EIS and SEIS: tax relief and risks

The Enterprise Investment Scheme (EIS) and the Seed Enterprise Investment Scheme (SEIS) are two government schemes that give income tax relief for money put into small unlisted companies. EIS gives 30% relief, and SEIS gives 50% relief, on the amount invested, credited against the tax you owe for that year¹. Both also exempt profits from UK Capital Gains Tax, subject to conditions³.

The reliefs are generous because the investments are risky. EIS and SEIS companies are small, early-stage and unlisted, and this type of investing is considered high-risk⁴. The value can go down as well as up, the shares are hard to sell quickly, and there is no FSCS protection for the investment itself⁵. Losing the whole amount is a real possibility.

The rules changed in the 2026 Budget. From 6 April 2026, the amount companies can raise under EIS rises, and the gross assets limit increases to £30 million from £15 million⁶.

EIS income tax relief: 30% of what you invest

EIS gives 30% of the amount subscribed for shares in early-stage qualifying trading companies as relief against your income tax liability⁷. If you invest £10,000, that is £3,000 off your tax bill for the year, provided you have enough tax to pay and you hold the shares for the minimum period.

The minimum holding period is three years¹. If the company is sold or listed within three years, the benefits of EIS tax relief will not apply⁹. That is a condition you may have no control over: a successful exit event within three years removes the relief.

There is a cap on how much you can claim relief on. The maximum amount subscribed in a tax year on which relief can be claimed is £2 million, but any amount over £1 million must be for shares issued by one or more knowledge-intensive companies⁷. That structure has been in place since 2018, when the annual investment limit was raised to £2 million for knowledge-intensive investment.

The relief is claimed through your tax return. Tax reliefs reduce the tax you pay if you qualify for them¹⁰. The company issues a compliance certificate for your shares, and you use that to support the claim.

SEIS income tax relief: 50% for the earliest-stage companies

SEIS gives 50% of the investment credited against the tax payable for that tax year². It is limited to very early-stage businesses², which is why the relief is higher: the risk is greater.

By committing cash to SEIS for three years, the investor benefits from a 50% income tax break¹. The minimum commitment of three years mirrors the EIS holding period. As long as the investment is held for a minimum of 3 years, profits are also exempt from capital gains taxes².

The amount a company can raise under SEIS is capped. For shares issued on or after 6 April 2023, the limit is £200,000⁸.

SEIS is aimed at the very earliest stage of a company's life, before it has a trading record. That means the failure rate is higher than for EIS companies, and the shares are even harder to sell.

EIS and SEIS and inheritance tax

Investments in an EIS-qualifying company can help mitigate against inheritance tax, provided the investment is held for two years and at the time of death¹. That is a shorter holding period than the three years needed for income tax relief, and it is a separate condition.

The inheritance tax treatment of EIS shares sits alongside Business Relief. Business Relief can reduce the business's value by 50% or 100% so you pay less Inheritance Tax¹¹. You can pay inheritance tax in instalments for any asset that qualifies for Agricultural Relief or Business Relief¹².

For comparison, a stocks and shares ISA does not shield your investments from inheritance tax or stamp duty when buying shares¹³. An ISA can be handed to your spouse or civil partner tax-free, and they get an extra ISA allowance equivalent to the value of the ISA inherited¹⁴. If inherited by anyone else, ISAs will be included as part of your estate for IHT calculations¹⁴.

The inheritance tax rate can also be reduced from 40% to 36% when 10% or more of the net value of the estate is donated to charity¹⁵. Inheritance tax rules are complex and the treatment of any individual estate depends on its circumstances.

Which companies qualify: EIS limits of up to £30 million in gross assets

For a company to receive EIS investment, it must not exceed a gross assets limit immediately before the issue of the shares or securities. From 6 April 2026, that limit rises to £30 million from £15 million⁶. The same change applies to companies receiving investment under the VCT scheme⁶.

One official policy statement gives the new gross assets limit as £30 million, another as £35 million, and this has not been resolved⁶. The £30 million figure is the one given in the main policy statement.

The amount a company can raise also rises from 6 April 2026. The annual investment limit that companies can raise increases to £10 million from £5 million⁶. The company's lifetime investment limit increases to £24 million from £12 million⁶.

The current EIS legislation is contained in Part 5 of the Income Tax Act (ITA) 2007⁶. The government has confirmed continuing the availability of income and capital gains tax reliefs for investors in qualifying companies and VCTs¹⁶.

Knowledge-intensive companies: higher EIS limits of £20 million a year

Knowledge-intensive companies get higher limits. From 6 April 2026, the annual investment limit for knowledge-intensive companies rises to £20 million from £10 million⁶. The lifetime investment limit for knowledge-intensive companies rises to £40 million from £20 million⁶.

These higher limits are why the £2 million per investor cap has a condition attached. The maximum amount subscribed in a tax year on which relief can be claimed is £2 million, but any amount over £1 million must be for shares issued by one or more knowledge-intensive companies⁷.

A knowledge-intensive company is one that spends a high proportion of its turnover on research and development, or has a high proportion of highly skilled employees. The definition is set out in the legislation, and the company must meet it at the time the shares are issued.

The risks of investing in small unlisted companies

EIS and SEIS companies are small, early-stage and unlisted. Venture Capital Trusts, which invest in the same kind of companies, are considered high-risk investments⁴. The same risk applies to direct EIS and SEIS investing.

The main risks are:

• You can lose all your money. The companies are early-stage and many fail. The value of the shares can go down as well as up⁴.
• The shares are hard to sell. There is no ready market for unlisted shares, so money can be difficult to access in the short term⁴.
• The relief can be withdrawn. If the company is sold or listed within three years, the benefits of EIS tax relief will not apply⁹.
• There is no FSCS protection for the investment. Unregulated investments carry a higher risk and offer no protection from the Financial Services Compensation Scheme⁵.

If you invest in a firm which is not authorised by the FCA, you risk losing your money, without any protection¹⁷. The Financial Ombudsman Service can look at complaints about authorised firms, but it cannot recover money from an unauthorised one¹⁷.

The FSCS does cover some investment claims, but the limits are lower than for deposits. For firms that failed before 1 January 2010, the limit is 100% of the first £30,000 and 90% of the next £20,000 up to £48,000 per eligible person, per firm¹⁸. That is not a substitute for the value of the shares themselves.

How EIS and SEIS compare with other tax-efficient investments

EIS and SEIS sit alongside other tax-efficient ways to invest. Each has a different relief, a different limit and a different level of risk.

A stocks and shares ISA is an entirely tax-free account²¹, and you can invest up to £20,000, and this money will be able to grow tax-free¹⁴. But a stocks and shares ISA does not shield your investments from inheritance tax or stamp duty when buying shares¹³.

The estimated Exchequer cost of the tax relief for ISAs in 2024 to 2025 is around £9.4 billion²². That figure reflects the scale of ISA relief compared with the smaller EIS and SEIS schemes.

Where to get help

If you are considering EIS or SEIS, the first step is to understand the risk. These are high-risk investments and the tax reliefs are designed to compensate for that risk, not to remove it.

For free, impartial guidance on investing, MoneyHelper is the government-backed service. For help with tax, HM Revenue & Customs publishes guidance on income tax and reliefs¹⁰. A qualified tax adviser can help you work out whether EIS or SEIS fits your circumstances.

If you think you have been mis-sold an EIS or SEIS investment, you can complain to the firm first. If you are not satisfied, the Financial Ombudsman Service can look at complaints about authorised firms¹⁷. The ombudsman's case studies include examples of consumers who lost money in investments that were not what they were led to believe.