Global Wealth Investor

Investing wealth globally

Category: Tax

  • How to Spot the Top-Performing SEIS Funds

    A Look Beyond the Numbers

    For sophisticated investors, the Seed Enterprise Investment Scheme (SEIS) offers an unparalleled combination of generous tax reliefs and the potential for explosive growth. But in a landscape of private, early-stage companies, how do you separate the high-flyers from the hopefuls?

    Unlike VCTs or public equities, you can’t simply look up a 3-year performance table for SEIS funds. The true value of these investments is typically realised over five to ten years, upon a successful sale or IPO. So, how can an investor gauge success in the shorter term? By looking for the clues: industry recognition and, most importantly, a track record of real-world exits.

    The Challenge of Measuring Early-Stage Success

    Before we dive in, it’s crucial to understand why SEIS performance is so opaque. These funds invest in fledgling businesses whose valuations are not updated daily. A company’s worth is often only formally reassessed during new funding rounds or upon an exit. This means a simple three-year performance metric doesn’t capture the full picture and can even be misleading.

    Instead, savvy investors must act like detectives, piecing together evidence to identify managers who consistently make smart bets.

    A Mark of Quality: Following the Awards 🏆

    Industry awards are a strong indicator of a fund manager’s quality, expertise, and reputation among their peers. Events like the EISA (EIS Association) Awards and the Growth Investor Awards rigorously assess managers, and consistent winners are often at the top of their game.

    Based on recent accolades, a few names repeatedly appear in the winner’s circle:

    • Jenson Funding Partners: A veteran in the SEIS space, Jenson is highly respected for its long track record and deep experience. Their recent win as “Best SEIS Investment Manager” at the 2024 EISA Awards highlights their continued excellence.
    • SFC Capital: As one of the UK’s most active seed-stage investors, SFC Capital has built a vast and diverse portfolio. Their frequent award wins are a testament to their ability to source and secure high-quality deals at scale.
    • Fuel Ventures: With a sharp focus on tech and software startups, Fuel Ventures has carved out a niche as a top-tier manager for investors seeking exposure to this high-growth sector. Their recognition as a “Best SEIS Investment Manager” underscores their success in this competitive space.

    The Ultimate Proof: Successful Exits 🚀

    While awards are a great signpost, the ultimate validation of any venture capital strategy is a successful exit. This is where potential on paper turns into tangible returns in an investor’s pocket.

    Some managers are more transparent than others about their wins, and these figures provide invaluable insight:

    • Jenson Funding Partners has successfully exited 12 companies from its SEIS funds, delivering an impressive average exit multiple of 4.69x for their investors.
    • SFC Capital recently celebrated a partial exit from payment platform Ryft, which generated a 6.2x return for the SEIS investors who backed the company.

    These examples are powerful proof points, demonstrating a manager’s ability to not only pick winners but also guide them toward a profitable exit.

    Your Due Diligence Checklist ✅

    When evaluating an SEIS opportunity, past performance is just one piece of the puzzle. Use this checklist to ensure you’re looking at the complete picture:

    • Manager’s Track Record: Do they have a long and proven history of investing, nurturing, and exiting early-stage companies?
    • Investment Strategy: What is their sector focus? Does their approach to building a diversified portfolio align with your risk appetite?
    • Quality of Deal Flow: How do they source their investment opportunities? A manager’s network and reputation are critical for accessing the most promising startups.
    • Portfolio Support: Do they take an active role in helping their companies succeed? Look for managers who provide mentorship and strategic support, not just capital.

    Ultimately, identifying the best SEIS funds requires looking beyond simple league tables. By focusing on industry accolades, a proven history of successful exits, and a robust due diligence process, you can position yourself to tap into the remarkable growth potential of the UK’s most innovative startups.

  • UK Capital Gains Tax-Free Alllowance 2025/26

    Heads Up, Investors: The UK Capital Gains Tax-Free Allowance Has Been Slashed Again

    The government has once again tightened the rules on investment profits. For the 2025/26 tax year, the UK Capital Gains Tax (CGT) allowance has been cut in half.

    Here’s what you need to know to stay ahead.

    The New Capital Gains Allowance: It’s Just £3,000

    The Capital Gains Tax allowance – officially known as the Annual Exempt Amount – is the amount of profit you can make from selling assets in a tax year before you have to pay any tax.

    For the 2025/26 tax year (6 April 2025 to 5 April 2026), this allowance will be:

    • £3,000 for individuals
    • £1,500 for most trusts

    This is a sharp drop from the £6,000 allowance in 2023/24 and a world away from the £12,300 it was just a few years ago. This trend means that even small investment gains that were previously tax-free might now result in a tax bill. 📉

    What Happens if Your Profits Exceed the Allowance?

    If your total capital gains in the tax year are more than £3,000, you’ll pay tax on the excess amount. The rate you pay depends on two things: your Income Tax band and the type of asset you’ve sold.

    The CGT rates for 2025/26 are:

    • On most assets (like shares or funds held outside an ISA):
      • 10% if you’re a basic rate taxpayer
      • 20% if you’re a higher or additional rate taxpayer
    • On residential property (that isn’t your main home):
      • 18% if you’re a basic rate taxpayer
      • 28% if you’re a higher or additional rate taxpayer

    Important: Your capital gains are added on top of your regular income. This means a large gain could push you into a higher tax bracket, and you’ll pay the higher rate of CGT on the portion of the gain that falls into that new bracket.

