Claiming EIS relief to reduce income tax

EIS relief provides for a number of tax exemptions. One of the key reliefs is that you can qualify for a 20% income tax relief when you subscribe for shares in a qualifying EIS company. This means that 20% of the amount you invest in EIS shares can be offset against your income tax liability. There is a maximum for the current tax year of a £400,000 investment though (ie an £80,000 tax credit). This is per person though and therefore a married couple could get up to £160,000 in tax credits. This could be useful for reducing the charge to income tax on a large dividend or on property trading income. You will be issued a form EIS 3 from the EIS company when you make the investment. You should keep this. In terms of claiming the EIS income tax credit you would do this in the main pages of the tax return. In box 15.4 you enter the amount of qualifying subscriptions based on the EIS 3. Note that its the amount of subscriptions and not income tax relief that you enter into this box. You should also enter details of the company and investment in the 'white space' of the tax return.