EIS Tax Relief: The Complete Guide for UK Investors

The Enterprise Investment Scheme (EIS) has channelled over £24 billion into UK companies since its launch in 1994, making it one of the UK's most significant tools for directing private capital into growing businesses. For investors, EIS offers a compelling package of tax reliefs that reduce the effective risk of investing in innovative companies while contributing to the UK's entrepreneurial ecosystem.

What Is EIS?

The Enterprise Investment Scheme enables individuals to invest in qualifying UK companies and claim income tax relief of 30% on investments up to £1 million per tax year. This annual limit rises to £2 million if the investment above £1 million is directed at knowledge-intensive companies (KICs). EIS-qualifying companies must have fewer than 250 employees, gross assets under £15 million, and be carrying on a qualifying trade.

The scheme was extended until April 2035, providing a decade-long window for investors to benefit from these tax advantages.

The Core EIS Tax Reliefs

1. Income Tax Relief (30%)

EIS investors claim income tax relief at 30% on qualifying investments. A £100,000 EIS investment reduces the investor's income tax bill by £30,000, lowering the effective cost of the investment to £70,000. The relief can be carried back to the previous tax year, and shares must be held for a minimum of three years to retain the relief. Unlike SEIS, EIS relief can be set against investments up to £1 million (£2 million for KICs), making it suitable for larger investment allocations.

2. Capital Gains Tax Deferral

EIS offers a unique CGT deferral relief. Investors who have realised capital gains within three years before, or up to one year after, subscribing for EIS shares can defer those gains. The deferred gain only becomes payable when the EIS shares are disposed of. This is especially powerful for entrepreneurs and business owners who have recently sold a business and wish to defer the CGT liability while redeploying capital into new ventures.

3. CGT Exemption on EIS Gains

Any capital gains on EIS shares are completely exempt from CGT, provided income tax relief was claimed and the shares have been held for the three-year qualifying period. Combined with CGT deferral on other gains, EIS offers a powerful mechanism for managing an investor's overall capital gains position.

4. Loss Relief

If an EIS investment fails, the investor can offset the loss against income tax or capital gains tax. After the 30% income tax relief is accounted for, the remaining capital at risk can be offset at the investor’s marginal rate. For a 45% additional rate taxpayer investing £100,000, the net cost of a total loss after all reliefs would be approximately £38,500 — meaning over 61% of the original capital is protected.

5. Inheritance Tax Relief

EIS shares qualify for 100% IHT relief via Business Property Relief after a two-year holding period. From April 2026, this 100% relief will be capped at £1 million of combined business and agricultural assets. However, for investors with estates below this threshold, EIS remains one of the fastest routes to IHT relief, qualifying after just two years compared to seven years for gifts or potentially exempt transfers.

Why the Haatch EIS Fund?

The Haatch EIS Fund invests in seed-stage B2B SaaS companies that have already proven product-market fit through the Haatch SEIS Fund pipeline. This “follow-on” model gives the EIS Fund a unique information advantage: the team has already observed these companies through their earliest days and selects only the top performers for further investment. The fund also co-invests alongside Tier 1 institutional funds, providing access to larger rounds that would normally be inaccessible to individual investors. Haatch EIS Fund has delivered exits of up to 6.55x (Re-flow) and is independently reviewed by Hardman & Co.