Tax concessions for tech companies and their investors

Technology companies and their investors may be able to access a range of tax reliefs and incentives. These can support investment, employee share schemes, company sales and succession planning, including:

• Tax reliefs that may make technology companies more attractive to investors;
• Tax-efficient ways to provide shares or share options to employees;
• Capital Gains Tax (CGT) reliefs on the sale of shares; and
• Inheritance Tax planning and business succession

Whether raising investment from angel investors or crowdfunding, offering access to available tax reliefs can help attract investors.

Crowdfunding tax reliefs

SEIS and EIS tax reliefs may be available for qualifying investments made through crowdfunding platforms. Both the company and the investor must satisfy the relevant statutory requirements.

Tax reliefs for tech angel investors

Technology companies and their investors may be able to benefit from a range of tax reliefs, including:

• SEIS and EIS income tax and CGT reliefs;
• CGT deferral relief;
• SEIS reinvestment relief;
• Business Investment Relief in certain circumstances involving pre-6 April 2025 foreign income and gains;
• HMRC-approved employee share schemes; and
• Business Asset Disposal Relief and Investors’ Relief on qualifying share disposals.

The availability and value of each relief depend on the investment, the company’s activities and the investor’s circumstances.

Deferral relief

CGT deferral relief may allow an investor to defer a chargeable gain by reinvesting it in qualifying EIS shares. The deferred gain generally becomes chargeable when a relevant later event occurs, such as the disposal of the replacement shares. Eligibility depends on the statutory conditions and timing requirements.

Income tax relief on investment in a tech company

Angel investors may claim income tax relief when investing in qualifying SEIS or EIS shares. The current headline rates are:

• 50% income tax relief for qualifying SEIS investments; and
• 30% income tax relief for qualifying EIS investments.

Relief is subject to the applicable investment limits and conditions. Depending on the investor’s circumstances, a claim may reduce their income tax liability or result in a repayment.

To qualify for SEIS or EIS relief, investors must satisfy the relevant statutory requirements. These include restrictions on connections with the company and, in certain circumstances, employment or financial arrangements with it. Directors may qualify in circumstances where employees would not.

HMRC administers the schemes, and companies must follow the relevant procedures before investors can claim relief. We help investors in technology companies assess eligibility and navigate SEIS and EIS claims.

Rolling SEIS backwards

Investors may be able to treat some or all of a qualifying SEIS or EIS investment as made in the preceding tax year, subject to the rules of the relevant scheme. This can help use available income tax relief across two tax years. SEIS reinvestment relief may also be available where its separate conditions are met.

Business Investment Relief

Business Investment Relief (BIR) may remain relevant to qualifying investments made using certain foreign income and gains that arose before 6 April 2025. The remittance basis was abolished from that date and replaced by the foreign income and gains (FIG) regime, so the previous rules for UK-resident non-UK-domiciled individuals no longer provide a general description of the current position.

BIR is subject to detailed conditions governing the funds invested, the qualifying company and the investment itself. Investors should obtain advice before transferring funds to the UK or investing them, as the tax consequences depend on the source and timing of the funds and the applicable transitional rules.

Providing shares for employees in tech companies

Equity structures are common in technology companies. We advise on structuring employee share arrangements to support recruitment, retention and long-term business growth.

Providing shares to employees in tech companies

Awarding shares to employees can create significant tax liabilities if not structured correctly. We help technology companies assess the tax implications and implement suitable arrangements for awarding shares to employees.

Providing options to employees in tech companies

Eligible technology companies may be able to use HMRC-approved share option schemes, including Enterprise Management Incentives (EMI) and Company Share Option Plans (CSOP). These can offer tax advantages, subject to the relevant company, employee and option conditions. The tax treatment on exercise and sale depends on the scheme and the circumstances.

Capital gains tax on the sale of a technology company

Technology companies may command significant valuations, making the tax treatment of a sale an important part of exit planning. The availability of relief depends on the transaction structure, the shareholder’s circumstances and the statutory requirements.

Business Assets Disposal Relief (Entrepreneurs’ Relief) on the sale of shares

Business Asset Disposal Relief (formerly Entrepreneurs’ Relief) may reduce CGT on qualifying gains from the sale of shares in a personal company. The rate is 18% for disposals made on or after 6 April 2026, subject to the applicable conditions and the £1 million lifetime limit.

Shares acquired on the exercise of EMI options may qualify for Business Asset Disposal Relief, but the relevant conditions and holding periods must be satisfied. The relief is not automatic.

Investors Relief on the sale of shares

Investors’ Relief may be available to external investors disposing of qualifying shares in an unlisted trading company. For disposals made on or after 6 April 2026, the CGT rate is 18%, subject to the applicable conditions and the £1 million lifetime limit. The rules include requirements concerning the shares, the investor’s connection with the company and the holding period.

SEIS/EIS shares - no capital gains tax to pay

A disposal of SEIS or EIS shares may be exempt from CGT where the relevant conditions are met. These generally include:

• The shares have been held for the required period, normally at least three years, subject to the rules for when the company’s trade begins; and
• The investor has obtained and retained the required income tax relief on the full qualifying subscription.

The precise conditions differ between the schemes, so investors should confirm eligibility before relying on an exemption.

Succession planning in a technology company - tax on death

Business Relief may reduce or eliminate Inheritance Tax on qualifying shares in an unlisted trading company. From 6 April 2026, 100% relief is generally capped by a £2.5 million allowance for qualifying business and agricultural property, with qualifying value above the allowance generally receiving 50% relief. The rules are subject to detailed conditions, including the nature of the business and the ownership and holding requirements.

Technology companies must be assessed on their actual activities and structure. Businesses that mainly deal in securities, stocks, shares, land or buildings, or that carry on other excluded activities, may not qualify. Relief should not be assumed simply because a company operates in the technology sector.

Change of voting rights following death of a shareholder

In private companies, the remaining shareholders may not want family members inheriting shares to have the same voting rights as the deceased. We review articles of association and shareholders’ agreements to consider appropriate provisions for voting rights, share transfers and the continued management of the business following a shareholder’s death.

Cross options permitting acquisition of shares following death

Cross-option arrangements can give surviving shareholders and the deceased shareholder’s estate reciprocal rights to buy or sell shares following death. They may be supported by insurance to help fund the purchase. The terms should address the exercise period, valuation and the time needed to arrange finance, as well as the potential Inheritance Tax consequences.