Enterprise Investment Scheme (EIS): Complete UK Guide for Companies and Investors

Last updated: April 2026

The Enterprise Investment Scheme is one of the most generous tax relief programmes in the world. It exists to channel private investment into small, high-growth UK companies that would otherwise struggle to raise capital. For investors, it significantly reduces the downside risk of backing early-stage businesses. For companies, it makes their fundraising proposition far more attractive.

This guide covers everything both sides need to know: qualifying conditions, the four distinct tax reliefs available, the application process, common pitfalls, and detailed worked examples showing how the numbers play out in practice.

What Is the Enterprise Investment Scheme?

EIS was introduced in 1994 by the UK government to encourage investment in smaller, higher-risk trading companies. The core principle is straightforward: the government shares the risk with private investors by offering substantial tax reliefs in exchange for backing companies that create jobs and drive innovation.

The scheme was extended in the 2023 Autumn Statement and is now confirmed to run until 6 April 2035, giving both companies and investors long-term certainty.

How EIS Works in Practice

1. A qualifying company applies to HMRC for advance assurance that it meets EIS requirements
2. The company issues new ordinary shares to investors
3. After the shares have been held for at least three years, the company applies for and receives EIS3 compliance certificates
4. Investors use the EIS3 certificates to claim tax relief through their Self Assessment tax return

Key Benefits at a Glance

Who Benefits from EIS?

For investors, EIS dramatically changes the risk profile of early-stage investment. A higher-rate taxpayer investing £100,000 receives £30,000 in income tax relief upfront. If the company succeeds, any gains are completely tax-free. If it fails, loss relief further reduces the effective amount at risk. The downside protection is substantial.

For companies, EIS is a powerful fundraising tool. Investors are far more willing to back a company when HMRC is effectively subsidising 30% of their investment. Many angel investors and EIS-focused funds will only invest in companies with EIS advance assurance in place.

EIS Tax Reliefs for Investors

EIS provides four separate tax reliefs. Each works independently, and an investor can benefit from all four on the same investment. Understanding each one is essential for calculating the true cost and potential return of an EIS investment.

1. Income Tax Relief: 30% of the Investment

The headline relief is a reduction in your income tax bill equal to 30% of the amount you invest in qualifying EIS shares. This is a tax reduction, not a deduction from taxable income, so it directly reduces the amount of tax you owe pound for pound.

Key rules:

• Maximum qualifying investment: £1,000,000 per tax year (£2,000,000 if at least £1,000,000 is invested in knowledge-intensive companies)
• The relief is 30% of the investment amount
• Maximum tax relief in a single year: £300,000 (or £600,000 with KIC investments)
• You must have sufficient income tax liability to set the relief against. You cannot create a tax refund beyond the tax you owe
• The relief is clawed back if shares are disposed of within three years or the company ceases to qualify

Carry-back provision: You can elect to treat all or part of the investment as if it were made in the previous tax year. This is valuable when you have a higher tax liability in the prior year, or when you want to spread the relief across two years.

For example, if you invest £200,000 in June 2026 (the 2026/27 tax year), you could elect to carry back up to £200,000 to the 2025/26 tax year and claim 30% relief against that year's income tax instead.

Worked example: Income tax relief

Sarah is a company director with a total income of £180,000 in the 2025/26 tax year. Her income tax liability (before EIS) is approximately £55,000. She invests £100,000 in an EIS-qualifying company.

Sarah's £100,000 investment effectively costs her £70,000 after the income tax relief. She has sufficient tax liability to absorb the full £30,000 relief.

2. Capital Gains Tax Exemption

If you hold EIS shares for at least three years and the company remains qualifying throughout, any gain you make when you eventually sell those shares is completely exempt from capital gains tax.

This is a full exemption, not a reduced rate. It applies regardless of how large the gain is.

