Short answer
Qualifying EIS investments can attract income tax relief of 30% of the amount invested, along with possible capital gains tax exemption, CGT deferral and loss relief. Every relief depends on the investor and the company meeting HMRC's conditions.
Income tax relief
You can reduce your income tax bill by 30% of the amount you invest in qualifying EIS shares. Relief cannot exceed the income tax you owe for the year, so it does not create a refund beyond tax paid.
| Item | Position at date of review |
|---|---|
| Rate of relief | 30% |
| Annual investment limit | £1 million per tax year, or £2 million where anything above £1 million is invested in knowledge-intensive companies |
| Carry-back | All or part of an investment can be treated as made in the previous tax year, subject to that year's limit |
| Minimum holding period | Three years |
Illustration only: an investment of £50,000 in qualifying shares could reduce an income tax liability by up to £15,000, if the investor has at least that much income tax liability and all conditions are met.
Try the illustrative EIS tax relief calculator.
Capital gains tax exemption
If you received income tax relief that has not been withdrawn, and you hold the shares for at least three years, any gain on disposal of those shares is generally free of capital gains tax.
Capital gains deferral relief
A gain made on any asset can be deferred by investing it in EIS shares, provided the investment is made within one year before or three years after the gain arose. The deferred gain becomes chargeable again when the EIS shares are disposed of, unless further reinvested. Deferral relief has no upper limit and does not require you to qualify for income tax relief.
Loss relief
If EIS shares are disposed of at a loss, the loss — reduced by any income tax relief received — can be set against income in the year of disposal or the previous year, or against capital gains.
How relief is claimed
- The company submits a compliance statement (form EIS1) to HMRC after it has traded for at least four months.
- Once HMRC authorises it, the company issues each investor a compliance certificate (form EIS3).
- The investor uses the EIS3 to claim relief through their Self Assessment return or by asking HMRC to adjust their tax code.
Relief can be withdrawn if, within the qualifying period, the company stops qualifying or the investor receives value from the company, becomes connected with it or disposes of the shares.
Frequently asked questions
Is EIS tax relief guaranteed?+
No. Relief depends on the company and the investor meeting the conditions throughout the qualifying period, and on HMRC authorising the company's compliance statement.
Can I claim relief for last tax year?+
Yes, carry-back allows you to treat all or part of an investment as made in the previous tax year, subject to that year's limits.
Sources
- GOV.UK — Venture capital schemes: tax relief for investors
- 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?
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.