EISA celebrates Government Reversal of Angel Investment Rules
The Enterprise Investment Scheme Association (EISA), the official body for the Enterprise Investment Scheme (EIS), has applauded the Chancellor's decision to retract the January amendments to the definitions of High Net Worth and Sophisticated Investors in the Spring Budget 2024. This reversal is seen as a pivotal signal of support for entrepreneurs and early-stage investors.
On 31st January, the Treasury had elevated the financial thresholds for High Net Worth and Sophisticated Investor exemptions under the Financial Promotion Order. This adjustment increased the income benchmark for high net-worth individuals from £100,000 to £170,000 and eliminated crucial criteria for qualifying as a Sophisticated Investor. As a consequence, the amendment drastically narrowed the pool of potential investors in startups, notably affecting female investors, other underrepresented groups, and those outside of London and the South East.
The government's recent reversal is interpreted as a reaffirmation of its dedication to nurturing early-stage companies and promoting innovation. It marks a positive development for the expansion of angel investing across the UK, including for women, in alignment with the British Business Bank’s regional angels programme aimed at bridging the regional equity gap.
The January modifications had prompted widespread concern within the ecosystem over restricted funding for startups, especially impacting women and minority investors, and threatening the UK’s startup ecosystem and its role as a catalyst for economic growth.
The reversal followed a campaign by the Startup Coalition, during which EISA joined forces with other significant organisations and individuals, including the signing of the Angel’s Letter, an open request for government intervention. Among the notable signatories were the UKBAA, Alma Angel’s Network, Extend Ventures, The Entrepreneurs Network, Enterprise Alumni, Angel Academe, and the Angel Investing School, with over 2,900 signatures, many from EISA members.
Caroline Nokes, chair of the Women and Equalities Committee, had warned that without such a policy change, the UK would see a 70% decrease in the number of women eligible to invest in startups.
The EISA’s Director General Christiana Stewart-Lockhart, expressed her enthusiasm for the reversal, stating, "We warmly welcome the government's decision to reverse the January changes. We’re grateful to the Government for listening so attentively to our concerns and for taking quick action. This is an important step to allow the continued growth in the number of angel investors across the UK able to support innovative startups."
