The short version: Equity crowdfunding is where you invest in a startup or small business in exchange for shares. Instead of one big investor putting in a lot of money, lots of smaller investors each put in a bit.
How does it work?
Companies list on platforms like Seedrs or Crowdcube. You browse the opportunities, pick ones you like, and invest. In return, you get shares in the company. If it grows and succeeds, your shares could become worth more. If it fails, you could lose everything.
How is it different from buying stocks?
The companies are usually much smaller and younger. The shares aren’t traded on a stock exchange, so you can’t easily sell them whenever you want. But because these are early stage businesses, your investment might qualify for tax relief through schemes like SEIS or EIS.
What are the risks?
High. Most startups fail. Even if the company survives, it might take years before you see any return, and there’s no guarantee you ever will. Only invest money you can genuinely afford to lose.
What about tax?
If the company qualifies for SEIS or EIS, you can claim Income Tax relief on your investment. Any profit when you sell might be CGT free too, depending on how long you held the shares.
Interested in equity crowdfunding and want to understand the tax side? Get in touch and we’ll talk you through it.
