EIS Tax Relief Explained (2026)

The Enterprise Investment Scheme offers five distinct tax reliefs to investors who back qualifying UK companies. They are among the most substantial tax incentives available to UK investors and are particularly powerful when used by higher and additional-rate taxpayers with capital gains to manage.

This guide explains each EIS tax relief with worked examples.

Relief 1: 30% income tax relief

Invest up to £1 million in EIS-qualifying companies in a tax year and claim 30% back against your income tax bill. The relief applies in the year of investment and can be carried back one year.

Example: You invest £200,000 in EIS. Your income tax relief is £60,000. If your income tax bill for the year is £80,000, it falls to £20,000. The relief is paid via Self Assessment — either as a reduction in tax owed or a refund.

Relief 2: CGT exemption on EIS gains

Hold EIS shares for three years or more and any gain is completely exempt from CGT. For gains on investments outside tax wrappers, CGT is 24% for higher-rate taxpayers — the EIS exemption is therefore equivalent to a 24% uplift on successful returns.

Relief 3: CGT deferral relief — the most powerful EIS feature

This relief allows you to defer a capital gain by investing the proceeds into EIS. The deferred gain is not taxed until you sell the EIS shares. You can defer a gain arising up to one year before or three years after the EIS investment.

Example: You sell a buy-to-let property in 2025 and make a gain of £300,000. You face a CGT bill of £72,000. Instead, you invest £300,000 in EIS. The £72,000 CGT is deferred. You also receive EIS income tax relief of £90,000 (30%). In the year of the property sale, your combined tax saving is £162,000.

The deferred gain eventually crystallises when you sell the EIS shares — unless you hold them until death, in which case the deferred gain may be extinguished. This is why EIS CGT deferral is used extensively in estate planning.

Relief 4: Loss relief

If an EIS company fails, you can claim loss relief on the net loss (original investment minus the 30% income tax relief already received). The loss relief can be set against income tax or capital gains tax.

Example (45% taxpayer): £100,000 invested. £30,000 income tax relief received. Net at risk: £70,000. Company fails. Loss relief at 45% = £31,500. Total recovered: £61,500. Net loss: £38,500 — 38.5p in the pound.

Relief 5: Inheritance tax relief

EIS shares held for two or more years attract Business Relief, removing them from the investor's estate for inheritance tax. At a 40% IHT rate, a portfolio of £500,000 in qualifying EIS shares could reduce an estate's IHT liability by £200,000.

Stacking EIS reliefs

The reliefs can stack. An investor who uses £300,000 of a capital gain to invest in EIS receives: income tax relief of £90,000, CGT deferral on £300,000 (saving £72,000 immediately), CGT exemption on any future EIS gain, and IHT relief after two years. The combined first-year value is £162,000 of tax savings on a £300,000 investment.