Short answer
Any individual can buy EIS shares, but to claim income tax relief you need a UK income tax liability and must not be 'connected' with the company — broadly, not a paid employee or director and not holding more than 30% with your associates. Because EIS investments are high risk, they are usually promoted only to high-net-worth, sophisticated or professional investors.
Individuals, not companies or trusts
EIS income tax relief is available only to individuals. Companies and trusts cannot claim it, although trustees of certain trusts can claim CGT deferral relief.
UK tax position
Income tax relief reduces UK income tax, so you need a UK income tax liability to benefit. You do not need to be UK resident to claim income tax relief if you have UK-taxable income, but you must be UK resident (when the gain arises and when you invest) to claim CGT deferral relief.
The connection rules
You cannot claim income tax relief if you are connected with the company at any time from two years before the share issue (or incorporation, if later) to three years after it. You are connected if you or your associates:
- hold more than 30% of the company's ordinary share capital, issued share capital or voting power, or would be entitled to more than 30% of its assets on a winding up; or
- are an employee of the company or a partner, or a paid director (subject to exceptions).
'Associates' include your spouse or civil partner, parents, grandparents, children and grandchildren — but not brothers and sisters.
Can directors invest under EIS?
Unpaid directors can generally qualify. A director can also receive reasonable pay and still qualify as a 'business angel' if they were not connected with the company, and had no involvement in its trade, before the first share issue that qualified for relief.
How much you can invest
| Limit | Amount per tax year |
|---|---|
| Standard annual limit for income tax relief | £1,000,000 |
| Higher limit where the excess is in knowledge-intensive companies | £2,000,000 |
| CGT deferral relief | No upper limit |
Investor categories and financial promotions
Shares in unlisted companies are classed as high-risk investments. Under FCA rules, promotions of these investments are generally restricted to people who are certified high-net-worth, certified or self-certified sophisticated investors, or professional clients, or who receive regulated advice. Being in one of these categories is not an HMRC condition for relief, and confirming a category yourself does not make an investment suitable for you.
For the company-side rules, see EIS eligibility.
Frequently asked questions
Can I invest in EIS through my pension or ISA?+
No. EIS relief is available only on shares held directly (or through a nominee) by the individual.
Can my spouse and I both invest?+
Yes. Each individual has their own annual limit, but your combined holdings count together for the 30% connection test.
Sources
- GOV.UK — Venture capital schemes: tax relief for investors
- HMRC internal manual — Venture Capital Schemes Manual
- FCA — High-risk investments and financial promotions
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.