Short answer
EIS, or the Enterprise Investment Scheme, is a UK government scheme designed to encourage investment in qualifying smaller businesses by offering investors certain tax reliefs, subject to qualifying conditions.
Why the scheme exists
Young, unlisted companies often find it hard to raise money because investing in them is high risk. The Enterprise Investment Scheme was introduced in 1994 to help those companies raise equity finance by giving individual investors tax reliefs in return for accepting that risk.
The main EIS reliefs at a glance
| Relief | In summary |
|---|---|
| Income tax relief | 30% of the amount invested, set against your income tax liability, up to an annual investment limit. |
| Capital gains tax exemption | Gains on qualifying EIS shares may be free of CGT if income tax relief was given and not withdrawn, and shares are held for at least three years. |
| CGT deferral relief | A gain on another asset can be deferred by reinvesting it in EIS shares within the permitted period. |
| Loss relief | If shares are disposed of at a loss, the loss (net of income tax relief) may be set against income or gains. |
Each relief has its own conditions. Figures reflect GOV.UK guidance at the date of review and can change.
Who the scheme is for
EIS reliefs are available to individuals who pay UK tax and who are not 'connected' with the company — broadly, they must not be an employee (with some exceptions) or hold more than 30% of the company. The company itself must meet conditions on its size, age, activities and how it uses the money raised.
See the detailed conditions in EIS eligibility.
What EIS does not do
EIS reduces the tax cost of an investment; it does not reduce the business risk. A company can fail regardless of its EIS status, and relief can be withdrawn if conditions are broken during the qualifying period.
Before investing, read the main risks of EIS investing.
How investors typically access EIS
- Directly, by subscribing for new shares in a single company.
- Through an EIS fund or portfolio service that invests in several companies on the investor's behalf.
- Via an investment platform or adviser arranging the investment.
For an overview of the market, see EIS investments in the UK.
Frequently asked questions
Is EIS a government guarantee?+
No. EIS provides tax reliefs subject to conditions. It does not protect you against losing money.
How long do I need to hold EIS shares?+
Generally at least three years from the date the shares are issued, or from when the company starts trading if later.
Is EIS the same as SEIS?+
No. SEIS is a separate scheme for very early-stage companies with different limits and rates of relief.
Sources
- GOV.UK — Venture capital schemes: tax relief for investors
- GOV.UK — Venture capital schemes: apply for the Enterprise Investment Scheme
- 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.
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Capital at risk. EIS investments are high risk and illiquid. Tax reliefs depend on individual circumstances and qualifying conditions.