What is EIS and how does it work?
By SuLe · Updated 22 June 2026
The Enterprise Investment Scheme (EIS) is a UK government tax-relief scheme for growth companies: individuals who subscribe for new shares get 30% of what they invest back as an income tax reduction, on up to £1m per tax year. A qualifying company can raise up to £5m in any 12 months and £12m over its lifetime — £20m if knowledge-intensive. Investors must hold the shares for 3 years.
Key facts
- Investors get 30% income tax relief on up to £1m per tax year — £2m if the excess is invested in knowledge-intensive companies.
- Companies can raise up to £5m in any 12 months (all venture schemes combined) and £12m lifetime (£20m for knowledge-intensive companies).
- Company limits: fewer than 250 full-time equivalent employees (500 for knowledge-intensive) and gross assets of £15m or less before the issue, £16m after.
- The first investment must come within 7 years of the company's first commercial sale (10 for knowledge-intensive).
- Shares must be held for 3 years or the income tax relief is withdrawn; gains are then free of capital gains tax if the relief was given and not withdrawn.
What tax reliefs do EIS investors get?
The core relief is 30% of the amount invested off the investor's income tax bill, on up to £1m per tax year — £2m where the excess is invested in knowledge-intensive companies. That means a £100,000 cheque costs a qualifying investor £70,000 net.
The growth is sheltered too: gains on EIS shares are free of capital gains tax if the shares are held for 3 years and the income tax relief was given and not withdrawn. If things go wrong instead, loss relief lets the investor set the loss — net of relief already received — against income tax or capital gains.
EIS also interacts with an investor's wider capital gains position — HMRC's investor guidance covers the full set of reliefs. The income tax relief is currently legislated for shares issued before 6 April 2035.
Which companies qualify for EIS?
Established-but-still-growing ones. You need fewer than 250 full-time equivalent employees (500 for knowledge-intensive companies) and gross assets of £15m or less before the issue and £16m after it.
There is also an age test: the first investment must come within 7 years of your first commercial sale — 10 years for knowledge-intensive companies. Excluded trades (dealing in land or shares, banking, property development, hotels, energy generation and others) cannot use the scheme, and the money raised must be employed in the business within 2 years.
Finally, the risk-to-capital condition from the Finance Act 2018 applies: the company must have objectives to grow and develop long-term, and the investment must carry a significant risk of losing more capital than the net return.
How much can we raise — and over what period?
Up to £5m in any 12 months, counting all the venture capital schemes combined — so earlier SEIS money inside the same 12 months eats into the £5m. Over the company's lifetime the cap is £12m, or £20m for knowledge-intensive companies.
Knowledge-intensive status is HMRC's label for research-heavy businesses; the precise conditions are in HMRC's guidance and worth checking early if you are deep-tech.
The shares themselves must be new ordinary shares, full-risk, paid up in full in cash at issue, with no preferential rights to assets on a winding up and no pre-arranged exit or capital protection.
Who can invest under EIS?
Outside investors, essentially. Anyone holding more than 30% of the shares, votes or capital — counting their associates — cannot claim, and employees cannot claim at all.
Paid directors are generally excluded too, unless the business angel rules apply — a sharp contrast with SEIS, where directors can claim. If a prospective investor wants a board seat and a salary, take advice before you promise them 30% relief.
The process mirrors SEIS: advance assurance first (non-statutory, but most angels require it), then the share issue, then a compliance statement (form EIS1) once you have traded 4 months or spent 70% of the money — HMRC's acceptance unlocks EIS3 certificates.
| Limit | Standard EIS | Knowledge-intensive company |
|---|---|---|
| Lifetime raise cap | £12m | £20m |
| Employees | Fewer than 250 full-time equivalents | Fewer than 500 |
| Age window | First investment within 7 years of first commercial sale | Within 10 years |
| Investor annual cap | £1m | £2m, where the excess is in knowledge-intensive companies |
Worked example
Tomasz and Ayesha run a medtech device company: first commercial sale four years ago, 38 full-time staff, gross assets of £3.4m — inside the 7-year window, the 250-employee limit and the £15m asset test. They raise £1.2m under EIS, comfortably within the £5m 12-month cap.
Their lead angel invests £400,000 and takes £120,000 off her income tax bill. The company issues new ordinary shares, files its EIS1 once it has spent 70% of the money (£840,000), and sends out EIS3 certificates after HMRC accepts it.
If the lead sells before the 3-year mark, her £120,000 relief is withdrawn — so nobody plans an early exit.
Where founders go wrong
Missing the age window
— the first investment must land within 7 years of your first commercial sale (10 for knowledge-intensive companies); older companies should take advice before promising EIS.Counting only EIS towards the £5m
— the 12-month cap covers all venture schemes combined, so SEIS money in the same period counts.Letting a paid directorship disqualify an investor
— under EIS, paid directors are generally excluded unless the business angel rules apply; check before the round, not after.Leaving the money unspent
— it must be employed in the business within 2 years; idle cash undermines the growth story HMRC signed off.
Related questions
Can my company raise under SEIS instead of EIS?
If it is young and small enough, yes — SEIS covers companies whose qualifying trade is under 3 years old, with gross assets of £350,000 or less and fewer than 25 staff, up to £250,000 lifetime. Investors get 50% relief instead of 30%, so eligible companies normally use SEIS first. [More: SEIS vs EIS — what's the difference?]
Do I need advance assurance before an EIS round?
It is not mandatory — advance assurance is a non-statutory pre-clearance — but most angels will not complete without it. You apply to HMRC with details of the company, your plans for the money and your expected investors, and wait for the assurance letter before issuing shares. [More: How do I get SEIS/EIS advance assurance?]
What is a knowledge-intensive company?
A company that meets HMRC's knowledge-intensive conditions — broadly, research-heavy businesses. The label buys higher limits: a £20m lifetime raise cap instead of £12m, up to 500 employees instead of 250, a 10-year age window instead of 7, and a £2m investor cap where the excess is knowledge-intensive.
Can non-UK investors claim EIS relief?
The relief works by reducing a UK income tax bill, so the practical question is whether your investor has UK income tax to relieve, not their passport. Overseas investors with little or no UK tax liability may get nothing from the 30%, even where the shares themselves qualify. [More: Can non-UK investors claim SEIS or EIS relief?]
EIS rounds are bigger than SEIS rounds and the mistakes scale with them: a mistimed raise, a disqualified director-investor or the wrong share rights can strip 30% relief from your syndicate. A SuLe solicitor can pressure-test your round design before the paperwork goes out. Book a free SEIS/EIS readiness call and close with the relief intact.
Keep reading: What is SEIS and how does it work? · SEIS vs EIS — what's the difference? · Can I raise under SEIS and EIS at the same time? · What is the risk-to-capital condition? · Can my company lose SEIS/EIS status after the investment? · What happens to SEIS/EIS investors in an exit?
Primary sources: HMRC — Apply to use the Enterprise Investment Scheme · HMRC — Tax relief for investors using venture capital schemes
