EIS: The Complete Guide for UK Companies (2025/26)

The Enterprise Investment Scheme is the UK's primary tax relief programme for scaling companies raising investment. Where SEIS targets the earliest stage with a £250,000 cap, EIS lets you raise up to £5 million per year and £12 million over the life of the company. For investors, EIS offers 30% income tax relief, CGT deferral, CGT exemption after 3 years, and loss relief.

If you've outgrown SEIS or need to raise a larger round, EIS is the next step. This guide covers everything: eligibility, the application process, investor tax reliefs, and the specific rules you need to follow.

Key Takeaways

• EIS gives investors 30% income tax relief on investments up to £1 million per tax year (£2 million for Knowledge-Intensive Companies)
• Your company can raise up to £5 million per year and £12 million lifetime under EIS
• Investors can defer Capital Gains Tax by reinvesting gains into EIS shares
• Gains on EIS shares held for 3+ years are completely exempt from CGT
• Company must be less than 7 years old (10 years for Knowledge-Intensive Companies), with gross assets under £15 million and fewer than 250 employees
• EIS has been extended to 2035, removing previous uncertainty about the scheme's future

What Is EIS and How Does It Differ from SEIS?

The Enterprise Investment Scheme has been running since 1994 and is the more established of the two schemes. While SEIS targets seed-stage companies with very small raises, EIS is designed for companies that have progressed beyond the earliest stage and need larger amounts of capital.

The key differences at a glance:

For a detailed comparison of when to use each scheme, see our SEIS vs EIS guide.

Investor Tax Reliefs

30% Income Tax Relief

An investor who subscribes for new shares in an EIS-qualifying company can deduct 30% of the amount invested from their income tax bill. The maximum qualifying investment is £1 million per tax year for standard companies, giving up to £300,000 of relief.

For investments in Knowledge-Intensive Companies (KICs), the limit doubles to £2 million per tax year, potentially delivering £600,000 of income tax relief.

The relief can be claimed for the tax year in which the shares are issued, or carried back to the previous tax year. The investor must have sufficient income tax liability to offset -- EIS relief cannot create a refund beyond tax already paid.

CGT Deferral Relief

This is one of EIS's most powerful features. An investor who has realised a capital gain on any asset can defer that gain by reinvesting the proceeds into EIS-qualifying shares. The gain is deferred until the EIS shares are disposed of.

Key details:

• The investment must be made 1 year before to 3 years after the gain arises
• There is no upper limit on the amount of gain that can be deferred
• The deferral applies to gains from any asset, not just shares
• If the investor dies while holding the EIS shares, the deferred gain is eliminated entirely

This makes EIS particularly attractive to investors who have recently sold a business or property and face a significant CGT bill.

CGT Exemption

Any gain on the disposal of EIS shares is completely exempt from CGT, provided:

• The shares have been held for at least 3 years from the date of issue (or the date the company began trading, if later)
• The 30% income tax relief was claimed and has not been withdrawn

Combined with the deferral relief, an investor can defer a gain from a previous investment, reinvest into EIS shares, and if those shares are held for 3+ years, the new gain is tax-free. The deferred gain from the original asset will crystallise when the EIS shares are sold, but the growth on the EIS investment is entirely exempt.

Loss Relief

If the company fails and the EIS shares become worthless or are sold at a loss, the investor can claim loss relief. The allowable loss is the amount invested minus the income tax relief received.

Example: An investor puts £100,000 into your company. They claimed £30,000 income tax relief. The company fails. The allowable loss is £70,000. A 45% additional-rate taxpayer can offset this against income, recovering £31,500. Total recovered from a £100,000 investment: £61,500 (£30,000 income tax relief + £31,500 loss relief).

For a higher-rate taxpayer (40%), total recovery would be £58,000. This significant downside protection makes EIS a compelling proposition even for cautious investors.

Company Eligibility Criteria

Company Age

Your company must meet one of these conditions:

• It made its first commercial sale less than 7 years ago, or
• It is less than 7 years since the end of the accounting period in which the first commercial sale was made

For Knowledge-Intensive Companies, this extends to 10 years.

If your company is older than 7 years but has never received previous SEIS/EIS investment, it will not qualify. However, companies that received EIS investment within their first 7 years can continue to receive EIS investment beyond that point, provided the total doesn't exceed the lifetime limit.

Gross Assets Test

Your company's gross assets must be:

• Less than £15 million immediately before the share issue
• Not more than £16 million immediately after

Gross assets means total assets before deducting liabilities.