Key rules:

• Shares must be held for a minimum of three years from the date of issue
• The company must remain qualifying throughout the holding period
• The investor must not be connected to the company (see connection rules below)
• Income tax relief must have been claimed and not withdrawn on those shares

Worked example: CGT exemption

James invested £50,000 in an EIS company in 2023. The income tax relief of £15,000 reduced his effective cost to £35,000. Four years later, in 2027, the company is acquired and James receives £200,000 for his shares.

Without EIS, James would have paid £30,000 in CGT on the £150,000 gain (at the 20% rate for higher-rate taxpayers). With EIS, he keeps the entire £200,000 proceeds. Combined with the initial income tax relief, EIS saved him £45,000 in tax on this single investment.

3. Capital Gains Tax Deferral

This relief allows you to defer a capital gain from any asset by reinvesting the gain into EIS-qualifying shares. The deferred gain becomes payable only when you dispose of the EIS shares (unless the EIS CGT exemption applies, in which case the deferred gain is written off entirely in certain circumstances).

Key rules:

• The gain being deferred can be from any asset, not just shares
• The EIS investment must be made within the period starting one year before and ending three years after the disposal that created the gain
• There is no upper limit on the amount of gain you can defer
• The deferred gain crystallises when the EIS shares are disposed of
• If the EIS shares qualify for the CGT exemption (held 3+ years), the deferred gain remains deferred until another triggering event occurs. It does not disappear.
• Deferral relief is available even if you are connected to the company (unlike income tax relief)

Important distinction: CGT deferral does not eliminate the original gain permanently. It postpones the tax liability. However, by the time the deferred gain crystallises, you may be in a lower tax bracket, have available losses, or benefit from the annual CGT exemption.

Worked example: CGT deferral

Rachel sold a buy-to-let property in March 2026 for a gain of £250,000. In September 2026 she invested £250,000 into an EIS-qualifying company.

Rachel now owes no CGT on the property gain. The £60,000 liability is deferred until she disposes of the EIS shares. If she holds the EIS shares for three years and they increase in value, the gain on the EIS shares themselves is exempt from CGT. The deferred gain of £60,000 remains payable when she eventually disposes of the EIS shares or another triggering event occurs.

She also receives 30% income tax relief (£75,000) on the EIS investment, further reducing her effective outlay.

4. Loss Relief

If an EIS company fails or the shares become worthless, you can claim loss relief. This allows you to offset the loss (after deducting the income tax relief already received) against either your income tax or your capital gains tax liability.

This is the safety net that makes EIS particularly attractive: if things go wrong, HMRC absorbs a significant portion of the loss.

Key rules:

• The allowable loss is the amount invested minus the income tax relief received
• You can offset the loss against income tax in the year of disposal or the previous year
• Alternatively, you can offset against capital gains in the usual way
• If offset against income tax, relief is at your marginal rate (up to 45%)

Worked example: Loss relief for a higher-rate taxpayer

David invested £100,000 in an EIS company and received £30,000 income tax relief. Three years later, the company enters liquidation and the shares become worthless.

Despite the company failing completely and the shares becoming worthless, David's actual financial loss is £38,500 out of his original £100,000 investment. The government effectively shared 61.5% of the risk through the combination of upfront income tax relief and loss relief.

For a basic-rate taxpayer, the loss relief would be at 20%, giving a total relief of £44,000 (£30,000 + £14,000) and an actual loss of £56,000. Still substantial protection, but the scheme is most tax-efficient for higher and additional-rate taxpayers.

Combined Tax Relief Summary

EIS Qualifying Conditions for Companies

Not every company can offer EIS shares. HMRC sets strict qualifying conditions to ensure the scheme targets genuinely high-risk, growth-oriented businesses rather than established, low-risk operations or tax avoidance vehicles.

Company Requirements

To qualify for EIS, a company must meet all of the following conditions at the time the shares are issued and, for most conditions, throughout the three-year relevant period.

