Don't invest unless you're prepared to lose all the money you invest. This is a high-risk investment and you are unlikely to be protected if something goes wrong.
Risk Summary

Estimated reading time: 2 min

Due to the potential for losses, the Financial Conduct Authority (FCA) considers this investment to be high risk.

What are the key risks?

  • You could lose all the money you invest
  • Most investments are shares in start-up businesses or bonds issued by them. Investors in these shares or bonds often lose 100% of the money they invested, as most start-up businesses fail.
  • Checks on the businesses you are investing in, such as how well they are expected to perform, may not have been carried out by the platform you are investing through. You should do your own research before investing.

You won't get your money back quickly

  • Even if the business you invest in is successful, it will likely take several years to get your money back.
  • The most likely way to get your money back is if the business is bought by another business or lists its shares on an exchange such as the London Stock Exchange. These events are not common.
  • Start-up businesses very rarely pay you back through dividends. You should not expect to get your money back this way.
  • Some platforms may give you the opportunity to sell your investment early through a 'secondary market' or 'bulletin board', but there is no guarantee you will find a buyer at the price you are willing to sell.

Don't put all your eggs in one basket

  • Putting all your money into a single business or type of investment for example, is risky. Spreading your money across different investments makes you less dependent on any one to do well. A good rule of thumb is not to invest more than 10% of your money in high-risk investments. Learn more here.

The value of your investment can be reduced

  • If your investment is shares, the percentage of the business that you own will decrease if the business issues more shares. This could mean that the value of your investment reduces, depending on how much the business grows. Most start-up businesses issue multiple rounds of shares.
  • These new shares could have additional rights that your shares don't have, such as the right to receive a fixed dividend, which could further reduce your chances of getting a return on your investment.

You are unlikely to be protected if something goes wrong

  • Protection from the Financial Services Compensation Scheme (FSCS), in relation to claims against failed regulated firms, does not cover poor investment performance. Try the FSCS investment protection checker.
  • Protection from the Financial Ombudsman Service (FOS) does not cover poor investment performance. If you have a complaint against an FCA-regulated platform, FOS may be able to consider it. Learn more about FOS protection here.

If you are interested in learning more about how to protect yourself, visit the FCA's website here.

For further information about investment-based crowdfunding, visit the crowdfunding section of the FCA's website here.

Investing Capital

Tax efficient initiatives: from first home to IHT planning

The introduction of the Help-to-Buy Individual Savings Account (ISA) in December 2015 represented another example of financial assistance that was introduced to assist aspiring first time buyers.

Those that save through the scheme will benefit from a boost worth 25% of their savings when they purchase their first home.

The Help-to-Buy ISA is summarised alongside various other approaches to tax efficient investment in our free, downloadable guide.

Complementing the UK Government’s Help-to-Buy equity loan scheme, it enables buyers of new homes to buy with a 5% deposit and take out a mortgage of 75%.

The equity loan provides the residual 20% and is available interest free for the first five years.

Over 1,000,000 people have opened Help-to-Buy ISAs; evidence of the continued appeal of property ownership in the UK.

However, from 2019 Help-to-Buy ISAs will be incorporated with Lifetime ISAs (LISAs). The unification of deposit saving and retirement planning reinforces the sense that financial planning should adopt a ‘life-cycle’ approach.

From property purchase to estate planning

This extends to planning for retirement and, eventually, the transfer of your estate.

Whilst  inheritance tax (IHT) may not be uppermost in the minds of people currently saving through a Help-to-Buy ISA, the chart below demonstrates the importance of estate planning for all property owners.

Change in average UK house prices, relative to the IHT nil-rate band


The chart presents average UK house prices since 1987 as a proportion of the individual IHT-free allowance, known as the nil-rate band.

This peaked at 64% in Q1 2017, having been as low as 27% in Q2 and Q3 1996.

This national average conceals higher property values in London and South East England.

The closer the average house price gets to consuming the nil-rate band, the more carefully estates will have to be planned.

The need for estate planning

Inheritance tax (IHT) is charged in the UK at a flat rate of 40%. This is the most straightforward aspect of IHT.

You will not be required to pay IHT on the entirety of your estate, but the proportion on which you will have to pay IHT will vary depending on a range of factors.

The prospect of having to relinquish 40% of the assets you’ve worked hard to acquire provides a clear incentive to arrange these in a way that minimises your IHT liability.

What's more, there are a variety of investment products that can help you achieve this, all of which are entirely legal and many of which offer benefits beyond minimising your IHT liability.

Tax efficient IHT planning

The good news is should your house value reach or exceed your nil-rate band, there are various means through which you can structure your other assets to minimise the IHT liability that they attract.

Fortunately, we’ve just produced a new, free guide to 'Mitigating IHT through Intelligent Investing'.

This guide provides you with an insight into how you can mitigate your IHT liability, giving a comprehensive understanding of how you can ensure your assets are enjoyed by the people closest to you.

By downloading the guide, you'll gain a free insight into:

  • Who pays Inheritance Tax? – explores your likelihood of paying Inheritance Tax, looking at trends in the proportion of estates that are liable and the average liability faced.
  • Understanding your Inheritance Tax liability – provides detailed information that will help you to understand what your IHT liability could be.
  • Mitigating Inheritance Tax – introduces some of the most effective means by which to reduce your IHT liability.

Inheritance Tax may not seem like something you need to consider, either because you feel you're still too young for it to be a concern, and/or you won't exceed the current threshold.

But whether you take into account the average UK house price is currently £223,257 (immediately equating for over half of your Inheritance Tax liability), or that the more time you have to plan and prepare, the more likely it is you'll see additional benefits (investing in various EIS opportunities rather than just one, for instance), planning for IHT liability is something the vast majority of us should be making a consideration towards.

Free guide download  to Inheritance tax

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