    How to Protect Your Gains 🛡️

    With the allowance now so low, smart planning is more crucial than ever. Here are a few key strategies to consider:

    • Maximise Your ISA: This is your best defence! Any gains you make on investments held within a Stocks & Shares ISA are completely free from Capital Gains Tax. You can invest up to £20,000 each tax year.
    • Use Your Pension: Like an ISA, any growth within your pension pot is sheltered from CGT.
    • Think as a Couple: If you’re married or in a civil partnership, you can transfer assets to your partner without triggering a CGT event. This allows you to use both of your individual £3,000 allowances, potentially shielding up to £6,000 of gains per year.
    • Harvest Your Gains Annually: Consider selling investments to realise gains up to the £3,000 annual limit. By “harvesting” your tax-free allowance each year, you can prevent a much larger, taxable gain from building up over time.

    The key takeaway is that the goalposts have moved. The days of ignoring small investment profits are over. By understanding these changes and using the tax-efficient accounts available, you can keep more of your hard-earned money. 💰

  • Capital Gains and Dividend Tax Rates in Australia

    Here are the tax rates and how they apply to capital gains and dividends for Australian resident individuals.

    It is important to note that the Australian financial year runs from 1 July to 30 June. The rates below are the most current available.

    Individual Income Tax Rates (2024-2025)

    The tax on both capital gains and dividends is determined by your marginal income tax rate. From 1 July 2024, the following rates apply to Australian resident individuals:

    Taxable IncomeTax on this Income
    $0 – $18,200Nil
    $18,201 – $45,00019% of the excess over $18,200
    $45,001 – $135,000$5,092 + 30% of the excess over $45,000
    $135,001 – $190,000$32,097 + 37% of the excess over $135,000
    $190,001 and over$52,447 + 45% of the excess over $190,000

    Important Note: In addition to the rates above, most resident taxpayers are also required to pay the Medicare Levy, which is 2% of their taxable income. Low-income earners may be eligible for a reduction or exemption.1

    Capital Gains Tax (CGT) Rates

    As explained previously, Australia does not have a separate tax for capital gains. The “rate” is your marginal income tax rate plus the Medicare levy. The key is how much of the gain is subject to tax.

    • Assets held for less than 12 months: 100% of the net capital gain is added to your taxable income and taxed at your marginal rate.
    • Assets held for 12 months or more: You are entitled to a 50% CGT discount.2 This means only 50% of the net capital gain is added to your taxable income and taxed at your marginal rate.

    Example with Actual Rates:

    Let’s say you are in the 30% tax bracket with an income of $80,000. You make a $10,000 capital gain on shares.

    • Held for 10 months (no discount):
      • Taxable gain: $10,000
      • Tax payable: $10,000 x (30% + 2% Medicare Levy) = $3,200
    • Held for 14 months (50% discount applies):
      • Taxable gain: $10,000 x 50% = $5,000
      • Tax payable: $5,000 x (30% + 2% Medicare Levy) = $1,600

    Dividend Tax Rates

    The tax rate on dividends is also your marginal income tax rate. However, the effective tax you pay is significantly altered by franking credits, which are tied to the corporate tax rate.3

    • Standard Corporate Tax Rate: 30%
    • Base Rate Entity Corporate Tax Rate: 25% (for companies with an aggregated turnover of less than $50 million)

    The franking credit attached to your dividend is based on the tax rate the company paid.4

    Unfranked Dividends:

    These are simple. The entire dividend amount is added to your taxable income and taxed at your marginal tax rate plus the Medicare Levy.

    • Example: You receive a $1,000 unfranked dividend. Your marginal rate is 30% (+2% Medicare Levy).
      • Tax payable: $1,000 x 32% = $320

    Franked Dividends:

    This is a two-step process to calculate your tax.

    1. “Gross up” the dividend: Add the franking credit to the cash dividend you received to determine the pre-tax amount to include in your assessable income.
    2. Calculate tax and apply the credit: Calculate the tax on the grossed-up amount, and then subtract the franking credit as a tax offset.

    Example: Fully Franked Dividend from a 30% Tax Company

    You receive a $700 cash dividend, fully franked.

    1. Gross-up:
      • The company paid 30% tax, so the $700 represents the 70% of profit paid to you.
      • Franking Credit = ($700 / (1 – 0.30)) – $700 = $300
      • Grossed-up Dividend (taxable income): $700 + $300 = $1,000
    2. Calculate Tax Outcome:
      • If your marginal tax rate is 47% (45% + 2% Medicare Levy):
        • Tax on $1,000: $1,000 x 47% = $470
        • Less franking credit: $470 – $300 = $170 tax to pay
      • If your marginal tax rate is 32% (30% + 2% Medicare Levy):
        • Tax on $1,000: $1,000 x 32% = $320
        • Less franking credit: $320 – $300 = $20 tax to pay
      • If your marginal tax rate is 21% (19% + 2% Medicare Levy):
        • Tax on $1,000: $1,000 x 21% = $210
        • Less franking credit: $210 – $300 = -$90
        • Result: $90 cash refund from the ATO

    Disclaimer: These examples are for illustrative purposes. Individual financial circumstances can vary, and you should consider seeking advice from a registered tax agent or financial advisor.