offers available – individual companies
and portfolios. EIS portfolio offers can be evergreen, so
you could invest any time. Individual company offers tend
to have a fundraising target. When that is achieved, the
offer will typically close.
Compare VCTs, EIS and SEIS side by side on page 11 »
Wealth Club | Clubfinance Guide to tax-efficient investing | April 2021
When and how do I claim the EIS tax reliefs?
The date your shares are allotted (not the date you invest)
will usually determine the investment date for tax purposes,
unless it is a knowledge-intensive approved fund.
EIS portfolios tend to be evergreen and will typically
be allotted over the year, but it can take 12-18 months
from when you invest. If a fund qualifies as a knowledge-
intensive approved EIS fund, it will have a closing date,
which is also the investment date for income tax purposes.
Single company EIS offers often have a closing date – this
can be either a set date or, more commonly, the point at
which the fundraising target is met. Shares are normally
allotted soon after the offer closes.
You can claim income tax relief after your shares are allotted
and you receive your EIS3 certificate, which can take
around six months to be produced. Note, for knowledge
intensive approved funds the position is different. The tax
relief can be claimed for the tax year the fund closes, but
only once you’ve received the EIS5 certificate, which may
be up to 24 months after the fund closes. Once you receive
your EIS3 or EIS5 certificate(s), you can claim relief via
your tax return. If you’ve already filed your tax return,
there is no need to worry. A claim for EIS tax relief can be
submitted up to 5 years after the 31 January following the
tax year in which the shares were issued.
EIS fees and charges
EIS fees vary widely and it is important to read this
section of each EIS offer document carefully. Individual
EIS companies may not levy any explicit charge, but
administrative and other fees may be deducted as part of
the costs of running the business. Managed portfolios of EIS
investments may typically levy an initial fee of 2%-5%, and
annual fees of 2%. There may also be a performance fee.
£100,000
What if I want to sell my EIS investment?
As EIS shares are not usually traded on the stock market,
£30,000
you cannot sell them the way you would an investment
£0 trust. Instead, it is the managers’ responsibility to design
£31,500 an exit strategy that allows them to return capital and
-£38,500 any tax-free growth to investors. The managers will
usually give an indication of the targeted exit options and
timeframe (three years but likely to be longer) at the onset.
Common strategies include management buy-outs, trade
sales or refinancing. However, there are no guarantees.
For more information
Visit www.wealthclub.co.uk/eis-explained for more
information, free factsheets, video guides and manager
interviews. You can also call 0117 929 0511 or email
enquiries@wealthclub.co.uk and we’ll be happy to
answer your questions, knowledgeably.
Page 8
 ◆ Seed Enterprise Investment Scheme ◆
E
ven more generous tax breaks are available
through the SEIS, as these investments focus on
even younger and smaller – and therefore higher
risk – companies than EIS and VCTs.
SEIS-qualifying companies must be less than two years
old, have fewer than 25 employees, gross assets of less than
£200,000 and can receive no more than £150,000 funding
through the SEIS. These restrictions make the SEIS much
riskier than investments in established, larger companies.
A way to mitigate the risks is to access SEIS opportunities
through a managed portfolio service, which should spread
the investment across several SEIS businesses. You
would typically be investing in 5-10, usually unquoted,
companies and be a direct shareholder of those companies.
Within an SEIS portfolio it is likely some companies
would fail, but hopefully the more successful ones would
help compensate for this.
SEIS incentives include up to 50% income tax relief –
more generous than the EIS – plus tax-free profits, 50%
CGT reinvestment relief, inheritance tax relief, and loss
relief if things don’t go to plan.
Wealth Club | Clubfinance Guide to tax-efficient investing | April 2021
SEIS highlights
♦ Income tax relief of up to 50%: a £10,000 investment
could provide a £5,000 saving on that year’s income
tax bill. To claim this, you must have sufficient income
tax liability and hold the shares for at least three years.
♦ Carry back: you can elect for your SEIS shares to be
treated as though they had been acquired the previous
tax year. This in effect lets you offset the tax relief
against income tax from a previous year, provided you
have unused SEIS allowance for that year. This way,
you can claim back tax you’ve already paid.
♦ Tax-free growth (disposal relief): you pay no capital
gains tax (CGT) when you sell SEIS shares, if you have
held them for at least three years, claimed income tax relief
on them and the companies are still SEIS-qualifying.
♦ 50% capital gains reinvestment relief: this is a
particular feature of SEIS, differing from EIS. If you
invest capital gains made on assets elsewhere into a
qualifying SEIS company, you can reduce the CGT
on the gain by up to 50%, provided you also get SEIS
income tax relief.
Page 9
♦ Inheritance tax relief: SEIS investments can qualify
for Business Property Relief (BPR) and become IHT-
free after they have been held for two years, provided
the investor still holds the shares and the companies are
still SEIS-qualifying on death.
♦ Loss relief: any SEIS investments sold at a loss can
be offset against the same or previous year’s income
tax (instead of against CGT, the only option for most
investments), less any income tax relief received. So
an additional-rate taxpayer could effectively reduce a
total loss of £1 to as little as 13.5p.
