How to Invest In Enterprise Investment Scheme – A Step-by-Step Guide for UK Investors in 2026

What Is the Enterprise Investment Scheme (EIS)?

Launched by the UK government in 1994, the Enterprise Investment Scheme is one of several initiatives set up to help smaller companies raise funding from private investors. Eligible investors could qualify, investors could qualify for a range of tax reliefs, including 30% income tax relief, capital gains exemption, CGT deferrals and inheritance tax relief. Furthermore, understand the risks, illiquidity and eligibility requirements.

An Overview of the Enterprise Investment Scheme for Investors

The EIS scheme is not for everyone, which is why it is important to understand the risks, illiquidity and eligibility requirements. Even with the lure of the tax reliefs, the EIS is a high-risk investment. Capital is typically tied up for several years, returns are uncertain and some companies may not last long enough for you to receive any of those tax advantages.

Suitability depends on individual circumstances, objectives and risk tolerance. EIS investments are generally unsuitable for individuals who require short-term access to capital or prioritise capital preservation.

As always people should be seeking professional advice from a qualified individual before making investment decisions.

Step 1 – Understand How EIS Investments Work

When investors invest in an EIS-qualifying business, they essentially subscribing for newly-issued shares from that company. The money investors must be used by the company within two years on a qualifying business activity, whether that’s expanding, developing products or funding growth.

Investments in early-stage businesses can be volatile and outcomes are uncertain, including the risk of total loss relief.

Step 2 – Check That You’re Eligible to Invest

Eligibility requirements apply for investors seeking EIS reliefs. Qualifying investors are UK taxpayers who are not connected to the company they’re investing in, whether that’s being a director, an employee or holding more than a 30% stake. Investors are also required to invest personally and not through another company. However, some firms will have specific requirements as well and so these will need to be considered.

Step 3 – Understand the Tax Reliefs Available

The Enterprise Investment Scheme includes a number of tax reliefs, subject to meeting qualifying conditions. While income tax relief is often referenced in relation to EIS, other forms of tax treatment may also apply depending on individual circumstances. An overview of the main reliefs is set out below.

• Income Tax Relief
  Subject to HMRC rules, investors may be able to claim income tax relief of up to 30% of the amount invested in qualifying EIS shares. Relief is generally available once the appropriate EIS documentation has been issued. To retain the relief, the shares must usually be held for the required minimum period. Income tax relief may be set against either the current or previous tax year, within the relevant limits.
• Capital Gains Tax Exemption: Gains on disposal of EIS shares may be exempt from CGT where the relevant conditions are met, including minimum holding periods.
• CGT Deferral Relief: Another relief of the scheme is that investors can claim CGT deferral relief on gains made from the sale of other assets, as long as those gains are invested in EIS-eligible companies.
• Loss Relief: Should investors make a loss when selling EIS shares, they could offset some of those losses against their income tax or capital gains bills. Loss relief is available on the amount you invested minus any initial income tax relief.
• Inheritance Tax Relief: As long as investors have held the EIS shares for two years and they are held at the time of death, they will transfer to your beneficiary free of inheritance tax. However, from April 2026, there will be a £2.5m cap on the 100% relief.

Tax treatment depends on individual circumstances and may change. Reliefs are not guaranteed.

The above is just a brief introduction to the EIS reliefs, so make sure you research the full range of conditions and other requirements about each before jumping into an EIS investment.

Step 4 – Decide How You Want to Invest

There are two primary ways to invest under the EIS scheme, with each carrying its own differences.

Direct Purchase of EIS Shares

Investors may invest in companies with EIS qualifying status directly. With this type of investment, investors have more control. That’s because you will need to perform greater due diligence, such as reviewing financial forecasts, business plans and commercial strategies.

Investing Through EIS Funds

Another approach is to invest via an EIS fund. These funds use pooled capital from multiple investors and spread it across several EIS-qualifying companies. Such funds are typically managed by an investment manager and will usually charge fees.

