EIS tax relief gives investors in small, unlisted UK trading companies 30% income tax relief on up to £1m a year (£2m if the excess goes into knowledge-intensive companies), tax-free gains after 3 years, capital gains tax deferral, loss relief if the company fails, and inheritance tax relief after 2 years.
The Enterprise Investment Scheme (EIS) exists to get private money into young, risky companies that find it hard to raise. The reliefs are the government’s way of sharing that risk with the investor.
I’ve invested in over 100 businesses and funded more than 750 others with over £1bn, so I’ve looked at deals as an investor, as a lender and as the founder raising the money.
Key points
- Income tax relief is 30% of the amount you invest, taken off your tax bill, as long as you hold the shares for at least 3 years.
- From 6 April 2026 a company can have gross assets of up to £30m before the share issue and £35m after it. Many guides still show the old £15m limit.
- From 6 April 2026, 100% Business Relief from inheritance tax applies to the first £2.5m of qualifying business and agricultural property, with 50% relief above that.
- You don’t have to live in the UK to claim income tax relief, but you need UK income tax to set it against.
Risk warning: Investing in early-stage companies puts your capital at risk. The shares are illiquid and you could lose all the money you invest. Tax treatment depends on your circumstances and can change. This article is general information, not tax or financial advice.
EIS Tax Relief at a Glance
| Relief | What you get | Main condition | Limit (2026/27) |
|---|---|---|---|
| Income tax relief | 30% of the amount invested off your income tax bill | Hold the shares for 3 years | £1m invested a year, or £2m if the excess is in knowledge-intensive companies |
| Tax-free gains | No capital gains tax (CGT) on the profit when you sell | Income tax relief claimed and kept; shares held 3 years | No limit |
| CGT deferral | CGT on another gain put off by reinvesting it | Invest from 1 year before to 3 years after the gain | No limit |
| Loss relief | The net loss set against income or gains | Shares sold or worthless at a loss | The loss after income tax relief |
| Inheritance tax relief | Shares can pass free of inheritance tax through Business Relief | Held for 2 years and at death | 100% on the first £2.5m of business and agricultural property, 50% above |
Income Tax Relief
What you get. 30% of the amount you invest comes off your income tax bill for the year the shares are issued. It reduces the tax you owe, not your taxable income, so it can’t take your bill below zero. You need at least as much UK income tax to pay as the relief you’re claiming.
The condition. You have to hold the shares for at least 3 years from the date they’re issued, or from when the company starts trading if that’s later. Sell or give them away before then and HMRC takes the relief back.
The limit. You can claim on up to £1m a tax year, or £2m if everything above £1m goes into knowledge-intensive companies, which are companies that spend heavily on research and development or innovation. That caps the relief at £300,000 a year, or £600,000. HMRC sets out the detail in its EIS income tax relief helpsheet.
You can also treat shares bought in one tax year as if they were bought in the previous one, which is called carrying back the relief.
Example. You invest £10,000 and £3,000 comes off your tax bill. The investment has cost you £7,000.
Tax-Free Gains
What you get. No CGT on the profit when you sell the shares.
The condition. You claimed income tax relief on the shares, it hasn’t been taken back, and you’ve held them for at least 3 years.
The limit. There’s no cap on the gain.
Example. After 4 years, the £10,000 of shares is sold for £20,000. The £10,000 gain is free of CGT. At the higher rate of CGT on shares, 24% for 2026/27, the tax would have been £2,400.
Capital Gains Tax Deferral Relief
What you get. If you make a gain on any asset, such as shares or a buy-to-let property, and reinvest the gain in EIS shares, the CGT on it is put off until you sell the EIS shares. The tax is still due at that point, unless you reinvest again in new EIS shares and defer it again.
The condition. The EIS shares have to be issued between 1 year before and 3 years after the gain. You can use deferral even if you can’t claim income tax relief, for example because you’re connected to the company. HMRC sets out the conditions for each relief in its guidance on tax relief for investors.
The limit. There’s no upper limit on the gain you can defer.
Example. You sell a buy-to-let flat and make a £50,000 gain. You reinvest the £50,000 in EIS shares, and £12,000 of CGT at 24% is deferred. It comes back into charge when you sell the EIS shares, or earlier if you become non-UK resident within 3 years of the shares being issued.
EIS Loss Relief
What you get. If the company fails and the shares become worthless, or you sell them at a loss, you can set the loss against your income for that tax year or the year before, or against your capital gains.
The condition. The loss is worked out after the income tax relief you’ve already had, so you claim on your net cost, not the full amount.
The limit. The relief is the net loss multiplied by your tax rate.
Example. On the same £10,000, a total loss works out like this at each income tax rate.
| Your income tax rate | Income tax relief | Net cost | Loss relief on net cost | Your real loss |
|---|---|---|---|---|
| 45% | £3,000 | £7,000 | £3,150 | £3,850 (38.5%) |
| 40% | £3,000 | £7,000 | £2,800 | £4,200 (42%) |
| 20% | £3,000 | £7,000 | £1,400 | £5,600 (56%) |
Even at 45%, a total loss still costs £3,850 of every £10,000 invested. There’s more on weighing that against the upside in risk vs reward.
EIS Inheritance Tax Relief
What you get. EIS shares are shares in unlisted trading companies, so they usually qualify for Business Relief, which reduces the inheritance tax due on them.
