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The Enterprise Investment Scheme (EIS) and Seed Enterprise Investment Scheme (SEIS) offer some of the UK's most generous tax incentives for investors willing to back high-risk, high-potential startups. With carefully planned investments, these schemes can dramatically reduce your tax bill whilst supporting innovative British businesses.
Do note that tax treatments depend on individual circumstances and may be subject to change. You should seek advice from a registered tax adviser if you are unsure of how the schemes might apply to you. Refer to HMRC’s published guidance for the most up to date rules and information.
Understanding the tax relief landscape
SEIS provides the highest rate of income tax relief at 50%, but only up to a maximum investment of £200,000 per year (cumulatively across investments). EIS provides income tax relief at 30% up to a maximum cumulative investment of £1 million per year, which can be increased to £2 million if the additional £1 million is invested in knowledge-intensive companies.
The appeal extends beyond income tax relief. Both schemes offer capital gains tax exemptions on disposal after three years, inheritance tax relief after two years of ownership, and valuable loss relief if investments don't perform as expected.
You can read more about each of these schemes in our guides, click here for SEIS, and here for EIS.
Maximising tax efficiency across different taxes
Income tax relief
For example, if £100,000 of EIS investment is made, an income tax reduction of £30,000 can be claimed in that tax year or the previous tax year. SEIS investors enjoy even better terms - a £100,000 investment could yield £50,000 in income tax relief.
The relief is particularly valuable for higher-rate taxpayers facing marginal rates of 40% or 45%. However, it's crucial to have sufficient income tax liability to utilise the relief fully, as it cannot reduce your tax charge below zero.
Recent changes to capital gains tax rates make EIS and SEIS investments even more attractive. The main rates of Capital Gains Tax increased from 10% and 20% to 18% and 24% respectively for disposals made on or after 30 October 2024. Against this backdrop, the complete CGT exemption on EIS and SEIS shares becomes increasingly valuable.
SEIS offers additional CGT reinvestment relief. Capital gains reinvestment relief allows an individual who has disposed of a chargeable asset - that would normally be liable to capital gains tax (CGT) - to treat up to 50% of the gain as capital gains tax exempt should they reinvest some or all of it into SEIS qualifying shares. This can save higher-rate taxpayers significant sums, with potential CGT savings of up to £12,000 annually.
Both schemes offer valuable inheritance tax relief through Business Relief. In accordance with the UK's Business Relief (BR) rules, there would be no inheritance tax liability on SEIS shares following the death of an investor (as long as the shares were held for at least two years).
This becomes particularly important given recent inheritance tax changes. From 6 April 2026 100% IHT relief on SEIS private companies will be limited to the first £1 million of qualifying assets, with the remainder eligible for 50% IHT relief. However, EIS and SEIS investments made before this date should retain full relief.
To find out more about inheritance tax relief through EIS and SEIS investing, see our inheritance tax guide.
Strategic timing and situations
SEIS and EIS investments are particularly valuable during years of exceptional income, such as bonus payments, business sales, or property disposals. The ability to carry back relief to the previous tax year provides additional flexibility for tax planning.
Property investors and those with significant share portfolios can use SEIS reinvestment relief strategically. By timing the disposal of other assets alongside SEIS investments, investors can halve their CGT liability whilst building a diversified portfolio of growth companies.
With inheritance tax receipts hitting record levels - £6.3 billion collected over nine months to December 2024, a £600 million rise compared with the same period last year - EIS and SEIS investments offer valuable estate planning opportunities. The combination of potential growth and inheritance tax relief makes them particularly attractive for wealthy individuals seeking to reduce their estate's IHT liability.
Recent exits demonstrate the schemes' potential for significant returns. In February 2025, Haatch partially exited field management software company Re-flow, achieving up to 6.55x returns for its EIS fund investors. Similarly, Fuel Ventures partially exited Arbolus, an AI-powered online marketplace, delivering a return of up to 5.8x for investors in Fuel's EIS funds.
Other notable successes include ContentCal, acquired by Adobe for £85 million with returns of 7.8x and 6x respectively for EIS investors. These examples highlight how the tax reliefs can amplify already substantial investment returns.
The generous tax reliefs significantly mitigate investment risk. An additional-rate taxpayer could effectively reduce a total loss of £1 to 15.5p once all the tax reliefs available have been taken into account through SEIS loss relief.
For EIS investments, loss relief allows investors to offset any losses against income tax. Combined with the initial 30% income tax relief, this dramatically reduces the effective downside risk whilst preserving the full upside potential.
Rather than backing individual companies, many investors use EIS and SEIS funds to achieve diversification across multiple investments.
EIS and SEIS markets in 2025 present both significant opportunities and evolving challenges for investors. Investment levels have reached record highs in recent tax years, with over £2.3 billion raised by 4,480 companies under EIS in 2021-22, representing a 39% year-on-year increase. SEIS similarly achieved £205 million raised by 2,270 companies, up 16% from the previous year.
However, the landscape has become more complex. The introduction of risk-to-capital conditions has shifted investment focus towards knowledge-intensive companies and follow-on funding rounds rather than purely new startups. This trend, combined with timing and qualification challenges, means investors must be increasingly strategic about their approach.
Geographic diversification is creating new opportunities, with regions like Yorkshire, Wales, the North-East, Scotland, and South-West showing strong growth in EIS and SEIS investment. The information and communication sector has emerged as dominant, accounting for 35% of EIS investments in 2023-24.
Economic headwinds including slow UK growth and inflation have dampened some investor confidence, resulting in slower exits and investment flows.
The growing emphasis on ESG and sustainability is reshaping investment priorities. Investors are showing rising interest in companies aligned with climate technology, clean energy, and social equity themes, paralleling broader market trends favouring sustainable investment strategies.
The UK government has demonstrated continued support for both schemes, extending the EIS "sunset clause" beyond April 2025 and increasing SEIS limits to allow companies to raise up to £250,000 whilst investors can invest up to £200,000 annually.
Successful EIS and SEIS investing requires careful attention to qualifying conditions. Companies must obtain advance assurance from HMRC, and investors must hold shares for at least three years to retain tax reliefs. The complexity of regulations means investing through an S/EIS fund is often preferable.
For investors, the key is viewing these schemes as long-term investments in genuine businesses rather than purely tax-motivated transactions. The most successful outcomes combine meaningful tax savings with exposure to Britain's most promising growth companies.
With inheritance tax changes looming, capital gains tax rates rising, and income tax thresholds frozen, EIS and SEIS investments offer increasingly attractive opportunities to reduce tax bills whilst supporting innovation and potentially generating substantial returns.
