Published: 5 September 2019
In the 21st century, advances in technology have, arguably, made it much easier to set up a company, build a brand and achieve success without employing vast numbers of people or needing eye-watering levels of start-up capital. And with the BBC’s Dragon’s Den now on Series 171 it’s clear many of us are fascinated by the fortunes of would be entrepreneurs.
The dream of entrepreneurialism can often be associated with new, disruptive ideas and technology. For many of us though, the financial risks involved in becoming an entrepreneur mean the only thing likely to be disrupted by us striking out alone would be our sleep.
The same may apply to the idea of backing businesses as an angel investor (using your own capital to invest in a specific enterprise) – a particularly direct way of supporting a start-up.
While the different options all have their own advantages and disadvantages, one clear theme runs through them – whatever the structure and the tax benefits, investing in fledgling enterprises can be a high-risk pursuit.
Investing in start-ups can offer potential for growth and generous tax perks but they are suitable only for those comfortable with the risks involved and even then, ideally forming just a small part of a diversified portfolio.
This is provided for general information only and takes no account of personal circumstances. It is not a recommendation to buy or sell. It is provided solely to support you in making your own investment decisions. If you have any doubts as to their suitability you should seek expert advice. Alliance Trust Savings does not give financial or investment advice.
Please be aware that the value of investments can fall as well as rise so you could get back less than you invest.
Laws and tax rules may change in the future without notice. This information takes no account of your personal circumstances which may have an impact on tax treatment.
1 BBC, Dragon’s Den.
2 Money Advice Service – Venture Capital Trusts.
3 Enterprise Investment Scheme Association – What is the EIS?.
4 Scotsman – Taking aim at alternatives is riskier – 24 June 2015.
5 London Stock Exchange – AIM – August 2019 – see link to 2 August stats table under Statistics.
6 Money Observer, How to use AIM shares to guard against inheritance tax risk – 21 February 2019.
7 London Stock Exchange, Stamp Duty exemption.
8 Guardian, ISA investors can now take aim at the Alternative Investment Market – 6 August 2013.
9 The Times, Investors lose millions in Lendy collapse, 17 July 2019.
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