The Risk-to-Capital Condition

Since 2018, HMRC applies a "risk-to-capital" test to ensure EIS investments involve genuine entrepreneurial risk. The investment must have:

1. A significant risk that the investor could lose more capital than they receive in tax relief over the investment's life
2. A genuine growth and development objective for the company receiving the investment

This was introduced to shut down low-risk schemes where companies essentially held investments in secure assets. Property-backed schemes and asset-leasing structures were common targets.

In practice, most genuine startups and growth companies pass this test easily. It primarily affects structured schemes that were designed to provide tax relief with minimal genuine business risk.

The Trading Requirement

The company must carry on a "qualifying trade." This does not mean the company must be profitable. It means the company must be genuinely trading or preparing to trade, and its trade must not fall into the list of excluded activities.

A company that is still in its pre-revenue phase can qualify, provided it is preparing to trade and the investment is being used to develop that trade. However, there must be a credible plan to begin trading within a reasonable timeframe.

Connection Rules

An investor cannot claim EIS income tax relief if they are "connected" to the company. An investor is connected if they:

• Are an employee or director of the company (with exceptions for "business angel" directors who were not connected before investing)
• Control or own more than 30% of the company's ordinary share capital, voting rights, or assets on winding up
• Are an associate of a person who meets either of the above conditions (associates include business partners and certain relatives)

The 30% test is the one most commonly encountered. It means EIS is generally not suitable for founders who already own a significant stake. However, a founder who brings in a new investor and dilutes below 30% could enable that new investor to claim EIS relief, provided all other conditions are met.

Important exception for directors: An investor can become a paid director of the company after investing and still retain EIS relief, provided they were not previously connected to the company. This is the "business angel" exception and is widely used by angel investors who want board seats.

Use of Funds

The money raised through EIS must be used for the purposes of the qualifying trade within two years of the share issue (or within two years of the company starting to trade, if later). Acceptable uses include:

• Hiring staff
• Product development
• Marketing and sales
• Equipment and technology
• Working capital for the trade

The funds cannot be used for:

• Repaying existing loans or debts (unless the loan was itself used for qualifying purposes)
• Acquiring shares in another company (unless it becomes a qualifying subsidiary)
• Investing in financial assets

EIS vs SEIS: Key Differences

The Seed Enterprise Investment Scheme (SEIS) is the younger sibling of EIS, designed for very early-stage companies. Many companies start with SEIS and graduate to EIS as they grow. Understanding the differences helps companies plan their fundraising strategy and helps investors choose the right scheme.

The SEIS-to-EIS Graduation Path

A common strategy for UK startups is to raise an initial SEIS round (up to £250,000) in the first two to three years, then move to EIS for subsequent rounds. This works because:

1. SEIS offers more generous relief (50% vs 30%), making very early-stage investments more attractive
2. By the time a company exhausts its SEIS allowance, it has a track record that makes it more attractive for larger EIS investments
3. The company can raise significantly more through EIS (up to £5m per year vs £250k lifetime under SEIS)

Example timeline:

The company raises £5,750,000 over six years, with every pound qualifying for either SEIS or EIS tax relief for investors.

You can check whether your company qualifies for either scheme using our SEIS/EIS eligibility checker, or estimate the investor tax savings with the SEIS/EIS tax relief calculator.

How to Get EIS Advance Assurance

Advance assurance is an optional but strongly recommended step. It is a written confirmation from HMRC that your company meets the EIS qualifying conditions, issued before you raise the investment. While not legally binding, it gives investors confidence that their tax relief will be honoured.

Why Advance Assurance Matters

Most experienced angel investors and EIS funds will not invest without advance assurance in place. The reason is simple: if the company turns out not to qualify, the investor loses all their tax relief. Advance assurance removes this uncertainty.

Without advance assurance, the company issues shares, the investor claims relief, and then finds out months or years later (potentially during an HMRC enquiry) that the company did not qualify. At that point, the investor must repay the relief plus interest.

