Investing in social enterprises may be a great move, thanks to new tax breaks which come into force in the UK in April 2017.
Under the Social Investment Tax Relief scheme, a qualifying social enterprise can currently raise around £293,000. This will rise to £1.5 million over its lifetime following changes to the scheme, making social enterprises an attractive option for potential investors.
This is fantastic news for social enterprises as it allows more opportunities for funding, and they will usually get a lower interest rate than they would get from banks or other finance organisations. What’s more, the enterprises are only required to start paying back the principal of the investment after three years, helping them through that difficult start up phase. For an investor, the benefits are also attractive. By lending a social enterprise £10,000, for example, they would get a £3,000 reduction in that year’s income tax bill.
Doing good and saving tax seems to be a draw for some organisations - it’s a win-win situation. Annika Tverin, the director of Social Finance, says people drawn to these types social investments tend to be very motivated by the idea of putting their money to work in a good cause. “Impact investing is definitely on the up.”
Read more: Do good and save tax