Maximum loss of as little as 13.5% – an example
Initial investment
Income tax relief
Capital gains tax relief
Value of investment on exit
Loss relief (45% taxpayer)
Gain/loss after all tax reliefs
How might I buy SEIS investments?
As with EIS, SEIS investments are not traded on the stock
market, but you can invest through a specialist broker,
such as Wealth Club.
There are many SEIS offers available – individual
companies and portfolios. SEIS portfolio offers can
be evergreen, so you could invest any time. Individual
company offers tend to have a fundraising target. When
that is achieved, the offer will typically close.
How do I claim SEIS tax reliefs?
You will need an SEIS3 form from the SEIS company,
which you will receive after your money has been
invested, your shares allotted and the SEIS company
receives confirmation from HMRC it has satisfied all
the requirements. This can take several months to be
produced.
Once you receive your SEIS3 certificate(s), you can claim
relief via your tax return. If you have already filed your
tax return, don’t worry. A claim for SEIS tax relief can be
submitted up to 5 years after the 31 January following the
tax year in which the shares were issued.
Compare VCTs, EIS and SEIS side by side on page 11 »
Wealth Club | Clubfinance Guide to tax-efficient investing | April 2021
SEIS fees and charges
SEIS fees vary widely and it is important to read this
section of each SEIS offer document carefully. Individual
SEIS companies may not levy any explicit charge, but
administrative and other fees may be deducted as part
of the costs of running the business. Managed portfolios
of SEIS investments will typically levy an initial fee of
5-6% and annual fees of 2%. There will also typically be
a performance fee.
What if I want to sell my SEIS investment?
SEIS shares are not traded on the stock market, so you
cannot sell them the way you would an investment trust.
Instead, it is the managers’ responsibility to design an exit
£100,000
strategy that allows them to return capital and any growth
to investors.
£50,000
£14,000 The manager will usually give an indication of their
£0 targeted exit strategy and time frame (after three years
£22,500 or more) at the onset. Common exit options include
management buy-outs, trade sales or refinancing.
-£13,500
For more information
Visit www.wealthclub.co.uk/seis-explained for more
information, free factsheets, video guides and manager
interviews. You can also call 0117 929 0511 or email
enquiries@wealthclub.co.uk and we’ll be happy to
answer your questions, knowledgeably.
Page 10
VCTs: invest up to £200,000
per tax year
VCTs are companies on the London Stock
Exchange. They have a manager and a
board. They typically invest in 30 to 70
young, small and dynamic companies,
which could potentially become tomorrow's
£billion businesses, but are also high risk.
When investing in a VCT you acquire shares
in the trust (not in the individual companies),
so you get exposure to the whole portfolio.
This may include larger and more mature
businesses, into which the VCT invested
years ago.
What is the tax position?
♦ Income tax relief of up to 30% – so a
£100,000 investment could provide a
£30,000 saving on that year’s income
tax bill. To qualify for the tax relief, you
must have sufficient income tax liability
and hold the shares for at least five
years.
♦ Tax-free dividends – any returns
from VCTs are usually paid out as
dividends and are tax free. Some VCTs
target a tax-free dividend of around
5% a year but they can be higher or
lower. Dividends are variable and not
guaranteed.
♦ Tax-free growth – any growth should
also be tax free.
Zoopla was the first VCT-backed £1 billion company
TAX BENEFITS DEPEND ON CIRCUMSTANCES AND TAX RULES CAN CHANGE. THIS IS A BRIEF OUTLINE BASED ON CURRENT
RULES: THERE ARE DETAILED CONDITIONS AND RULES YOU SHOULD CONSIDER CAREFULLY BEFORE INVESTING. IF UNSURE,
SEEK ADVICE.
Wealth Club | Clubfinance Guide to tax-efficient investing | April 2021
EIS: invest up to £2 million
per tax year
EIS investments focus on the same type of
companies as VCTs but you typically get less
diversification.
If you invest in an EIS fund/portfolio, you'll
typically have access to 5-8 companies and
be a direct shareholder of those companies.
If you invest in single company EIS offers,
you'll have no diversification unless you
invest in a range.
For this reason, EIS are riskier than VCTs. To
reflect this, the tax reliefs are more generous.
What is the tax position?
♦ Income tax relief of up to 30% – a
£100,000 investment could save
£30,000 income tax, provided you have
sufficient income tax liability and hold
the shares for at least three years.
♦ Carry back contributions to the
previous year to reduce that year's tax
bill, if you have unused allowance.
♦ Tax-free growth (disposal relief) – you
normally pay no CGT when realising an
EIS investment, if you claimed income
tax relief on it and the companies still
qualify.
♦ Capital gains deferral relief – If you
have realised a taxable gain and invest
that gain in an EIS-qualifying investment,
you can defer the gain for as long as
the money stays invested and EIS
conditions are not breached. Once you
get your money out the gain comes
back into charge and you pay CGT at the
prevailing rate. Alternatively you could
invest into another EIS and continue to
defer the gain. You do not have to obtain
income tax relief to claim deferral relief.
♦ Loss relief – if the investment doesn’t
work out, you could offset any loss, less
the income tax relief received, against
your income tax bill. So an additional-
rate taxpayer could effectively reduce
a total loss of £1 to as little as 38.5p.
♦ Inheritance tax relief – EIS shares
should qualify for 100% relief from
inheritance tax, provided they are held
for at least two years and at the time of
death.
SEIS: invest up to £100,000
per tax year
