Flows of new money into the Seed Enterprise Investment Scheme (SEIS) have “surged” since the General Election in early July, according to Wealth Club.

Between the election and the end of August, the amount invested in SEIS funds through Wealth Club was 188% higher than in the same period last year, while the number of investors trebled.

The SEIS is a government-backed scheme that grants investors tax reliefs when investing in early-stage UK companies.

Wealth Club noted that fears of tax increases, such as to capital gains tax (CGT), in the upcoming October Budget was one potential driver of the increased SEIS investment.

The SEIS is “probably the most tax-efficient vehicle” available, according to Wealth Club, as investors get up to 50% income tax relief and 50% CGT relief, while any gains are also tax free.

It highlighted that the CGT relief in particular could be hugely attractive at the moment, as many are reportedly rushing to liquidate assets ahead of the Budget.

Wealth Club also pointed to improving investment sentiment as a possible reason behind the increase, as improving economic sentiment and lower valuations mean there could be “rich pickings for braver investors”.

There has also been new certainty about the future of the scheme, following the news that the government has extended the EIS and Venture Capital Trust scheme to 2035.

“This is great news for UK startups – and the economy as a whole,” commented Wealth Club founder, Alex Davies.

“It’s a sign appetite to invest in very early-stage businesses might be finally picking up again.

“I suspect there are number of reasons for this. Since the election everyone has been expecting tax rises, with wealthier investors likely to bear the brunt. Many are feeling twitchy, and SEIS is a hugely tax efficient way to invest for those prepared to take the extra risk.

“At the same time, we’ve been in the doldrums for a couple of years, but one good thing to come out of it is vastly improved valuations.

“If this trend continues, it may be the start of a virtuous cycle: Better sentiment leads to more investment in young companies, which create a disproportionate number of jobs and economic growth, which in turn improves investor sentiment, leading to more investment. It’s what the country needs.”

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