Step-by-Step Process

Step 1: Check eligibility

Before applying, confirm your company meets all the qualifying conditions listed above. Pay particular attention to:

• Whether your trade is excluded
• Whether your company is within the age, employee, and asset limits
• Whether any existing investors would be "connected"

Step 2: Prepare the application

Apply using HMRC form EIS/AA (available online). You will need to provide:

• Company name, UTR, and Companies House number
• A description of the company's trade and activities
• Details of the proposed share issue (number of shares, price, total amount to be raised)
• Details of all existing shareholders and their holdings
• Details of the proposed investors (if known)
• A business plan or summary explaining how the funds will be used
• Details of any previous SEIS, EIS, VCT, or other risk finance investments
• Financial statements (if available)

Step 3: Submit the application

Send the completed form and supporting documents to HMRC's Small Company Enterprise Centre (SCEC). This can be done by post or, in some cases, electronically.

Step 4: Wait for HMRC's response

HMRC typically responds within 4 to 6 weeks, though this can vary. During busy periods (particularly around the end of the tax year), it may take longer.

HMRC may come back with questions or request additional information. Respond promptly to avoid delays.

Step 5: Receive advance assurance (or rejection)

If HMRC is satisfied, they will issue a letter confirming that, based on the information provided, the company appears to meet the EIS conditions. This is not a guarantee, as it is based on the facts presented and assumes those facts do not change.

If HMRC rejects the application, they will explain why. Common reasons include the company carrying on an excluded trade, exceeding the age or asset limits, or failing the risk-to-capital condition.

After the Share Issue

Once the shares have been issued and held for at least four months (or the company has been trading for at least four months, if later), the company applies for EIS compliance certificates by submitting form EIS1 to HMRC. HMRC then issues EIS3 certificates to the company, which passes them on to investors.

The EIS3 certificate is what the investor needs to claim tax relief on their Self Assessment return.

Timeline Summary

How Investors Claim EIS Tax Relief

Once you have received your EIS3 certificate from the company, claiming the relief is straightforward.

Step 1: Receive Your EIS3 Certificate

The company is responsible for applying to HMRC for compliance certificates (form EIS1) and distributing the resulting EIS3 certificates to investors. This cannot happen until at least four months after the share issue.

The EIS3 certificate contains all the information you need to claim: the company name, the date of share issue, the amount subscribed, and a unique certificate reference.

Step 2: Claim on Your Self Assessment Tax Return

Include the EIS investment details in the "Other tax reliefs and tax credits" section of your Self Assessment return. You will need:

• The amount invested
• The date the shares were issued
• The unique reference from the EIS3 certificate
• Whether you are claiming carry-back to the previous year

If you have already submitted your return for the relevant tax year, you can amend it (within 12 months of the filing deadline) or write to HMRC to claim the relief separately.

Step 3: Carry-Back (Optional)

If you want to claim the relief against the previous tax year's income tax, you must make a carry-back election. This can be done on your Self Assessment return or by writing to HMRC. The entire investment amount can be carried back, not just a portion, though you can choose to split it between the two years.

Example: You invest £200,000 in September 2026 (2026/27 tax year). You could:

• Claim all £60,000 relief against 2026/27 income tax
• Carry back all £200,000 and claim £60,000 against 2025/26 income tax
• Split: claim £100,000 (£30,000 relief) in each year

Step 4: Receive the Tax Reduction

The relief reduces your income tax bill. If you are due a refund (because you have already paid more tax through PAYE or payments on account than you owe after the relief), HMRC will issue a repayment.

Timing Considerations

There can be a significant delay between making the investment and receiving the tax relief. The company cannot apply for EIS3 certificates until at least four months after the share issue, and HMRC processing adds further time. In total, investors often wait 6 to 12 months from investment to receiving the EIS3 certificate.

This is worth factoring into cash flow planning. The income tax relief is retrospective, so you will receive it, but not instantly.

