EIS Rules For Investors a Complete 2026 Guide

Understanding the Enterprise Investment Scheme (EIS)

The Enterprise Investment Scheme was introduced by the UK government in 1994 to support investment into early-stage companies. The scheme provides tax reliefs to investors who subscribe for shares in qualifying companies, with the intention of supporting those businesses in raising growth capital.

To address this risk, the Enterprise Investment Scheme provides a range of tax reliefs, which may include income tax relief, loss relief and exemptions from certain capital gains taxes, subject to eligibility and individual circumstances. Changes introduced to the scheme in 2026 increased certain investment limits and amended qualifying criteria for companies. These changes were intended to support a broader range of businesses in accessing investment through the scheme.

EIS vs SEIS and Other Venture Capital Schemes

The EIS is not the only scheme aimed at supporting young UK businesses. It is one of several, although the level of investment each can attract and the tax benefits for investors vary.

• Enterprise Investment Scheme (EIS): Focuses on attracting investment for young small to medium-sized companies, including Knowledge Intensive Companies. Tax benefits include up to 30% income tax relief, CGT exemptions and deferral relief, loss relief and inheritance tax relief.
• Seed Enterprise Investment Scheme (SEIS): Similar to the EIS, but the focus is on new start-ups. As the investments in SEIS shares are even riskier, investors can claim up to 50% income tax relief, although only up to £200,000 per year.
• Venture Capital Trust (VCT): As for VCTs, these are listed investment trusts that also invest in small companies but offer slightly less generous up front reliefs and pay tax-free dividends.

Here’s how all three compare side-by-side:

How the New 2025 Budget Rules Affect EIS, SEIS and VCTs

The changes announced in the Autumn Budget primarily relate to the qualifying requirements for the Enterprise Investment Scheme and the maximum amounts companies may raise through certain investment schemes. From an investor perspective, there were limited changes to the core features of the EIS and the Seed Enterprise Investment Scheme. One change affecting investors was the reduction in the rate of income tax relief available to Venture Capital Trust investors, from 30% to 20%.

When considering the changes to company eligibility, a number of the relevant thresholds were increased.

From April 2026, certain qualifying criteria for companies seeking to raise funds under the EIS schemes were amended. At the point of share issue, and for a period of three years thereafter, companies must meet specific conditions in order for the investment to qualify under the relevant scheme.

Among the other criteria that have not changed under the new rules, a company applying for the EIS scheme :

• Must have a permanent establishment in the United Kingdom
• Must have made their first commercial sale within the last seven years.
• Must have fewer than 250 full-time employees
• Cannot be listed on any stock exchange
• Does not control any other companies other than qualifying subsidiaries
• Is not owned by another company or has 50% of its shares owned by another company
• Must carry out a qualifying trade
• Must agree to use the investment on a qualifying business activity within two years of receiving

Additional qualifying conditions if the business is applying as a Knowledge Intensive Company:

• The company must be carrying out research, development or innovation at the time of the share issue.
• Must have made their first commercial sale within the last ten years, or had a turnover of over £200,000 in that time.
• Must have fewer than 500 full-time employees
• To continue qualifying, you must show that 20% of the company must demonstrate that 20% of employees, with a Master’s or higher degree, have carried out research for a minimum of three years since the date of investment.
• Must spend at least 10% of your operating costs on research, development or innovation for three years, or 15% for one year.

EIS tax reliefs are always subject to change and have been multiple times over the years. It is necessary to refer to the government website for the most up-to-date information on these schemes.

What is a Knowledge Intensive Company?

Unlike regular EIS-qualifying companies, Knowledge-intensive companies (KICs) can be older, have more employees and raise more money under the scheme. That is because a KIC is a company providing innovation, research or development, which could benefit both the UK and the world as a whole should that work lead to meaningful technological or medical advances.

Key EIS Rules for Investors in 2026

Going into 2026, the core EIS rules for investors remain unchanged. To qualify for the scheme and for the EIS tax relief that comes with it, would-be qualifying investors must meet the following eligibility criteria:

• Must be a UK taxpayer
• They’re not employed by or a director of the EIS qualifying company.
• They do not have a substantial interest in the company (more than a 30% stake)

Furthermore, investors hoping to claim EIS relief must comply with the following conditions:

• The investor never exceeds the maximum £1 million investment per year, although that can increase to £2 million as long as £1 million is invested in KICs.
• The investor paid for all EIS shares upfront.
• The investor held the shares for at least three years.

As evidenced in the 2025 budget, EIS rules can change at any time. Always make sure you’re up to date with the latest rules before considering investing in the EIS or any other investment scheme.

EIS Tax Relief Offered Under EIS

The Enterprise Investment Scheme offers a range of tax reliefs to eligible investors who subscribe for shares in qualifying companies. These reliefs are intended to support investment into early-stage businesses that carry a higher level of risk.

Where a company meets the relevant qualifying conditions and the investor holds the shares for the required minimum period, certain tax reliefs may be available, subject to individual circumstances and prevailing legislation. The sections below outline the principal forms of relief available under the scheme and how they operate in practice.

