Apart from being a good investment, picking up EIS also means that you would get good tax benefits. Investors are allowed to invest up to £1 million every year through EIS, and they take good advantage of it as it gives them the most tax benefits.
There are other benefits associated with EIS too, like capital gains tax deferral, and also the carry back facility of the taxes. However, being an investor, it is essential to maintain a good portfolio which is aligned with EIS and other investment schemes.
And to get the max benefits from EIS, they should choose the shares wisely. In this article, we have listed five things to look out for while choosing EIS shares!
Consultation With An Expert
Before choosing any EIS shares, it is essential to consult an experienced advisor. They are the ones who will scrutinise the personal circumstances of the investor and help them take the right level of risk with their investment. They will help the investors to reach their financial goals, along with adhering to their financial limitations.
You can invest in EIS-qualifying companies in two ways- directly or through a fund. The first one means you are investing in only one company and for the second one, you would have a fund manager who will build your investment portfolio. Each investment method has its advantages and disadvantages, and it depends on your choice.
As an investor, you should carefully assess the risk of investment and understand them. Your investment is at a risk and the EIS-qualifying companies are not listed in the stock market- their values can fall drastically and go nil. EIS shares have very fluctuating values compared to the large companies and also selling off the shares of unlisted companies is not easy. It is also essential to ensure that the given company is EIS-qualifying or else you won’t get the tax benefits.
Direct Investment Means Greater Visibility
Investing through a fund means you have less control over your money and where it is invested. But in the case of direct investment, you can choose your investment plans depending on your circumstances and preferences. If you are an experienced investor, with direct investment you can build a portfolio depending on your investment goals and limitations.
There are several EIS-eligible investments from which you can choose the right one. But ensure that the given business must be unquoted and have less than 250 full-time employees. They should be within seven years of their first commercial sale with a gross asset of less than £15 million.
Keeping these things in mind will help you choose the right shares and build an EIS investment portfolio that would help you reach your investment goals. Careful analysis is very important before the investment.