For shares issued in the 2026 to 2027 tax year, the Seed Enterprise Investment Scheme gives the highest income tax relief at 50% on up to £200,000, the Enterprise Investment Scheme gives 30% on up to £1 million (£2 million where the extra is in knowledge intensive companies), and venture capital trust relief has fallen from 30% to 20% on up to £200,000. VCTs offer tax free dividends and a spread of holdings in exchange for a five year minimum hold, against three years for EIS and SEIS.

What changed for VCT investors in April 2026?

Section 263(2) of the Income Tax Act 2007 (ITA 2007) sets the VCT tax reduction as a percentage of the amount subscribed. Finance Act 2026 replaced 30% with 20% with effect from 6 April 2026. HMRC’s Venture Capital Schemes Manual at VCM51030 confirms that relief is 20% for investments made on or after 6 April 2026 and 30% for earlier subscriptions, so shares already held keep the relief originally given.

The policy paper published on 26 November 2025 explains the reason: the government wanted to balance the up front relief on VCTs against EIS, which gives no dividend relief, and to push fund managers towards higher growth companies. The same measure doubled the company side limits for both EIS and VCT investee companies from 6 April 2026:

  • annual investment a company can raise: £10 million (from £5 million), or £20 million for knowledge intensive companies (from £10 million);
  • lifetime limit: £24 million (from £12 million), or £40 million for knowledge intensive companies (from £20 million);
  • gross assets: £30 million before the issue and £35 million after it (from £15 million and £16 million).

Companies registered in Northern Ireland that trade in goods or in the generation and supply of electricity stay on the old limits. None of this changes the EIS or SEIS investor relief rates.

How do the three reliefs compare side by side?

Feature EIS SEIS VCT
Income tax relief 30% (ITA 2007 s158) 50% (s257AB) 20% from 6 April 2026 (s263)
Annual subscription limit £1 million, or £2 million with at least £1 million in knowledge intensive companies £200,000 £200,000 (s262)
Minimum holding period Three years from issue, or from the start of trading if later (s256) Three years from issue (s257AC) Five years from issue (s266)
Carry back to previous tax year Yes (s158(4)) Yes (s257AB(5)) No
Dividends Taxable Taxable Exempt within the £200,000 limit
Gains on sale Exempt if relief given and not withdrawn Exempt if relief given and not withdrawn Exempt
Losses on sale Can be set against income Can be set against income Not allowable
Capital gains relief on money invested Deferral of any gain reinvested Exemption on 50% of the investment, capped at £100,000 None

All three are a tax reduction given at Step 6 of the income tax calculation in ITA 2007 s23. That means relief can only reduce your income tax bill to nil; HMRC’s guidance confirms unused relief cannot be carried forward to a later year. For the capital gains reliefs see EIS deferral relief and SEIS reinvestment relief.

How long do you have to hold, and what loses the relief?

For EIS and SEIS you must keep the whole investment for at least three years. Relief is lost if during that time you sell shares, the company stops meeting the scheme conditions, you become connected with the company, or you receive value from it. HMRC’s guidance says you must tell HMRC within 60 days of any of these events. The detail is in when EIS or SEIS relief is withdrawn. For EIS, the three years run from the start of trading where the money was raised for a trade that had not yet begun (ITA 2007 s256), which can make the real holding period longer.

The connection rules differ. For EIS you cannot claim if you or your associates hold more than 30% of the shares, voting rights or assets on a winding up, or if you are an employee or a paid director at issue, subject to the permitted payments list. For SEIS a director can claim. Associates include spouses, civil partners, parents and children, but not brothers and sisters.

For a VCT the holding period is five years. Under ITA 2007 s266, a disposal within five years that is not at arm’s length withdraws the relief; an arm’s length sale reduces or withdraws it. Becoming connected with the VCT or an investee company does not cost you the relief. There is also a trap in s264A: if you sell shares in a VCT within six months before or after subscribing for new shares in the same VCT, your subscription is treated as reduced by the sale proceeds.

What risks sit behind the tax relief?

EIS and SEIS investments are usually in a single unquoted company. SEIS companies are very small by design: HMRC’s company guidance caps them at £250,000 of SEIS money, gross assets of £350,000 before the issue, fewer than 25 full time equivalent employees and a trade no more than three years old. Your relief also depends on the company keeping to the rules for three years, which you do not control.

The cushion is share loss relief. ITA 2007 s131 lets an individual set a capital loss on EIS or SEIS shares against income of the year of the loss or the previous year, with the loss reduced by the income tax relief already given.

A VCT is a listed company approved by HMRC under ITA 2007 s274, which requires its shares to be admitted to a regulated market and at least 80% of its investments to be in qualifying holdings. You get a spread of underlying companies, but TCGA 1992 s151A makes a loss on VCT shares not allowable, so there is no loss relief if the portfolio falls in value. The dividend exemption in ITTOIA 2005 s709 also only covers shares acquired within the £200,000 limit in a tax year.

How does the relief work out in practice?

Illustration only. Priya has an income tax liability of £40,000 for 2026 to 2027. In that year she subscribes £20,000 for SEIS shares, £30,000 for EIS shares and £30,000 for new VCT shares.

  • SEIS relief: £20,000 × 50% = £10,000.
  • EIS relief: £30,000 × 30% = £9,000.
  • VCT relief: £30,000 × 20% = £6,000.

Her total relief of £25,000 is within her £40,000 liability, so it is given in full. Had she subscribed for the VCT shares in March 2026, the relief would have been £9,000 at the old 30% rate. If her liability had been only £20,000, she could carry the EIS or SEIS subscriptions back to 2025 to 2026 under s158(4) or s257AB(5), but the VCT relief can only be set against 2026 to 2027.

If the EIS company later fails and her shares become worthless, her allowable loss is £30,000 less the £9,000 relief, so £21,000, which she can claim against her income. If the VCT shares fall in value, there is nothing to claim.

How and when do you claim?

For EIS and SEIS the company first submits a compliance statement (EIS1 or SEIS1). Once HMRC is satisfied it issues the company with an EIS2 or SEIS2 and a unique investment reference, and the company then issues each investor with an EIS3 or SEIS3 certificate. You cannot claim without that certificate, and HMRC does not issue it to you. You can claim up to five years after 31 January following the tax year of the investment, through your Self Assessment return or by asking for a tax code change or a reduction in payments on account.

For a VCT you claim in your return for the year the shares were issued, or by asking HMRC for a tax code adjustment. The claim period is four years after the end of that tax year. There is more detail on each scheme in our guides to the Enterprise Investment Scheme, the Seed Enterprise Investment Scheme and venture capital trusts.

Which mistakes come up most often?

  • Assuming the old 30% VCT rate applies to subscriptions made on or after 6 April 2026.
  • Selling existing VCT shares and subscribing for new ones in the same VCT within six months, which reduces the relief under s264A.
  • Investing more than your income tax liability can absorb. EIS and SEIS can be carried back one year (see carrying back EIS and SEIS relief); VCT relief cannot.
  • Treating EIS and SEIS as interchangeable on connection. A paid director usually cannot claim EIS relief but can claim SEIS relief.
  • Counting the EIS three years from the share issue when the company had not started trading, so selling too early.
  • Expecting loss relief on VCT shares. Gains and losses on qualifying VCT disposals are outside capital gains tax altogether.
  • Claiming before receiving the EIS3 or SEIS3 certificate.

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Sources

Reviewed by Christine Anderson, Broker, Solar Protect. Last reviewed 19 October 2026. Part of Accountapedia, the Solar Protect guide to UK tax and accounting. This page is general information, not personalised advice.