Discover the benefits of Enterprise Investment Scheme tax relief and decide if the EIS is right for you.
Since launching in 1994, the Enterprise Investment Scheme (EIS) has helped over 30,000 early-stage companies in the UK attract much-needed investment. The government-run initiative offers angel investors significant tax breaks as an incentive to invest in these higher-risk companies.
Those who invest in qualifying companies can claim:
- Income Tax Relief
- Capital Gains Tax Exemption
- CGT Deferral Relief
- Loss Relief
- Inheritance Tax Relief
EIS Calculator – See How Much You Can Save Making an EIS Investment
We’ll explain more about the EIS investment scheme and the tax reliefs investors can take advantage of shortly. In the meantime, why not first use our EIS calculator below to get an idea of the anticipated return of an EIS investment and the tax savings participants can make?
No investment should be taken lightly, especially a higher-risk investment into an early-stage business with as much chance of failing as it does prospering. That’s why you can use the EIS calculator to show you the potential tax reliefs across different outcomes.
How big are the tax reliefs if your investment proves successful? Will the loss relief you receive on a failed EIS investment help soften the blow?
Input Your Numbers
PLEASE NOTE: This calculator is provided for general information and illustrative purposes only, it is not a reliable indicator of future performance. Any figures and outcomes shown are not intended to constitute financial, investment or tax advice. They are general in nature and may not be a true representation of your personal circumstances. Calculations are presented in nominal terms and do not include inflation adjustments. This calculator does not account for any additional costs and charges that may also need to be deducted. Tax treatment varies according to individual circumstances, may be subject to qualifying conditions, and is subject to change. EIS shares must be held for the required minimum holding period to retain tax reliefs. We strongly recommend that you obtain your own professional advice for your individual circumstances.
How Does the EIS Calculator Work?
When you fill in variables such as investment size and anticipated growth, the EIS calculator will give a forecast of potential tax reliefs. Interested investors can analyse potential reliefs on an investment, such as income tax relief and EIS loss relief.
It also projects the overall financial impact of an EIS investment, giving a clear view of potential outcomes. With this tool, investors can plan more strategically, when considering methods to improve tax efficiency, and align investments with long-term goals.
*Please remember that you should only use the EIS calculator as a guide. It does not take into account the specific circumstances of potential investors. If you are considering making an investment of this nature, you should consider the publicly available resources published by the UK government on the EIS Scheme, and the specific details of the target investment opportunity being considered.
What is the Enterprise Investment Scheme?
Now that you’ve used the EIS calculator to forecast what could happen when investing through the EIS, let’s have a closer look at what the EIS is and how it works.
In short, the Enterprise Investment Scheme (EIS) is a UK government initiative. It aims to support in growing the economy by supporting eligible startups which are typically high-risk investments due to the early stage of growth their business is in. EIS-qualifying companies get the funding they need to expand. By making an investment into EIS-qualifying companies, investors can claim tax relief.
It’s a win-win unless the business fails. However, participating investors can usually reduce their losses using EIS loss relief.
What is EIS Tax Relief?
EIS tax relief is a government incentive to encourage investment in small UK businesses. It offers tax benefits that aim to boost gains on successful investments and reduce losses on those that fail.
Companies that qualify for EIS investment can raise up to £12 million in total. Each year, they can raise no more than £5 million through EIS or similar schemes like the Seed Enterprise Investment Scheme (SEIS).
Knowledge Intensive Companies (KICs) can raise more, up to £20 million over their lifetime and £10 million per year. KICs are approved by HMRC and usually focus on research or innovation.
For investors, EIS offers 30% income tax relief on up to £1 million each year. If the investment is successful, they also pay no Capital Gains Tax on profits. Other benefits include loss relief, capital gains deferrals, and no tax payable on inheritance.
EIS tax reliefs are always subject to change and have done multiple times over the years. It is necessary to refer to the government website for the most up to date information on these schemes.
A Closer Look at the EIS Tax Reliefs for Investors
As discussed, to incentivise investors to invest in illiquid, early-stage companies, typically representing high-risk profiles, the Enterprise Investment Scheme offers significant tax reliefs. Below, we’ll talk you through those tax reliefs in more detail.
