EIS tax relief gives investors back 30% of what they put into qualifying early-stage companies — up to £1 million a year, or £2 million where the excess goes into knowledge-intensive companies — as a reduction in their income tax bill. Hold the shares three years and any growth is free of capital gains tax; if the company fails instead, loss relief softens the landing; and the scheme runs to at least 2035. For companies, EIS status is often the difference between a funding round closing and not.
The 2026/27 rules are unusually worth re-reading, because the Autumn 2025 Budget reshaped the venture capital schemes: EIS company limits were doubled, while VCT income tax relief was cut. Old summaries are now wrong in both directions.
What the investor gets
- Income tax relief: 30% of the amount invested, against that year's tax bill (or carried back one year). Invest £100,000, knock £30,000 off your income tax — provided you have £30,000 of tax to relieve.
- CGT-free growth: no capital gains tax on disposal after three years, where income tax relief was claimed and kept.
- CGT deferral: gains on other assets can be deferred, without limit, by reinvesting them into EIS shares — the gain comes back when the EIS shares are sold, ready to be deferred again.
- Loss relief: if the company fails, the loss net of income tax relief can be set against income, not just gains. For a 45% taxpayer, a total wipe-out of a £10,000 investment ends up costing about £3,850 after both reliefs.
- Inheritance tax: unquoted EIS shares generally attract business relief after two years — though since April 2026, 100% relief is capped at a £2.5 million combined business and agricultural property allowance (transferable between spouses), with 50% relief above it and AIM shares on their own 50% footing — so business relief is a likely outcome to plan around, never a guarantee to assume.
The full investor rules are on gov.uk. The recurring practical mistakes: claiming relief without enough income tax to absorb it (the relief is not repayable cash), selling in year three because a buyer turned up (relief clawed back), and being connected to the company — broadly, holding over 30% or being a paid director outside the "business angel" rules kills the income tax relief entirely. Founder status alone is not the test, but in practice founders' shareholdings and roles usually disqualify them from EIS on their own company.
EIS vs SEIS vs VCT in 2026/27
SEIS is the seed-stage sibling: 50% income tax relief on up to £200,000 a year, for companies under three years old raising their first £250,000, plus a reinvestment relief that exempts half of a reinvested capital gain. Higher risk, more generous — most startups raise SEIS first and EIS after.
VCT investing changed materially this year: income tax relief on new VCT shares fell from 30% to 20% from 6 April 2026, with the £200,000 annual limit and tax-free dividends unchanged and a five-year minimum hold. Plenty of marketing material still says 30%; check the date on anything you read.
EIS sits between them: bigger cheques than SEIS, relief attaching to each underlying company (whether you invest directly or through an EIS fund) rather than to a fund vehicle as with a VCT, and the deferral relief that neither alternative offers. Sophisticated investors often use all three across a portfolio — and the CGT deferral makes EIS a specific planning tool for anyone sitting on a large taxable gain from a business sale or property disposal. That is a conversation for a CGT planning adviser before the gain crystallises, not after.
Which companies qualify — the 2026 doubling
From 6 April 2026 the company-side ceilings were doubled, opening EIS to substantially larger businesses:
- Fundraising: up to £10 million per rolling 12 months and £24 million lifetime (knowledge-intensive companies: £20 million and £40 million)
- Gross assets: up to £30 million before the share issue, £35 million after (previously £15m/£16m)
- Employees: fewer than 250 full-time equivalents (500 for KICs)
- Age: generally within seven years of the first commercial sale (ten for KICs) — this limit did not move
The money must be spent on growing a qualifying trade within two years of investment (or of trading starting, if later), the shares must be full-risk ordinary shares with no exit guarantees, and excluded activities — property development, banking and lending, farming, energy generation, legal and accountancy services — disqualify a company however good the story. The company-side detail lives in HMRC's EIS guidance.
A company that was over the old limits in 2025 may be squarely inside the new ones. If a raise was structured around EIS being unavailable, that assumption has expired.
How a company gets EIS status in practice
The sequence that works: apply to HMRC for advance assurance before the round, with a real business plan and details of the proposed investment — most serious angels will not commit without it. Issue the shares, then after four months of trading file the compliance statement (form EIS1). HMRC authorises the company to issue EIS3 certificates, and investors claim their relief through self assessment using them — including carry-back to the previous tax year if that suits their tax position better.
Where rounds go wrong is rarely the trade and usually the plumbing: shares issued before advance assurance addressed a problem, subscription funds routed as loans first, preference-like rights buried in the articles, or the two-year spending condition drifting. Unwinding any of these after investors have banked on 30% relief is somewhere between painful and impossible — the certificates simply never arrive.
Worth the complexity?
For investors with UK income tax to relieve and genuine risk appetite, EIS remains the most generous mainstream relief on the statute book — but it is a tax wrapper around venture risk, not a way to remove it, and relief-driven investing in weak companies has burned plenty of people who read only the first paragraph of articles like this one.
For companies, EIS and SEIS status is fundraising infrastructure, and worth building properly. Acumon handles advance assurance, compliance statements and round structuring — start with our EIS services page — and our tax planning team advises investors on using the reliefs, deferral included, inside a coherent overall position.