Claim Income Tax Relief

Income tax relief is available under the Enterprise Investment Scheme at a rate of up to 30% of the amount invested, subject to eligibility and individual circumstances. Relief may be claimed on investments of up to £1 million per tax year, or up to £2 million per tax year where at least £1 million is invested in knowledge-intensive companies.

Where an investor has sufficient income tax liability, the relief may be set against the income tax due for the tax year in which the investment is made. Alternatively, investors may elect to carry back all or part of the relief to the preceding tax year, subject to the applicable limits and HMRC rules.

Claim CGT Exemption on an EIS Investment

Another feature offered to private investors is an exemption from capital gains tax on an EIS qualifying investment. However, there are certain criteria to adhere to.

Primarily, you must have held the EIS shares for at least three years for the CGT exemption to kick in. Once you sell the shares, the profits you made are free of capital gains taxation – subject to meeting relevant conditions.

Claim Capital Gains Tax (CGT) Deferral Relief

Investors can also claim CGT deferral relief on gains made from assets outside of the Enterprise Investment Scheme. Whether from property, shares, or crypto, for example, any tax that’s usually applied will be deferred as long as they are used for an EIS investment. Those gains are deferred for as long as you hold the shares, with the gain becoming chargeable when the EIS shares are disposed of or cease to qualify

This capital gains deferral applies to gains made up to three years before and one year after the EIS investment.

Claim Loss Relief

Loss relief may be available where an investment made under the Enterprise Investment Scheme results in a loss. Any relief is calculated on the amount invested after taking account of any income tax relief already received, and is subject to eligibility and individual circumstances.

The net loss may be set against income tax or capital gains tax, in accordance with HMRC rules. The value of the relief will depend on the investor’s marginal rate of tax. For example, an investor subject to the additional rate of income tax may be able to reduce the effective cost of the loss, although the exact outcome will vary and is not guaranteed.

Inheritance Tax Relief

Once EIS shares have been owned for a minimum of two years, they can become eligible for full Business Relief. If the shares are still held when the investor passes away, their value may fall outside the scope of Inheritance Tax entirely.

How to Claim EIS Tax Relief

Once EIS shares have been issued to the investor and compliance certificates received, investors can claim tax relief by:

• Submitting an EIS claim through their Self Assessment tax return
• Using HMRC’s online service
• Claiming relief for the current or previous tax year

The Key Takeaway for EIS Investors in 2026

From an investor perspective, the Enterprise Investment Scheme in 2026 remains broadly consistent with previous years. The majority of changes introduced relate to the eligibility criteria for companies and the maximum amounts they are permitted to raise under the scheme.

While higher limits may provide qualifying companies with access to additional capital, investments made under the Enterprise Investment Scheme continue to involve a high degree of risk, including the risk of total capital loss. Any potential impact on investment outcomes will depend on a range of factors and cannot be assured.

Investors should consider seeking independent professional advice before investing in the Enterprise Investment Scheme. Investments in early-stage companies are high risk, tax reliefs depend on individual circumstances, and the value of any reliefs may change in the future.

EIS Rules for Investors FAQ

What are the main EIS rules for investors in 2026?

Investors qualify for the EIS if they’re UK taxpayers and not employed by or act as a director for the EIS company they wish to invest in. To claim most EIS tax benefits, investors must also hold the shares for three or more years. As for the investing limit, the maximum is £1 million (or £2 million when investing at least £1 million into Knowledge Intensive Companies).

Have EIS tax reliefs changed following the 2025 UK Budget?

No changes have been made to the benefits received through the EIS and SEIS. However, there have been alterations to Venture Capital Trusts, where income tax relief will be reduced from 30% to 20% from April 2026.

How long must I hold shares to receive my 30% income tax relief?

Income tax relief can be claimed once an investor is in receipt of the EIS3 form. However shares need to be held for a minimum of 3 years and the company remain a qualifying company for the same period or the relief can be withdrawn and tax will need to be repaid.

What tax reliefs can investors claim through the EIS?

Investors can receive income tax relief, capital gains tax exemption, inheritance tax relief and loss relief. Furthermore, the scheme allows you to defer capital gains on other assets if you invest those gains into an EIS-qualifying company. 

Is EIS still a high-risk investment in 2026?

Yes. Despite tax benefits, EIS investments remain high-risk due to the early-stage nature of qualifying companies, illiquid shares and long holding periods.

Important Information – This article is provided for information purposes only and does not constitute investment advice, tax advice, or a personal recommendation. You should not rely on this information when making an investment decision. Tax reliefs are subject to legislation, may change, and depend on individual circumstances. Eligibility for EIS and VCT reliefs depends on the company continuing to meet qualifying conditions and may be withdrawn if these conditions are not met. EIS and VCT investments are high-risk, illiquid, and you may lose some or all of your invested capital. These investments are not suitable for all investors and are not comparable to cash savings products. You should seek independent financial and tax advice before investing.