Claim Income Tax Relief
Angel investors can claim up to 30% income tax relief on their EIS investments. That’s 30% of what you invest up to £1 million per year, or £2 million if it’s in knowledge-intensive companies. If you invest the full amount and have enough tax liability, this could mean saving up to £300,000 in tax each year.
To qualify, you must hold the EIS shares for at least three years.
More Risk and Reward with Knowledge Intensive Companies
Alternatively, for those investors open to more risk, they might consider investing in a knowledge-intensive company (KIC) which offers extra tax relief. KICs have a special status with HMRC and can raise more through EIS.
These companies focus on research, development, or innovation. Think of a startup creating a new medicine or breakthrough tech.
Typically, participants can invest up to £1 million per year. But if investing in a KIC, this can double that up to a maximum of £2 million. That means investors could claim up to £600,000 in income tax relief if they invested the full amount.
Receive Capital Gains Tax Exemption
Every investor hopes for a win. With EIS, a successful investment brings even bigger rewards.
If you hold EIS shares for at least three years, any profit from selling them qualifies as tax-free capital gains. That means you don’t pay the standard capital gains tax rate, which can reach up to 24% depending on your income.
This capital gains relief can lead to significant savings. For example, a £1 million gain could save up to £240,000 in CGT.
Take Advantage of Capital Gains Deferral
Another possible benefit of EIS is the option to defer tax on previous gains. If you’ve sold an asset at a profit, EIS can let you delay paying tax on that gain, subject to certain conditions being met.
To do this, investor must reinvest the profit into shares of an EIS-qualifying company. To qualify, the investment must be made within one year before or three years after the gain was made. The tax stays deferred for as long as the money remains invested.
EIS Loss Relief for When an Investment Doesn’t Work Out
EIS also offers loss relief to ease the blow if an investment proves a complete failure. It won’t erase losses, but it can soften them.
If the company fails or shares are sold at a loss, participating investors can offset that loss against income tax. This can be applied to the current or previous tax year. When investors claim loss relief, it is calculated after subtracting any income tax relief already received.
Beneficiaries Pay No Inheritance Tax
One of the lesser-known EIS tax benefits is inheritance tax relief. That’s because it doesn’t help the investor directly. But if you hold EIS shares for at least two years, they’re exempt from inheritance tax. With the current inheritance tax rate at 40%, that can mean big savings for your beneficiaries.
It’s important to realise that the tax benefits you can receive will vary depending on the circumstances of each individual. We strongly recommend seeking advice from a professional based on your own circumstances.
What Companies Qualify for the Enterprise Investment Scheme?
To qualify for EIS, a company must meet certain criteria. If it does, it can apply for relief through this government scheme.
Eligibility Criteria
The company must be based in the UK. It must have been trading for less than seven years since its first commercial sale.
It should have fewer than 250 employees and hold no more than £15 million in gross assets before issuing shares.
Usage of Funds
Money raised must be used for qualifying business activities. This must happen within two years of receiving the investment or starting trade, whichever is later.
Advance Assurance
Companies should request advance assurance from HMRC. This involves submitting a business plan and financial forecasts.
Investors often expect to see this before committing. It shows the company is likely to qualify for EIS.
Qualifying as a KIC
For a company to qualify as a knowledge intensive company,
- Knowledge Intensive Companies (KICs) focus on research, development, or innovation. To qualify, they must meet specific criteria when issuing shares.
- The company must spend at least 15% of its operating costs on R&D. Or at least 10% per year over the past three years.
- It must be working to develop intellectual property at the time shares are issued.
- That intellectual property must remain central to the company’s work for at least the next 10 years.
- The company must have no more than 500 full-time employees.
- If it meets these rules, it can raise up to £10 million per year through EIS. That’s double the usual limit.
- Its total lifetime funding cap also increases from £12 million to £20 million.
While the risk for investors is increased further when investing in a KIC, the potential tax breaks are greater as well. Investment limits are now up to £2 million per tax year into KICs, meaning investors could claim up to £600,000 in tax relief.
The KIC qualifying rules are always subject to change, so make sure you double check that the above is current.
