Short answer
EIS investments are high risk. You could lose all of the money you invest, you may be unable to sell your shares for many years, and tax reliefs can be withdrawn if conditions are not met. Tax relief reduces cost but does not remove risk.
Loss of capital
Most early-stage businesses fail or return less than was invested. You should only invest money you can afford to lose entirely without affecting your standard of living.
Illiquidity
Shares in unquoted companies are not traded on a public market. An exit usually depends on a sale of the company or a listing, which may take many years or never happen.
Dilution
Companies often raise further rounds of investment. New shares can reduce your percentage ownership, and later investors may receive preferential rights.
Concentration
Investing in a single company concentrates risk. Spreading across several investments can reduce — but not remove — the impact of any one failure.
Tax relief risk
- Relief may be refused if the company does not qualify or HMRC does not authorise its compliance statement.
- Relief may be withdrawn if the company or investor breaches the rules during the qualifying period.
- Tax rules and rates can change, and their value depends on your circumstances.
Information risk
Private companies publish far less information than listed companies. Review investment documentation carefully, check the company on Companies House and seek independent advice.
Read our full investment risk warning.
Frequently asked questions
Does EIS loss relief mean I can't lose money?+
No. Loss relief can reduce the net cost of a loss but you will still lose a substantial part of the money invested if a company fails.
Sources
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.