Discover the benefits of Enterprise Investment Scheme tax relief and decide if the EIS is right for you.
The short answer
EIS income tax relief is thirty percent of the cash you subscribe for new qualifying shares. The standard annual investor limit is one million pounds. That gives a maximum income tax reduction of three hundred thousand pounds for that year. If at least one million pounds of your total goes into knowledge intensive companies, the limit increases to two million pounds, so the potential reduction rises to six hundred thousand pounds, subject to your actual income tax liability
What counts as the qualifying amount
Only the money used to buy new ordinary shares in a qualifying company counts. Shares must be fully at risk, without redemption rights or capital protection. When you invest through a portfolio or fund, the qualifying amount is the net cash actually used to buy shares in each company, and you receive an EIS3 for each issue.
The Enterprise Investment Scheme in context
The enterprise investment scheme supports smaller companies by attracting private capital with defined tax relief. You subscribe for shares, the company completes its compliance steps, and you use the certificate to claim income tax relief. Many people refer to it as the Enterprise Investment Scheme EIS.
Beyond 30 percent, what else affects the total benefit
When people ask how much is EIS tax relief, they usually mean the thirty percent figure. The full picture also includes three additional effects that can increase the overall tax outcome for an EIS investment.
Capital gains tax exemption on disposal
If you hold qualifying shares for at least three years, gains on sale can be free of capital gains tax. The saving depends on the size of the gain and your capital gains tax rate at the time. There is no monetary cap on the gain that can be exempt if conditions are met.
Capital gains deferral from other assets
You can use capital gains deferral by subscribing for EIS shares where the shares are issued from twelve months before to three years after the date the original gain arose. The gain is postponed and later becomes chargeable when a trigger event happens, such as disposal of the EIS shares or the company ceasing to qualify.
EIS loss relief when things go wrong
If an EIS investment fails, EIS loss relief lets you offset the net loss against income of the disposal year or the previous year, or against capital gains. The net loss is calculated after deducting the thirty percent already received. You can claim loss relief through Self Assessment. Using EIS loss relief well can reduce the cash at risk.
Worked numbers to aid understanding
Example one. Standard case, full liability
- Subscription: £50,000
- Thirty percent income tax relief: £15,000
- If your income tax bill for the year is at least £15,000, the full amount reduces your payment.
Example two. Knowledge intensive uplift used
- Subscription: £1,500,000 with at least £1,000,000 into knowledge intensive companies
- Thirty percent relief: £450,000
- Usable amount depends on your income tax bill in the claim year and, if you elect, the previous tax year.
Example three. Deferral plus income relief
- Property gain: £100,000
- EIS subscription within the window: £100,000
- Thirty percent relief: £30,000
- Gain is deferred and may be charged later; your current capital gains tax bill is postponed.
Example four. EIS loss relief in practice
- Subscription: £20,000
- Relief already received: £6,000
- Shares sold for £1
- Net loss: £14,000
- If you claim loss relief against income taxed at 45%, the further saving is £6,300. Total tax saving becomes £12,300.
Example five. Disposal relief after three years
- Subscription: £50,000
- Thirty percent reduction: £15,000
- Sale after three years: £180,000
- Gain: £130,000
- Capital gains tax on that gain: £0 if conditions remain satisfied.
How timing changes what you can use
The issue date of the shares drives three things:
- It sets the tax year for the claim.
- It starts the three-year holding period for capital gains tax exemption.
- It anchors the five-year claim window that runs from the 31st January after the end of that tax year.
If your current-year income tax bill is not high enough, consider a carry back election so part of the subscription counts for the previous tax year within that year’s investor limit.
Matching the claim to your bill
The thirty percent amount cannot exceed your income tax liability. If the calculated figure is larger than your bill, the excess does not create a repayment by itself. Use carry back if the prior-year liability can absorb the difference. This avoids wasting relief and keeps the answer to how much is EIS tax relief as close to the headline number as possible.
Fees and net deployment
With a managed portfolio, you may see an initial fee, an annual fee, and sometimes a performance fee. Ask for a schedule that shows gross subscription, fees, and net deployment into shares for each company. Your thirty percent is calculated on the amount actually used to purchase shares. Clear schedules make it easy to claim income tax relief and to record any later EIS loss relief or exemption.
Risk controls that help protect the benefit
- Hold for three years to keep disposal relief.
- Monitor investee updates to ensure qualifying conditions continue.
- Avoid prohibited loans or arrangements that protect capital.
- Keep records so you can claim loss relief if a disposal occurs at a loss.
- Diversify across multiple EIS investments and across more than one issue date.
Quick reference table
- Rate: thirty percent
- Standard annual limit: one million pounds
- Knowledge intensive uplift: two million pounds, if at least one million pounds goes to those companies
- Disposal relief: potential capital gains tax exemption after three years
- Deferral: use on gains from other assets within the allowed window
- EIS loss relief: set net losses against income or against gains
- Key driver: your income tax liability in the claim year and, if elected, the prior tax year
Frequently asked questions
Does the thirty percent arrive as a cash payment
Usually it reduces what you owe. If you have already paid on account, the calculation may show a repayment. Employees can request a code change so relief appears in payslips during the year.
Can I get more than thirty percent
The income tax relief rate is fixed. Extra value comes from capital gains tax exemption, capital gains deferral, and EIS loss relief when applicable.
How does my capital gains tax rate affect outcomes
Your capital gains tax rate matters when there is a gain and disposal relief does not apply. If disposal relief applies after three years, the capital gains tax on that gain can be zero.
What reduces the final amount I keep
Selling inside three years, breaching connection rules, or a company drifting into excluded activities can withdraw relief. Fees also affect how much is deployed into shares, so track the net amounts.
How do SEIS and EIS work together
The seed enterprise investment scheme supports very early stage rounds. Some investors use SEIS for seed and EIS for follow-on, building a pipeline while keeping the rules for each scheme separate.
Capital is at risk. This guide is not to be treated as advice and 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.
