i. Overview

Direct investment, direct risk, direct relief.

The Enterprise Investment Scheme is an HMRC-approved route for direct investment into early-stage, unquoted UK trading companies. Unlike a VCT, which pools money into a single listed vehicle, EIS investors typically hold shares in the underlying investee companies themselves, either directly or through a managed fund structure that allocates across a portfolio of qualifying businesses on their behalf.

Seed EIS (SEIS) is EIS's smaller, higher-risk sibling, designed for the very earliest stage of company formation. SEIS-qualifying companies are typically younger and smaller than EIS-qualifying ones, and the scheme's reliefs are more generous to compensate for the correspondingly higher risk of failure.

How EIS and SEIS work in practice

An investor subscribes for new shares in a qualifying company, or in a fund that allocates across several qualifying companies. Income tax relief is available immediately on the amount subscribed, at 30% for EIS and 50% for SEIS, provided the shares are held for a minimum of three years. Because the underlying companies are early-stage and unquoted, capital losses are a real possibility, and EIS loss relief allows an investor to offset a net loss on disposal against either capital gains or income tax, which meaningfully changes the risk-adjusted outcome for a higher-rate taxpayer.

EIS and SEIS shares also typically qualify for Business Relief once held for two years, meaning they can fall outside an investor's estate for inheritance tax purposes on top of the income tax and CGT reliefs already claimed, an overlap that's often central to how these products get positioned for clients doing both growth and estate planning.

ii. The reliefs

Six reliefs — the most generous wrapper in the UK tax system.

EIS and SEIS offer a wider package of reliefs than any other tax-efficient product category. Each is designed to offset a specific element of the risk of investing at the earliest stage of company formation.

i.
30%

Income tax relief · EIS

Upfront income tax relief on new subscriptions, up to £1m per tax year (£2m where the excess is invested in Knowledge Intensive Companies). Held for a minimum of three years or relief is clawed back.

ii.
50%

Income tax relief · SEIS

A higher rate of upfront income tax relief on new SEIS subscriptions, up to £200,000 per tax year, reflecting the earlier stage and higher risk of SEIS-qualifying companies.

iii.
0%

Capital gains on disposal

Gains realised on the disposal of EIS or SEIS shares are exempt from capital gains tax, provided the shares were acquired within the annual limit and the three-year holding condition has been met.

iv.
Unltd

CGT deferral

A capital gain from any asset can be deferred by reinvesting it into EIS shares, with no upper limit, deferring the tax liability until the EIS shares are eventually disposed of.

v.
Yes

Loss relief

If the investment is disposed of at a loss, the net loss can be offset against either capital gains or the investor's income tax liability, whichever is more valuable to them.

vi.
2yr

IHT relief via Business Relief

Shares in qualifying EIS and SEIS companies typically also qualify for Business Relief, falling outside the investor's estate for inheritance tax purposes after two years of ownership.

iii. Next steps

Ready to compare current offerings?

The EIS product page lists all currently distributed EIS and SEIS funds, with fees, target returns and offering documents. The matrix tool provides side-by-side comparison across all current offerings.