Short answer
EIS income tax relief lets you reduce your income tax bill by 30% of the amount you invest in qualifying EIS shares, up to £1 million a year (£2 million if the excess is in knowledge-intensive companies). You must hold the shares for at least three years, and relief cannot exceed the income tax you owe.
How much relief you get
Relief is 30% of the amount subscribed, given as a reduction in your income tax liability for the year. It is a 'tax reducer': it cannot reduce your liability below zero, so you cannot receive a repayment of more tax than you have paid.
| Amount invested | Maximum income tax relief at 30% |
|---|---|
| £10,000 | £3,000 |
| £50,000 | £15,000 |
| £100,000 | £30,000 |
| £1,000,000 | £300,000 |
Model figures with the illustrative EIS calculator.
Annual investment limits
The maximum you can invest and claim relief on is £1 million per tax year. This rises to £2 million provided anything over £1 million is invested in knowledge-intensive companies. Spouses and civil partners each have their own limit.
Carry-back to the previous tax year
You can treat all or part of an investment as if it were made in the previous tax year, provided that year's limit is not exceeded. This can help if you paid more income tax last year or have already used this year's limit.
Conditions you must meet
- The shares must be new, full-risk ordinary shares, paid for in full in cash at issue.
- You must not be connected with the company in the qualifying period.
- You must hold the shares for at least three years.
- You must not receive value from the company or have arrangements protecting you from risk.
- The company must satisfy all EIS conditions throughout the qualifying period.
How to claim
Use the EIS3 certificate the company sends you. Enter the claim on your Self Assessment return, or complete the claim section of the EIS3 and send it to HMRC to adjust your tax code or receive a repayment. The time limit is five years from 31 January following the tax year of the investment.
When relief is withdrawn
Relief is withdrawn or reduced if you dispose of the shares within three years, receive value from the company, become connected with it, or if the company stops qualifying. On a sale at arm's length, the withdrawal is limited to 30% of the sale proceeds.
How income tax relief links to other reliefs
Claiming income tax relief (and keeping it) is needed for the CGT exemption on a later gain. It also affects loss relief, because the allowable loss is reduced by the income tax relief you have kept.
Frequently asked questions
Can I claim EIS relief against dividend income tax?+
Yes. Relief reduces your overall income tax liability, which includes tax on dividends, savings and earnings, but it cannot reduce it below zero.
Does EIS relief reduce National Insurance?+
No. EIS relief reduces income tax only.
Sources
- GOV.UK — Venture capital schemes: tax relief for investors
- GOV.UK — Enterprise Investment Scheme: income tax relief (HS341)
- HMRC internal manual — Venture Capital Schemes Manual
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?
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Capital at risk. EIS investments are high risk and illiquid. Tax reliefs depend on individual circumstances and qualifying conditions.