The Enterprise Investment Scheme tax benefits

tiemadmin • 2 October 2025

The Enterprise Investment Scheme (EIS) is designed to help smaller, higher-risk trading companies raise finance by offering a range of tax reliefs to investors who purchase new shares in those companies.

This scheme aims to encourage investment in early-stage businesses by providing substantial tax benefits to investors. However, in order to claim EIS tax reliefs, the issuing company must meet a set of strict criteria regarding its size, the amount of money it can raise, and the purpose and timing of the funds raised.

For individual investors, the tax benefits include 30% Income Tax relief on investments, with a maximum annual investment limit of £1 million, or £2 million if at least £1 million is invested in knowledge-intensive companies. The generous tax allowances are intended to offset the higher risk of investing in these smaller companies. It is important for investors to be cautious and only invest money they are prepared to lose, as these companies can be particularly volatile.

The tax advantages of the EIS go beyond just Income Tax relief. Investors can also benefit from Capital Gains Tax (CGT) deferral for the life of their investment and tax relief for any losses incurred on the shares. However, it’s worth noting that Income Tax relief is capped at an amount that reduces the investor’s Income Tax liability to nil for the year, meaning it can’t exceed the individual’s tax due. These tax benefits make the EIS an attractive option for those looking to support high-growth companies while taking advantage of potential tax savings.

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