How You Can Qualify for the Enterprise Investment Scheme
To qualify for EIS tax relief, investors must meet a few basic rules.
- They must not be employees of the company. They also can’t have a vested interest or have invested in it before.
- Shares must be bought with cash and paid directly to the company.
- Investors must hold the shares for at least three years.
- EIS tax relief can be claimed up to five future tax years after the investment is made.
Again, the rules above are always subject to change and may not be an exhaustive list.
How to Claim Income Tax Relief
Once you’ve received your EIS3 certificate , you are eligible to claim tax relief through a self-assessment tax return.
- First, the company you invested in must submit an EIS1 compliance form to HMRC.
- HMRC will review the application—this usually takes 15 to 40 days.
- If approved, the company will receive two forms: EIS2 and EIS3.
- EIS2 contains your Unique Investment Reference (UIR) number.
- EIS3 confirms your investment qualifies for EIS tax relief.
- Use the UIR when filing a self-assessment tax return to claim the relief.
It is an investors responsibility to ensure the necessary formalities are complete in order to qualify for the tax relief benefits available in this scheme.
Why Invest in the Enterprise Investment Scheme?
Yes, there’s tax relief. But that’s not the only reason to consider EIS.
High Growth Potential
These are high-risk investments, but also high reward if successful. If the company takes off, your investment could grow faster than other lower risk traditional investments might. Add tax-free capital gains and income tax relief, and the upside increases further.
You’ll Support UK Startups
Your investment helps young companies grow. You can contribute to the creation of more jobs, more innovation, and a stronger UK economy.
You Can Diversify Your Portfolio
EIS investments don’t always follow traditional market trends. They add variety to your portfolio and can support to spread your risk. It’s applying a strategy of smart hedging with lots of small bets instead of one big one.
The Takeaway
Hopefully, you’ve used the EIS calculator to determine the potential and risks of investing in an EIS-qualifying company. Preferential tax treatment and reliefs look great should an investment turn out successfully. On the other hand, as our EIS loss relief calculator will tell you, that loss relief will only offset some of your losses, meaning a failed investment will hurt financially.
For that reason, we strongly suggest you seek professional advice before committing to an investment via the Enterprise Investment Scheme or similar initiatives like the Seed Enterprise Investment Scheme. The potential rewards on your original investment are significant, but it’s important to remember that these are high risk, illiquid investments with a chance that investors could lose all of their capital.
EIS Calculator FAQs
What Factors Does the EIS Calculator Use?
The EIS calculator looks at your investment amount, expected return, and any existing capital gains. It also factors in your income tax rate and capital gains tax rate. With those details, it estimates how much tax relief you could get from an EIS investment. However, remember that the calculator is just a guide and should not be relied upon when deciding whether to invest.
Can the EIS Calculator Show the Capital Gains Deferral I Can Potentially Receive?
Yes. The calculator includes CGT deferral in its results. If you reinvest a recent gain into an EIS company, it shows how much CGT you might be able to delay.
How Accurate Are EIS Calculator Results?
The EIS calculator uses straightforward formulas based on the info you provide. It estimates your tax reliefs and returns. However, real results depend on how your investment performs and any future tax changes. That said, we should stipulate that the calculator should only be used as a guide and not be relied upon when deciding to invest
This calculator has undergone internal testing for the purposes of its use however, it is not a recognised method of calculating investment returns, and should not be relied upon as such. It is purely an indicative tool, to aid in a readers understanding of the schemes described.
Returns are not guaranteed and participating investors risk losing the capital they have invested.
There is no guarantee the schemes offered by the UK government will always remain in place, and are subject to change, and without notice.
If you are considering making an investment, you should consult an authorised person specialising in advising on investments of this nature. The contents, and EIS calculator shall not be construed as investment, legal or tax advice, and investors must determine for themselves the merits of participating in schemes such as those described, and whether or not they are eligible.
We make best efforts to ensure information provided is accurate however, we make no guarantee the information provided herein is accurate or up to date. We have gathered this information from publicly available sources, and it describes the schemes as at 31-10-2025
Apply to use the Enterprise Investment Scheme to raise money for your company – GOV.UK