Employee Limit

Your company must have fewer than 250 full-time equivalent employees at the time the shares are issued. As with SEIS, part-time employees count proportionally, and working directors count as employees.

Qualifying Trade

The qualifying trade rules for EIS are the same as for SEIS. Your company must carry on (or be preparing to carry on) a qualifying trade. The same list of excluded activities applies:

• Dealing in land, commodities, futures, shares, or securities
• Banking, insurance, money-lending, debt factoring, or hire-purchase financing
• Leasing or receiving royalties or licence fees (exceptions apply for IP you created)
• Providing legal or accountancy services
• Property development
• Farming, market gardening, forestry
• Operating hotels, guest houses, or nursing homes (exceptions for KICs)
• Energy generation receiving subsidised tariffs
• Shipbuilding

Most technology companies, professional services firms (excluding legal/accountancy), manufacturers, and consumer businesses will qualify.

UK Permanent Establishment

The company must have a permanent establishment in the UK. The business doesn't need to operate exclusively in the UK, but there must be a substantive presence here.

Independence

The company must not be controlled by another company. It cannot be a subsidiary or under the control of another entity. It must be a genuinely independent business.

Not Listed

The company must not be quoted on a recognised stock exchange. However, companies listed on AIM (the Alternative Investment Market) do qualify for EIS. This is a key difference from SEIS, where AIM-listed companies are excluded.

Investment Limits

Annual Limit

Your company can receive a maximum of £5 million in total from all tax-advantaged venture capital schemes (SEIS, EIS, and VCTs) in any 12-month rolling period.

Lifetime Limit

The total amount your company can raise under all tax-advantaged venture capital schemes is £12 million over its lifetime. This includes SEIS and EIS combined.

Per Investor

Each individual can invest up to £1 million per tax year across all their EIS investments. For Knowledge-Intensive Companies, this doubles to £2 million per tax year.

Knowledge-Intensive Companies (KICs)

Knowledge-Intensive Companies get more generous treatment under EIS. A company qualifies as a KIC if it meets specific criteria around innovation and research spending.

KIC Criteria

Your company qualifies as a KIC if it meets one of these innovation conditions:

Innovation Condition A:

• The company is carrying out work to create intellectual property, and
• At the time of the share issue, it is reasonable to assume that the creation of the IP will form the greater part of the company's business within 10 years

Innovation Condition B:

• The company has been carrying on qualifying research for 3 years, or
• At least 15% of operating costs in each of the previous 3 years were spent on R&D, or
• At least 10% of operating costs were spent on R&D and the company has created or is creating IP

Plus at least one of these:

• At least 20% of employees have a relevant Master's degree or higher
• The company's expenditure on R&D or innovation is at least 15% of operating costs

KIC Benefits

Practical Impact

If you're a deep tech startup, biotech, AI research company, or university spin-out, you likely qualify as a KIC. The extended age limit and doubled investor limit can be significant for companies with longer development timescales.

The Application Process

Step 1: Check Eligibility

Before applying, work through the eligibility criteria above. Pay particular attention to:

• Your company's age and when first commercial sale occurred
• Gross assets position
• Employee headcount
• Whether your trade is on the excluded list
• Whether any proposed investors are connected persons

Step 2: Apply for Advance Assurance

While not legally required, EIS Advance Assurance is effectively essential. Submit your application to HMRC's Small Company Enterprise Centre (SCEC).

You'll need:

• Company details (name, number, incorporation date, UTR)
• Description of the trade and business model
• Financial projections and how the investment will be used
• Details of the proposed share issue (amount, price, share class)
• Copy of your Articles of Association
• Details of all shareholders, directors, and their relationships
• Evidence of KIC status if applicable

HMRC typically responds within 6 to 8 weeks. They may ask follow-up questions, particularly around qualifying trade and connected person issues.

Step 3: Issue Shares

Once you have Advance Assurance and your investors are ready:

• Issue new ordinary shares (no preferential rights to dividends or assets)
• Shares must be paid for in cash and fully paid up
• File SH01 with Companies House within one month
• Update your share register

Step 4: File the EIS1 Compliance Statement

After the shares are issued and the company has been trading for at least 4 months, submit the EIS1 compliance statement to HMRC via their online service.

This confirms that all qualifying conditions were met when shares were issued.

Step 5: Issue EIS3 Certificates

HMRC will issue EIS3 certificates for each investor. Forward these promptly so investors can claim their tax relief on their Self Assessment return.