The 3-Year Holding Period: Rules and Risks

The three-year holding period is the cornerstone of EIS. Almost all the tax benefits depend on maintaining the qualifying conditions throughout this period. Understanding what can go wrong is critical for both investors and companies.

What the Three-Year Period Means

The three-year period runs from the date the shares were issued to the investor. During this time:

• The investor must continue to hold the shares
• The company must continue to qualify for EIS
• The investor must not become connected to the company (e.g., by acquiring more shares that take them above 30%)

If any of these conditions are breached, the income tax relief is clawed back, and the CGT exemption and deferral are lost.

What Counts as a Disposal

A disposal within the three-year period triggers a claw-back of income tax relief. Disposals include:

• Selling the shares
• Giving the shares away
• The company being wound up (though if the company fails and the winding up is genuine, loss relief applies instead)
• Certain share reorganisations or exchanges

A disposal does not include:

• A transfer of shares between spouses or civil partners (though the receiving spouse inherits the holding period requirement)
• Shares becoming negligible in value (which triggers loss relief instead)

What Happens If Conditions Are Breached

If the investor disposes of shares within three years:

• Income tax relief is clawed back in full (or proportionally, if only some shares are disposed of)
• Any deferred CGT becomes payable
• CGT exemption is lost on the disposed shares

If the company ceases to qualify within three years:

• All investors' income tax relief is clawed back
• The company loses its EIS status
• This can happen if the company starts an excluded trade, exceeds the employee or asset limits, or is taken over by a non-qualifying company

If the company is wound up within three years:

• If the winding up is for genuine commercial reasons and not part of a tax avoidance scheme, the investor can claim loss relief and the income tax relief is not necessarily clawed back
• HMRC will scrutinise the circumstances carefully

Practical Implications for Companies

Companies with EIS shareholders must be careful about corporate actions during the three-year period. Mergers, acquisitions, changes of trade, and significant restructurings can all jeopardise EIS status. Before making any significant corporate changes, check with a tax adviser whether EIS qualifying status will be affected.

Common triggers that companies should watch for:

• Adding a new trade that falls within the excluded activities list
• A takeover or merger (even a friendly one)
• Breaching the 250-employee limit through rapid hiring
• Moving the permanent establishment outside the UK
• Receiving more than £5 million in risk finance in a 12-month period

Knowledge-Intensive Companies (KICs)

Knowledge-intensive companies receive enhanced EIS limits in recognition of the higher costs and longer development timelines typically associated with innovation-driven businesses.

Enhanced Limits for KICs

What Qualifies as Knowledge-Intensive?

A company qualifies as knowledge-intensive if it meets at least one of the following "innovation conditions" and at least one of the "skilled employee conditions."

Innovation conditions (meet at least one):

1. The company has spent at least 15% of operating costs on research and development (R&D) or innovation in each of the three years before the share issue (or 15% of operating costs since incorporation if the company is less than three years old)
2. The company has spent at least 10% of operating costs on R&D or innovation, AND has created or is creating intellectual property that will form the basis of its business within 10 years

Skilled employee conditions (meet at least one):

1. At least 20% of employees hold a relevant master's degree (or higher) and are engaged in R&D or innovation activities
2. At least 20% of employees hold a relevant master's degree (or higher), AND the company has spent at least 10% of operating costs on R&D or innovation

Examples of Knowledge-Intensive Companies

• Biotech and pharmaceutical companies developing new treatments
• Software companies building novel AI or machine learning systems
• Deep tech companies developing new hardware or materials
• Clean energy technology companies
• Medical device companies
• University spin-outs commercialising research

Why KIC Status Matters

For growing technology companies, the enhanced limits are significant. A company approaching its seventh year with 200+ employees might no longer qualify for standard EIS but could still qualify as a KIC. Similarly, investors who want to deploy more than £1 million per year into EIS companies can do so if they invest in KICs.

The 10-year age limit is particularly important for companies in sectors with long development cycles, such as biotech, where a company might spend seven or eight years in R&D before generating its first commercial revenue.

