Venture capital investing: back in the startups of tomorrow (and claim up to 50% of your investment back from HMRC) – by Rob Tominey

 

Over the past decade, venture capital funds have invested in nearly all of the best known startups, from Facebook and Airbnb to Revolut and Deliveroo. Along the way, these funds achieved notable success for investors.

But while you’ve probably made investments into bonds, listed shares or index funds before, you may not have invested in venture capital – but by doing so, you can back the startups of the future, participate in their growth, and gain some incredible tax reliefs.

 

So what is venture capital, and why should you invest in it?

 

Venture capital (or simply ‘VC’) is the name given to investing in young, fast-growing companies.

By raising venture capital, young companies are able to build their businesses faster than if they used revenue or founders’ savings alone. In return for money, startups give investors an ownership stake in their companies.

If a startup has a good product and team, raising venture capital often means a better product and more sales. As that startup grows, so does its value and, in turn, the value of the VC investors’ ownership stake.

VC-backed startups often grow faster than older public companies. Given this, VC investors aim to make more money from startups than they could if they invested in companies on the stock market.

 

Up to 50% tax relief on investments

 

Certain types of venture capital investment – EIS, SEIS and VCT – generate tax reliefs of up to 50% for the investor. If you’re asking why such generous reliefs exist – there is a good reason – the schemes are designed to encourage private investors to support innovation and stimulate growth in the UK economy.

Given the “high-risk” nature of early stage venture capital investing, in return for investing through EIS, HMRC provides generous income tax relief for investors (up to 50%, depending on the fund) and all investment gains are capital gains tax free.

 

How do I invest in venture capital funds?

 

There are numerous platforms that enable investors to access venture capital – with each offering funds at different minimum investment levels. For those new to venture capital, Further is a platform offering funds at the lowest minimum investment level, with minimums starting from £1,000.

 

Rob Tominey is CEO of Further

 





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