SEIS investments focus on even younger and
smaller companies than EIS and VCTs.
If you invest in an SEIS fund or portfolio,
you will usually have access to a number of
companies and will be a direct shareholder
of those companies.
SEIS companies are newer and far riskier
than VCT or EIS-qualifying ones. To reflect
this, SEIS offers the most generous tax reliefs
of the three schemes.
What is the tax position?
♦ Income tax relief of up to 50% – so a
£100,000 investment could provide a
£50,000 saving on that year’s income
tax bill, provided you have sufficient
income tax liability and hold the shares
for at least three years.
♦ Carry back contributions to the
previous year, to reduce that year's tax
bill if you have unused allowance.
♦ Tax-free growth (disposal relief) – you
normally pay no CGT when realising an
SEIS investment, if you claimed income
tax relief on it and the companies still
qualify.
♦ 50% capital gains tax reinvestment
relief – you could reduce the CGT on
gains made elsewhere by up to 50%.
To benefit, you must have claimed the
income tax relief for the same year.
♦ Loss relief – if the investment doesn’t
work out, you could offset any loss, less
the income tax relief received, against
your income tax bill. So an additional-
rate taxpayer could effectively reduce
a total loss of £1 to as little as 13.5p
once all the available tax reliefs have
been used.
♦ Inheritance tax relief – SEIS shares
should qualify for 100% relief from
inheritance tax, provided they are held
for at least two years and at the time of
death.
Page 11
 ◆ Inheritance Tax Planning ◆
A
ccountants sometimes refer to IHT as a ‘voluntary
tax’, because there are so many allowances and
exemptions available. For example, gifts up to
unlimited value can be completely IHT free, provided the
donor survives for at least another seven years.
However, few of us know the likely date of our death and
it is difficult to tell in advance how much will be needed
to fund the rest of our days in comfort – so relinquishing
assets too soon can be risky.
One way to shelter your wealth from IHT – but still keep
it accessible – is to invest in assets that qualify for Business
Property Relief (BPR). After you have held them for two
years, they can be 100% IHT free.
For example, some shares in private and AIM-quoted
companies qualify for BPR and can under current rules
become IHT free after two years, if the shares are still held
at time of death. AIM shares can also be held in an ISA,
to render any income or gains tax free in the hands of the
investor. Small companies that qualify for the EIS or very
small startups that qualify for the SEIS can also enjoy
BPR and can become IHT free after two years.
Wealth Club | Clubfinance Guide to tax-efficient investing | April 2021
However, against all this it is very important to remember
these are high-risk investments and they could lead to a
total loss.
These tax shelters are only suitable for sophisticated
investors who already have substantial investments
elsewhere, such as ISAs and pensions. There is no point
letting the tax tail wag the investment dog if this results in
a total loss.
That’s why it’s important you research the subject very
carefully before considering whether any of these – private
or AIM-listed companies, the EIS or SEIS – may offer tax
planning opportunities appropriate for you. If you are not
sure, please seek advice.
For more information
Visit www.wealthclub.co.uk/iht-info for more
information, free factsheets, video guides and VCT
manager interviews. You can also call 0117 929 0511 or
email enquiries@wealthclub.co.uk and we’ll be happy to
answer your questions, knowledgeably.
Page 12
◆ ◆
How Wealth Club Can Help
W
e hope you found this guide useful and
relevant. If you think investing in VCTs, EIS,
SEIS or AIM-quoted companies might be an
attractive option, our service could be helpful.
Wealth Club is the UK’s largest broker specialising in
tax-efficient and alternative investments – thousands of
experienced investors have invested over £500 million to
date through us.
We aim to make it easier for experienced investors to
find information on, apply for and manage tax-efficient
investments. However, we will not give you advice or a
personal recommendation.
So what do you get through Wealth Club?
Free and impartial investment commentary
Access regularly updated information on VCTs, EIS, SEIS,
IHT and AIM IHT ISA portfolios all in one place:
• Expert impartial reviews of over 70 offers from all the
main providers – we regularly add new offers
• Latest performance information
• Exclusive manager video interviews
• Detailed research reports
• Free guides and factsheets
Wealth Club | Clubfinance Guide to tax-efficient investing | April 2021
What our clients say
“My experience with Wealth Club has been excellent. I was
able to speak to and correspond with someone who took
my questions seriously and answered them competently
straightaway.” – Mr C.H., Aberdeenshire
“Seeing a site with intelligent commentary on the various
offerings is a breath of fresh air”
– Mr M.L., London
“Clear, unhurried and intelligent discussion with staff on
the pros and cons of possible investment targets. Quick
and reliable getting back on queries. Flexible approach to
tailoring offers to my requirements. I’m impressed. I have
the impression of dealing with people who understand
their business, convey information lucidly and objectively
and act with integrity.”
– Mr C.V., Hampshire
“The service is very good. I like your research reports as
they are very easy to read and understand, factual and
help me with my investment decisions.”
– Mr P.B., Aberdeenshire
“Friendly, unobtrusive and professional service.”
– Dr E.H.D., Wiltshire
Page 13
The first service to offer online applications
We were the first broker to offer online VCT applications.
We work with providers to make applications short and
easy.

