The Enterprise Investment Scheme (EIS) Explained

The Enterprise Investment Scheme (EIS) gives individual investors 30% Income Tax relief on up to £1 million invested each year in qualifying trading companies, or up to £2 million where at least £1 million goes into knowledge-intensive companies. Hold the shares for at least three years and any growth is free of Capital Gains Tax. Companies can raise up to £10 million a year and £24 million over their lifetime. Income Tax relief runs until at least 6 April 2035.

The EIS is a long-standing government scheme designed to help smaller, higher-risk trading companies attract equity investment by offering their backers a generous set of tax reliefs. This guide explains the reliefs, who qualifies on each side, and where the risks sit. For the wider picture, start with our accountancy and tax guide.

What tax reliefs does the EIS give investors?

The headline relief is Income Tax relief at 30% of the amount invested. Put £20,000 into qualifying EIS shares and you can reduce your Income Tax bill by £6,000, provided you have paid at least that much tax in the year. The maximum you can claim relief on is £1 million of investment per tax year. That ceiling rises to £2 million if at least £1 million of it goes into knowledge-intensive companies, which are firms carrying out significant research, development or innovation.

There are two further reliefs that make the scheme attractive. Once you have held the shares for at least three years, any gain you make when you sell them is free of Capital Gains Tax, as long as you claimed and kept the Income Tax relief. And through CGT deferral relief you can defer a gain made on almost any other asset by reinvesting it into EIS shares, where the investment falls between one year before and three years after the gain arose. The deferred gain comes back into charge when the EIS shares are eventually sold. To see how the underlying tax works, our guide to Capital Gains Tax rates sets out the current bands.

How long must you hold the shares?

The minimum holding period is three years from the date the shares are issued, or from when the company started trading if that is later. If you sell before three years are up, HMRC will withdraw or reduce the Income Tax relief you claimed, and the CGT exemption on any gain is lost. The company also has to keep meeting the scheme rules for that same three-year window. Break the conditions on either side and the reliefs can be clawed back, so this is very much a medium-term commitment rather than a quick trade.

Which companies qualify?

The EIS is aimed at genuinely small, growing trading companies rather than established firms. To qualify when the shares are issued, a company must generally:

• have gross assets of no more than £30 million before the shares are issued, and no more than £35 million immediately afterwards
• have fewer than 250 full-time equivalent employees
• not be listed on a main stock exchange, and not be controlled by another company
• receive the investment within seven years of its first commercial sale
• use the money for a qualifying trade, to grow the business, within a set period

Knowledge-intensive companies get more generous limits: they can have up to 500 employees, raise money within ten years of their first commercial sale, and take in more over their lifetime. Certain trades are excluded altogether, including dealing in land, financial activities, property development and generating most forms of energy.

How much can a company raise?

Most companies can raise up to £10 million in any twelve-month period and up to £24 million over their lifetime across the EIS and the other venture capital schemes combined. These figures increased from 6 April 2026; before that the annual and lifetime limits were £5 million and £12 million, and the gross assets test was lower too. Knowledge-intensive companies can raise up to £20 million a year and £40 million over their lifetime. A narrow category of specified Northern Ireland companies keeps the earlier, lower limits. The money must be spent on growing the trade, not on buying another business or repaying loans.

What are the risks?

The tax reliefs exist precisely because these are high-risk investments. EIS companies are young, unquoted and often loss-making, and many will fail. Shares can be hard to sell, values can fall to nothing, and the reliefs only soften the blow rather than removing the risk. The reliefs can also be withdrawn if the company or the investor breaks the rules within three years. EIS should be treated as one part of a diversified portfolio, and specialist financial advice is sensible before committing. If you also run a company, our comparison of sole trader versus limited company may help frame the decision.

How do you claim the relief?

Investors cannot claim until the company sends them form EIS3, the compliance certificate confirming the shares qualify. The company obtains this from HMRC after it has been trading for the required period. Armed with the certificate, you claim Income Tax relief through your Self Assessment tax return, or by asking HMRC to adjust your tax code, and you can carry relief back to the previous tax year if that suits you better. Keep every EIS3 safely, because HMRC can ask to see them. The EIS also has a smaller sibling for very early-stage firms, explained in our guide to the Seed Enterprise Investment Scheme.

How long will the EIS last?

The scheme carried a sunset clause limiting Income Tax relief to shares issued before a fixed date. That date has been extended to 6 April 2035, so investors and companies can rely on the reliefs continuing well into the next decade. As with any tax measure, the detail can change at future Budgets, so it is worth confirming the rules apply to your specific situation before you invest or raise money.

EIS claims and company compliance are areas HMRC does review, and an enquiry into your return can run up professional fees quickly. Solar Protect tax investigation insurance covers up to £100,000 of your accountant’s fees with no excess, so you can defend your position without the cost hanging over you. Get a quote.

Reviewed by Matthew Bartlett, Director, Solar Protect. This guide is general information, not personalised tax or financial advice. Figures are correct for the 2025/26 and 2026/27 UK tax years at the time of writing.