Excluded Trades

Certain trades are excluded from EIS, meaning companies engaged primarily in these activities cannot qualify. The list is designed to prevent the scheme from being used for lower-risk, asset-backed, or professional services businesses that can typically access conventional finance.

Full List of Excluded Trades

Important Nuances

Mixed trades: If a company carries on both a qualifying and an excluded trade, EIS can still apply if the excluded trade is not a "substantial" part of the business. HMRC generally considers "substantial" to mean more than 20% of the company's activities (measured by turnover, assets, or expenses).

SaaS and technology serving excluded sectors: A software company that sells to hotels, property developers, or financial services firms is not itself carrying on an excluded trade. The exclusion applies to the company's own trade, not its customers' trades. A company building accounting software (like AccountsOS) can qualify for EIS even though its users may include accountants.

IP royalties exception: Receiving royalties from intellectual property that the company itself created through R&D is not an excluded activity. This is important for technology companies, pharmaceutical companies, and other businesses that monetise their own IP through licensing.

Worked Examples

The following examples illustrate how EIS reliefs work in practice across different scenarios. All tax rates used reflect 2025/26 rates.

Example 1: First-Time Angel Investor

Background: Maria earns £250,000 per year as a finance director. She invests £100,000 in a SaaS startup through an EIS-qualifying share issue in October 2025.

Immediate position:

Maria claims the £30,000 relief on her 2025/26 Self Assessment return, reducing her income tax bill from approximately £86,000 to £56,000.

Scenario A: The company succeeds (exit after 4 years at 3x valuation)

Scenario B: The company fails after 3 years

Example 2: Company Raising Its First EIS Round

Background: TechCorp Ltd is a 3-year-old software company with 15 employees, £200,000 in gross assets, and no previous risk finance. The founders want to raise £500,000 through EIS.

Eligibility check:

Process:

1. TechCorp applies for advance assurance (form EIS/AA) and receives confirmation in 5 weeks
2. TechCorp issues 500,000 new ordinary shares at £1 each to five investors (£100,000 each)
3. After 4 months, TechCorp submits form EIS1 to HMRC
4. HMRC issues five EIS3 certificates, one per investor
5. Each investor claims £30,000 income tax relief on their Self Assessment return

Value to investors: Each investor effectively buys £100,000 of shares for £70,000. TechCorp's fundraising proposition includes "30% income tax relief for investors" as a headline benefit, which helps attract the round.

Example 3: CGT Deferral Combined with EIS

Background: Tom sold shares in a listed company in January 2026, realising a capital gain of £400,000. He wants to defer the CGT liability and is considering investing in an EIS company.

Tom invests £400,000 in an EIS-qualifying company in March 2026.

Immediate position:

Tom has deployed £400,000 into an EIS company at an effective immediate cost of £200,000, after accounting for the income tax relief and CGT deferral. He needs sufficient income tax liability to absorb the £120,000 relief (requiring approximately £350,000+ of income).

If the EIS investment succeeds (shares worth £800,000 after 4 years):

Example 4: Portfolio Approach with Loss Relief

Background: Emma takes a portfolio approach to EIS investing, spreading £300,000 across six companies at £50,000 each. She is a 45% taxpayer.

Income tax relief: £300,000 x 30% = £90,000 total, effective portfolio cost = £210,000.

After five years, the outcomes are:

Returns calculation:

Without EIS, Emma would have received £400,000 in proceeds minus £50,000 CGT, giving her £350,000 on a £300,000 investment, a £50,000 profit. With EIS, her profit is £221,500. The tax reliefs turned a modest portfolio return into a strong one, even with two total failures out of six investments.

EIS and AccountsOS

If you are a UK limited company director considering raising EIS funding, or an investor looking at EIS opportunities, proper record-keeping is essential. AccountsOS helps you stay on top of the financial reporting and compliance requirements that underpin EIS eligibility.

