Short answer
Gains you make when you sell EIS shares can be free of capital gains tax if you received income tax relief on them that has not been withdrawn, and you held them for at least three years. This exemption is separate from EIS deferral relief, which postpones gains on other assets.
Two different CGT reliefs
| CGT exemption (disposal relief) | CGT deferral relief | |
|---|---|---|
| Which gain? | The gain on the EIS shares themselves | A gain on any other asset |
| Effect | Gain is exempt | Gain is postponed, not removed |
| Needs income tax relief? | Yes | No |
| Upper limit | Linked to the £1m/£2m income tax relief limit | None |
For deferral, read EIS capital gains deferral.
Conditions for the CGT exemption
- You claimed EIS income tax relief on the shares and it has not been withdrawn.
- You held the shares for at least three years.
- The company continued to meet the EIS conditions for the qualifying period.
If income tax relief was given on only part of the subscription — for example because your tax liability was too low — only a proportion of the gain is exempt.
What if I sell within three years?
A disposal within three years normally means income tax relief is withdrawn and any gain is chargeable to CGT in the usual way.
What about losses?
Losses on EIS shares are allowable, even though gains may be exempt. The loss is reduced by any income tax relief you have kept, and can be set against capital gains or, by claim, against income.
See EIS loss relief.
Current CGT rates
From 30 October 2024, CGT on most assets is charged at 18% for basic-rate taxpayers and 24% for higher and additional-rate taxpayers. The value of the exemption therefore depends on your rate and on whether a gain is ever made.
Frequently asked questions
Is the EIS CGT exemption automatic?+
It applies on disposal if the conditions are met, but you must have claimed income tax relief on the shares. Keep your EIS3 and records.
Can I get the exemption if I didn't claim income tax relief?+
No. The CGT exemption on EIS shares depends on income tax relief having been given and not withdrawn.
Sources
- GOV.UK — Venture capital schemes: tax relief for investors
- GOV.UK — Enterprise Investment Scheme and Capital Gains Tax (HS297)
Tax rules can change. The information on this website is general information only and is not personal financial, investment, tax or legal advice. It does not take account of your individual circumstances. See our editorial policy.
Interested in EIS investing?
If you are a high-net-worth, sophisticated or professional investor, you can request investor information from us.
Capital at risk. EIS investments are high risk and illiquid. Tax reliefs depend on individual circumstances and qualifying conditions.