The condition. You’ve held the shares for at least 2 years and still hold them when you die.
The limit. From 6 April 2026, 100% relief applies to the first £2.5m of qualifying business and agricultural property combined, and 50% relief applies above that, an effective inheritance tax rate of 20%. Any unused allowance can pass to a spouse or civil partner, so a couple can have up to £5m.
Example. £10,000 of EIS shares held inside the allowance passes on free of inheritance tax, saving £4,000 at the 40% rate.
EIS Tax Relief Example
For an additional-rate taxpayer paying 45% who holds the same £10,000 for more than 3 years, the outcomes work out like this.
| Company fails | Value stays flat | Value doubles | |
|---|---|---|---|
| Amount invested | −£10,000 | −£10,000 | −£10,000 |
| Income tax relief | +£3,000 | +£3,000 | +£3,000 |
| Sale proceeds | £0 | +£10,000 | +£20,000 |
| Loss relief at 45% | +£3,150 | £0 | £0 |
| CGT on the gain | £0 | £0 | £0 (£2,400 saved) |
| Overall result | −£3,850 | +£3,000 | +£13,000 |
Who Qualifies for EIS Tax Relief
You. You must not be connected to the company, as defined in the Income Tax Act 2007. Broadly, that means you can’t hold more than 30% of its shares or votes, together with your close family and business partners, and you can’t be a paid employee or director, with limited exceptions for directors. You also need UK income tax to set the relief against.
The company. At the time the shares are issued, it has to be a trading company that isn’t listed on a recognised stock exchange (AIM companies can qualify), with fewer than 250 full-time employees, or 500 for knowledge-intensive companies. From 6 April 2026 its gross assets can be up to £30m before the share issue and £35m after it. It usually has to raise within 7 years of its first commercial sale, or 10 for knowledge-intensive companies.
The scheme runs until 6 April 2035.
You can back EIS-qualifying companies directly, through EIS funds or through equity crowdfunding platforms. In my private investor club, UK equity deals typically qualify for SEIS or EIS. Capital at risk: these investments are illiquid and you could lose all the money you invest.
EIS Tax Relief If You Live Outside the UK
You don’t have to be UK resident to claim EIS income tax relief. What you need is UK income tax to set it against, such as tax on UK rental income or a UK salary. If you pay no UK income tax, the 30% relief is worth nothing to you.
CGT deferral works differently. It’s tied to UK residence, and if you become non-UK resident within 3 years of the shares being issued, the deferred gain comes back into charge.
If you live in the UAE, Singapore or Hong Kong and still have UK tax to pay, take advice in both countries before relying on any of the reliefs, because the tax treatment where you live can change what they’re worth.
How You Can Lose EIS Tax Relief
HMRC can take back the relief, in full or in part, if any of these happen within the 3-year holding period:
- You sell or give away the shares.
- You receive value from the company, such as a loan or a payment that isn’t a normal salary or dividend.
- The company stops meeting the qualifying rules.
- You become connected to the company.
EIS, SEIS and VCTs Compared
| Income tax relief | Annual investor limit | Minimum holding period | |
|---|---|---|---|
| EIS | 30% | £1m (£2m with knowledge-intensive companies) | 3 years |
| SEIS | 50% | £200,000 | 3 years |
| VCT | 20% from 6 April 2026 (was 30%) | £200,000 | 5 years |
The Seed Enterprise Investment Scheme (SEIS) is for younger, smaller companies than EIS. A venture capital trust (VCT) is a listed company that invests in a spread of EIS-type companies for you.
How to Claim EIS Tax Relief
Once the shares are issued, the company sends you an EIS3 certificate. You use it to claim through your Self Assessment tax return, or ask HMRC to change your PAYE tax code if you’re employed.
FAQs
How much can I claim back from EIS?
You can claim 30% of the amount you invest off your income tax bill, up to £300,000 a year on £1m of investment, or £600,000 on £2m if the excess goes into knowledge-intensive companies. You can only claim as much as the income tax you owe for that year.
What tax relief do you get on EIS?
EIS gives 30% income tax relief, no CGT on gains after 3 years, deferral of CGT on other gains you reinvest, loss relief if the company fails, and inheritance tax relief through Business Relief after 2 years.
Does EIS relief reduce my taxable income?
No. EIS income tax relief reduces the tax you owe, not your taxable income. It comes off your income tax bill after your tax has been worked out, so it doesn’t change your tax band or any allowance that depends on your income.
Can I carry back EIS relief to last year?
Yes. You can treat shares bought in one tax year as if they were bought in the previous one, as long as the previous year’s limit isn’t exceeded. You claim it through your tax return or by writing to HMRC with the EIS3 certificate.
Is EIS tax relief worth it?
It depends on the company and your tax position. The reliefs reduce what you lose if the company fails and remove tax on the gain if it succeeds, but the company still has to be worth backing. For an additional-rate taxpayer, a total loss on £10,000 costs £3,850 after the reliefs.
Next read
If you qualify as a high net worth or sophisticated investor and want to back UK companies raising under the scheme, Off Market is my private investment club, where UK equity deals typically qualify for EIS and every deal is one I’ve sourced, checked and put my own money into. Capital at risk: these investments are illiquid and you could lose all the money you invest, and tax treatment depends on your circumstances and can change.