For companies raising EIS:

• Track your gross assets in real time to ensure you remain under the £15 million threshold
• Monitor employee headcount against the 250 (or 500 for KICs) limit
• Maintain clean financial records that support your advance assurance application
• Generate the profit and loss statements and balance sheets that HMRC may request during the EIS compliance process

For investors:

• Track your EIS investments alongside your other income and expenses
• Monitor the three-year holding period for each investment
• Record income tax relief claims for Self Assessment
• Calculate loss relief if an investment fails

Ask Finn, our AI accounting assistant, about EIS eligibility, tax calculations, or any other aspect of your company's finances. You can also use our SEIS/EIS eligibility checker to get an instant assessment, or the tax relief calculator to model investor returns.

Frequently Asked Questions

Can a company director invest in their own company through EIS?

A director who was already connected to the company before the EIS share issue cannot claim income tax relief. However, a new investor who becomes a director after investing can claim relief under the "business angel" exception, provided they were not previously connected. The key test is the 30% ownership threshold and whether the person was an employee or director before the share issue.

What happens if I sell my EIS shares before three years?

Your income tax relief will be clawed back by HMRC, either in full or proportionally depending on how many shares you sell. Any deferred capital gains will also become payable immediately. The CGT exemption will not apply to the disposed shares. There is no partial three-year relief: the minimum holding period is a hard boundary.

Can I invest more than £1 million in EIS in a single year?

Yes, if you invest at least £1 million in knowledge-intensive companies (KICs). In that case, your total EIS investment limit rises to £2 million for the year, with the additional £1 million restricted to KIC investments. You can invest £1 million in standard EIS companies plus £1 million in KICs in the same tax year.

Is EIS available for property companies?

No. Property development, property letting, and property management are all excluded trades. A company whose main activity involves buying, developing, or renting property cannot qualify for EIS. However, a PropTech company that develops software for the property industry could qualify, because its own trade is software development, not property dealing.

How long does it take to get EIS3 certificates?

Typically 6 to 12 months from the date of investment. The company must wait at least four months after the share issue before applying for compliance certificates (form EIS1), and HMRC then takes 4 to 8 weeks to process the application and issue EIS3 certificates. Investors should plan their cash flow accordingly, as the income tax relief cannot be claimed until the EIS3 is received.

Can I carry back EIS relief to a previous tax year?

Yes. You can elect to treat all or part of your EIS investment as if it were made in the previous tax year. This allows you to claim 30% income tax relief against that year's tax liability. The carry-back is limited to the amount invested in the current year. You cannot carry back further than one year.

What is the difference between EIS and VCT?

Venture Capital Trusts (VCTs) are listed funds that invest in a portfolio of EIS-qualifying companies on your behalf. VCTs offer 30% income tax relief (no carry-back), tax-free dividends, and CGT exemption on disposal. The key differences: VCTs invest in a diversified portfolio (reducing risk), have a five-year minimum hold period (vs three for EIS), and do not offer loss relief or CGT deferral. The maximum VCT investment for income tax relief is £200,000 per year.

Can overseas investors use EIS?

Yes. EIS tax relief is not restricted to UK-resident investors. However, the investor must have a UK income tax liability to set the relief against. A non-UK resident with no UK income tax liability cannot benefit from the income tax relief. CGT deferral is available to anyone who is liable to UK CGT on the original gain.

What happens to EIS relief if the company is taken over?

If the company is acquired within the three-year holding period, EIS income tax relief may be clawed back unless the shares are exchanged for shares in another qualifying company under a share-for-share exchange. If the takeover happens after three years, the CGT exemption still applies to the gain on disposal. Each takeover scenario is different, and professional advice is recommended.

Has EIS been extended beyond 2025?

Yes. EIS was extended in the 2023 Autumn Statement and is now confirmed to run until 6 April 2035. This gives companies and investors long-term certainty that the scheme will continue. The same extension applies to SEIS and VCTs.