What is the Enterprise Investment Scheme (EIS)?
The enterprise investment scheme offers tax reliefs for investing in qualifying smaller, higher-risk trading companies: income tax relief on subscriptions, capital gains deferral, tax-free growth after three years, and loss relief. The investments are illiquid and can fail completely.
Income tax relief is 30% of the amount subscribed, up to an annual limit, with the option to carry back to the previous tax year. Gains realised elsewhere can be deferred by reinvesting into EIS shares. Where an investment fails, loss relief can be set against income, which materially softens the downside for a higher rate taxpayer.
Shares must be held for three years for the reliefs to stick, and the company must remain qualifying throughout. Advance assurance from HMRC is standard practice but is not a guarantee.
The inheritance tax position has changed. EIS shares are unquoted trading company shares, but the business property relief reform from April 2026 restricts relief on shares traded on but not listed on a recognised exchange to 50%, and caps 100% relief overall. Any EIS proposition still marketed on the strength of full inheritance tax exemption after two years needs checking against the current rules.