The first online portal for tax-efficient investments

The Wealth Club Portal is the first and only online
portal where you can log in and view all your alternative
investments made through Wealth Club, in one place. Find
at a glance the most up to date valuation and your profit or
loss.

Market-leading savings and annual rebates of up to

0.25% on VCTs
When you invest through us you normally pay less than if
you had invested directly with the provider or through an
adviser or another broker. In addition to the initial saving,
on many VCTs you benefit from annual rebates of up to
0.25% for the first three years.

Access to investments not normally available through

any other channels
From the BBC CBeebies number one preschool children’s
show Bing, to state-of-the-art veterinary A&E centre The
Ralph, to Aparito, a digital health company backed by
pharma giant Bayer AG – Wealth Club investors get access About Alex Davies
to opportunities not normally available elsewhere, often on
preferential terms.
FOUNDER AND CHIEF EXECUTIVE
WEALTH CLUB
‘Knock your socks off’ service
We believe our job is to make it as easy as possible for Alex was a board director at FTSE 100 firm Hargreaves
experienced investors to make their own decisions. If you Lansdown, where he worked for 15 years. He was
have any questions, all you have to do is pick up the phone responsible for building Hargreaves Lansdown into
or email us. You will speak to someone who knows what the UK’s largest direct-to-consumer SIPP provider with
they’re talking about. Please note, we don’t provide advice more than 150,000 clients and over £12 billion under
or personal recommendations. management.

After leaving and selling some of his shares, Alex sought

tax-efficient ways to invest his money. To his surprise, he
found that good-quality services designed to help high
net worth and sophisticated investors with non-standard
and tax-efficient investments are thin on the ground.

This led to the idea of Wealth Club, now the UK’s largest
broker of tax-efficient investments.

The media has quickly recognised Wealth Club and

In November 2018, Wealth Club won Best Investment
Platform at the Growth Investor Awards – and a year later, in
2019, won Best Investment Platform – Funds.
regularly comes to us for comments on tax-efficient
investments. Wealth Club has been quoted in Forbes, the
Financial Times, the Times, The Telegraph, The Spectator
and MoneyWeek, to name but a few.

Wealth Club | Clubfinance Guide to tax-efficient investing | April 2021 Page 14

 By Ian Cowie
AWARD-WINNING SUNDAY TIMES COLUMNIST

Ian Cowie first joined The Sunday Times as Personal Account columnist in 2013, having been
personal finance editor of The Daily Telegraph since 1989.

Cowie joined the Telegraph as City Reporter in 1986. Writing about savings and investments since
then, he has seen and survived several stock market setbacks but continues to believe that a
disciplined approach and tax-efficient strategies can prove successful despite adversity.

He was judged to be Best Freelance Journalist at the 2017 AIC Media Awards, and Financial
Commentator of the Year in the Headline Money Awards 2015. Other awards include the Wincott,
Association of Investment Companies and the Association of British Insurers; he won Journalist
of the Year for the first three years of the ABI Awards.

Wealth Club | Clubfinance Guide to tax-efficient investing | April 2021 Page 15

 TEI042021

www.wealthclub.co.uk
enquiries@wealthclub.co.uk
0117 929 0511