Step 5 – Assess the Company or Fund

An EIS qualifying company must:

• Be a UK-based trading company
• Have gross assets and employees within HMRC limits
• Be carrying out a qualifying business activity
• Use the funds for growth within two years
• Have made their first commercial sale within the last seven years (ten years if a Knowledge Intensive Company)

Some companies apply to HMRC for advance assurance, which is an indication that the company is likely to meet the requirements based on the information provided. Advance assurance is not a guarantee of qualification. This allows the investor to purchase the EIS shares even before the full process is complete.

Knowledge-intensive businesses can raise more funding and benefit from extended age limits, but they must meet stricter criteria. KICs are subject to different limits and additional qualifying criteria relating to R&D activity and employee qualifications.

[As always, if you are unsure, please seek professional advice from a qualified individual]

Step 6 – Make Your Investment

Once an EIS company or EIS fund has been selected, the next step is to make the investment real. Investors will need to complete a subscription agreement before making the initial investment.

Step 7 – Receive Your EIS3 Certificate

The next step is to wait for the EIS3 certificate, which is the most important document needed when the time comes to claim EIS relief. HMRC will issue this certificate once it has approved the compliance statement. Timing of these certificates arriving can vary.

Step 8 – Claim Your EIS Tax Relief

Assuming all the qualifying conditions have been met by both investor and company, investors can now make a claim relief on income tax bill. They must do this through their self-assessment return or by asking the HMRC to adjust their tax code.

The income tax relief can be claimed against the current year, or if their tax liability does not cover the full amount of relief, carried back to the previous tax year.

Step 9 – Hold the Investment for the Minimum Period

To keep qualifying for all tax reliefs, investors must hold on to the EIS shares for a set length of time. Typically, for income tax relief and capital gains tax relief, it’s a full three years you need to hold the shares. If the investors sell early or the company no longer qualifies for the EIS, all or part of the relief could be withdrawn.

Risks to Consider Before Investing

While all investments carry risk, EIS investments involve significant risk, and tax reliefs are subject to eligibility and may be withdrawn. Therefore, this is not a scheme to jump straight into without speaking to financial experts and doing a high level of due diligence on the potential EIS company.

• Loss of capital if the company fails
• Lack of liquidity and long holding periods
• Changes to tax rules
• Delays in receiving tax relief
• Younger businesses are more likely to fail

While investors can potentially reduce that risk through diversifying their investment portfolio, there’s no way to eliminate it.

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.

Final Thoughts for UK EIS Investors in 2026

The Enterprise Investment Scheme is an option for investors who are considering higher-risk investments, where tax reliefs may be available to help UK businesses.

However, as with all high-risk investments, we strongly recommend seeking professional tax and financial advice before investing.

FAQS on How to Invest in the Enterprise Investment Scheme (EIS)

How much can I invest in the Enterprise Investment Scheme each tax year?

Individual investors can invest up to £1 million per tax year under the Enterprise Investment Scheme. This limit increases to £2 million if at least £1 million of that amount is invested into Knowledge Intensive Companies.

What happens if an EIS qualifying company fail

If a company fails, investors may lose some or all of their capital. Some tax reliefs may be withdrawn depending on circumstances and timing. Thankfully, there is loss relief that can reduce some of the financial impact. The amount investors lose when selling shares (minus income tax received) can be offset against income tax or capital gains. While this won’t cover all the losses, it may reduce them.

Do EIS investments qualify for inheritance tax relief?

Yes, EIS shares all qualify for 100% Business Relief, meaning you can pass them on to beneficiaries without losing 40% of it to inheritance tax. The only requirements are that you held the shares for at least two years and still owned them at the time of death. This is changing from April 2026. It is being capped at £2.5m. Above that level, relief is expected to apply at 50%, which at a 40% IHT rate produces an effective 20% IHT charge on the excess.

Can I sell EIS shares easily?

No. Typically, EIS shares are illiquid as they’re issued by unquoted companies or early-stage businesses. Usually, as there is no secondary market to share the shares, investors have to hold on to them until there is a trade sale, flotation or company exit.

Are there other investment schemes similar to EIS?

Yes. The UK offers several other venture capital schemes designed to encourage investment into newly established and high-risk companies. Some of the more well-known ones are the Seed Enterprise Investment Scheme and Venture Capital Trusts (VCTs).

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/VCT reliefs depends on the company continuing to meet qualifying conditions and may be withdrawn. 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. You should seek independent financial and tax advice before investing.