Connected Persons and the 30% Test

This is where many companies trip up. An investor is a connected person if they (together with their associates) hold or are entitled to acquire more than 30% of:

• The ordinary share capital, or
• The voting rights, or
• The rights to assets on winding up, or
• The rights to income distributions

Associates include spouses, civil partners, parents, grandparents, children, grandchildren, and business partners.

A connected person cannot claim EIS income tax relief. However, they can still claim CGT deferral relief on their investment.

Practical Implications

• A founder who holds 40% of the company cannot claim EIS relief on additional investment
• If two co-founders each hold 20%, they can both claim EIS relief (assuming no other associates hold shares)
• An investor's spouse's holdings count towards the 30% test
• Employee investors need to check their holdings carefully

Directors and Employees

Directors and employees can claim EIS relief, provided they are not connected persons (i.e., don't breach the 30% test). This is different from some other schemes where directors are automatically excluded.

However, a director or employee must not have been connected with the company before the share issue (other than through their role as director/employee and any shares acquired under SEIS/EIS).

EIS and Existing Shareholders

Existing shareholders can participate in an EIS round, but they must not be connected persons. The shares they subscribe for must be new ordinary shares (not a transfer of existing shares).

If an existing shareholder's total holding (existing shares plus new EIS shares) would exceed 30%, they cannot claim EIS relief on the new shares. Plan your funding round cap table carefully.

EIS Extension to 2035

The EIS sunset clause has been removed. The scheme was originally set to expire in April 2025, but the government extended it to April 2035 in the 2023 Autumn Statement. This provides long-term certainty for both companies and investors.

This extension was widely welcomed by the UK startup ecosystem. The previous uncertainty around the sunset clause was making it harder for companies to plan multi-year fundraising strategies.

Record-Keeping Requirements

Maintaining proper records is not optional. HMRC can enquire into EIS claims at any time, and if your records are inadequate, relief can be withdrawn from your investors.

You must keep:

• Share register: Up-to-date record of all shareholders, holdings, and transaction dates
• Board minutes: Records of share allotment decisions
• Financial statements: Accurate accounts showing gross assets, employee headcount, and trade classification
• Investor correspondence: All Advance Assurance applications, HMRC correspondence, and compliance filings
• Expenditure records: How EIS funds were spent and on what

Records must be kept for at least 6 years after the end of the accounting period in which the shares were issued.

How AccountsOS Helps with EIS

EIS compliance depends on clean, accurate financial records. Gross assets tests, employee headcount verification, qualifying trade documentation -- all of this requires your books to be in order.

AccountsOS maintains your records in real time, so when HMRC or investors ask questions, you have answers immediately. Track your qualifying expenditure, monitor your gross assets position, and keep your financial statements audit-ready. Use our SEIS/EIS eligibility checker to confirm your company qualifies, or try the tax relief calculator to model investor returns.

Frequently Asked Questions

Can my company raise under both SEIS and EIS?

Yes. Most startups raise under SEIS first (up to £250,000) and then progress to EIS for larger rounds. The total raised under both schemes counts towards the £12 million lifetime limit. You must spend at least 70% of SEIS funds on qualifying activity before issuing EIS shares. See our SEIS vs EIS comparison for guidance on sequencing.

What happens if a condition is breached after shares are issued?

If any qualifying condition is breached within 3 years of the share issue (for example, the company begins a non-qualifying trade or the investor becomes a connected person), income tax relief is withdrawn. Investors will need to repay the relief through Self Assessment. CGT exemption and deferral relief are also affected.

Can overseas investors claim EIS relief?

EIS income tax relief can only be claimed against UK income tax. An overseas investor with no UK tax liability cannot benefit from the income tax relief. However, they can still invest -- they just won't get the tax advantages. CGT deferral is also only available where the investor has UK CGT liability.

How does EIS interact with R&D tax credits?

They operate independently. Your company can claim R&D tax credits on qualifying expenditure and offer EIS shares to investors in the same period. However, you cannot use EIS investment specifically to fund activities that generate R&D tax credit claims in a way that creates a double benefit. In practice, this is rarely an issue for companies with genuine R&D activity.

Is there a minimum investment amount for EIS?

There is no statutory minimum investment amount. However, the administrative burden of filing compliance statements means most companies set practical minimums of £5,000 to £25,000 per investor. Some angel networks and investment platforms set their own minimums.