What is EIS? A plain-English guide for investors

The Enterprise Investment Scheme (EIS) is a UK government scheme that encourages individuals to invest in smaller, higher-risk trading companies by offering a set of tax reliefs on new shares. The headline relief is 30% income tax relief on up to £1 million of investment a tax year, alongside capital gains exemption, capital gains deferral and loss relief.

This guide is one part of a set covering the whole scheme. The EIS hub lists every guide, from eligibility to claiming.

EIS does not make an early-stage company safer. It changes the arithmetic: how much of the investment the Treasury effectively funds, what a loss ends up costing, and what a gain is worth after tax. Everything below follows HMRC's published guidance, which is linked throughout and listed at the end.

What EIS is for

Smaller trading companies struggle to raise equity because the risk of total loss is genuine and the shares cannot easily be sold. EIS is one of four UK venture capital schemes - alongside SEIS, VCTs and Social Investment Tax Relief - designed to bridge that gap by moving part of the downside onto the state. It has been running since 1994 and applies to new, full-risk ordinary shares paid for in cash, not to shares bought from an existing shareholder.

The four EIS reliefs

Income tax relief can also be carried back to the previous tax year, subject to that year's limit - explained in EIS carry back. EIS shares held for two years may also qualify for Business Relief from inheritance tax, though that depends on the company's activities rather than on its EIS status, and the inheritance tax rules are changing from April 2026. The full conditions for the reliefs are in HMRC's guidance on tax relief for investors using venture capital schemes.

Who can invest under EIS

• You must be an individual, not a company, and normally UK tax resident or otherwise have a UK income tax liability to set the relief against.
• You must not be connected with the company: broadly, not an employee or paid director at the time of issue, and not holding more than 30% of its shares, voting rights or assets.
• The shares must be new, full-risk ordinary shares, subscribed for in cash and fully paid up when issued.
• There must be no arrangement that protects your capital, guarantees a return or lets you exit early.

The connection rules run for two years before and three years after the share issue, and are set out in full in who can invest in EIS.

Which companies qualify

The company must be carrying on a qualifying trade, must not be listed on a recognised stock exchange, and must meet limits on its age, size and the amount it has raised. From 6 April 2026 the company limits increased: a qualifying company can raise up to £10 million a year and £24 million over its lifetime, rising to £20 million and £40 million for knowledge-intensive companies, with gross assets of no more than £30 million immediately before the share issue.

The money raised must be used for a qualifying business activity, and generally within two years. Relief depends on the company keeping its qualifying status for three years after the investment, which is outside the investor's control. The excluded trades and the age limits are set out in EIS qualifying companies.

How much you can invest

Relief reduces your income tax liability to nil but no further. It is not a repayment of tax you never paid. There is no statutory minimum investment, though individual companies and platforms set their own.

The three-year holding period

EIS shares must be held for at least three years from the date of issue, or from the date the company starts trading if that is later. Selling earlier, or the company losing its qualifying status within that window, causes income tax relief to be withdrawn and removes the capital gains exemption. The EIS three-year holding period covers what counts as a disposal and how withdrawal is calculated.

The risks

• Early-stage companies fail. Total loss of capital is a realistic outcome, and loss relief reduces that cost rather than removing it.
• The shares are illiquid. There is usually no market, and a return depends on a trade sale, a secondary sale or a listing.
• Relief depends on the company. If it breaches the EIS conditions in the three years after your investment, your relief is withdrawn even though you did nothing wrong.
• Relief depends on you. It is capped by your own income tax liability and lost if you become connected with the company.
• Rules change. Scheme limits and rates are set by Parliament and have changed several times.

How the process works

The detail of each step is in advance assurance and the EIS3 certificate and how to claim EIS relief.

EIS and SEIS together

SEIS is the seed-stage scheme: 50% income tax relief, a £200,000 annual investor limit and much smaller, younger companies. EIS is the follow-on: a lower rate of relief, a far higher limit, and companies slightly further along. Many venture-built companies raise under SEIS first and EIS later, and a single round can be part SEIS, part EIS. The comparison is set out in SEIS vs EIS and the SEIS scheme in full at the SEIS hub.

Common questions about EIS

How much tax relief do you get on EIS?

30% of the amount you subscribe for qualifying shares, set against your income tax liability. A £20,000 investment gives £6,000 of income tax relief, assuming you owe at least that much tax in the year you claim.

What is the maximum EIS investment per year?

£1 million a tax year qualifies for income tax relief, rising to £2 million where everything above £1 million goes into knowledge-intensive companies. There is no limit on how much you can invest without relief.

How long must EIS shares be held?

Three years from the date of issue, or from the date trading starts if later. Disposing of them earlier triggers withdrawal of the income tax relief.

What is the difference between EIS and SEIS?

SEIS gives 50% relief on up to £200,000 a year into very early companies, generally under three years old. EIS gives 30% on up to £1 million into slightly larger, older companies. SEIS carries more risk and more relief.

Can you lose EIS tax relief?

Yes. Relief is withdrawn if you sell within three years, become connected with the company, receive value from it, or the company stops meeting the EIS conditions during the three-year period.

What happens if an EIS company fails?

You keep the income tax relief already given, provided the failure was genuine and not a disposal by you, and you can claim loss relief on the net amount at risk against income or capital gains. EIS loss relief works through the numbers.

Is EIS worth it?

That depends entirely on your tax position, your tolerance for total loss and your ability to hold illiquid shares for years. The reliefs improve the after-tax outcome of a portfolio of early-stage investments; they do not make any individual company a good investment. Take independent advice.

Do you need advance assurance to claim EIS?

No. Advance assurance is HMRC's non-binding view before the raise, not a requirement. What you need to claim is the EIS3 certificate the company issues after four months of trading.