The Enterprise Investment Scheme (EIS) remains one of the most generous tax-advantaged routes for UK investors willing to back small, high-risk trading companies. For women investors and women in business more broadly, understanding EIS for investors is essential. It can reduce an investor’s income tax bill by 30% and unlock capital gains and inheritance tax reliefs, while channelling capital into early-stage companies that traditional lenders often overlook.
HMRC administers EIS, and the scheme is now permanent after the government removed the 2025 sunset clause in the Spring Budget 2024. As of the 2026/27 tax year, the core reliefs and thresholds remain in place, but the rules around qualifying companies and connected persons are strict. This guide sets out what investors need to know before committing capital.
EIS for investors: the five main tax reliefs
Income tax relief
Investors can claim income tax relief at 30% of the amount subscribed for new ordinary shares in an EIS-qualifying company, up to a maximum investment of £1 million per tax year. If you invest at least £1 million in knowledge-intensive companies, the annual limit rises to £2 million, according to HMRC guidance for the 2026/27 tax year. A £10,000 investment therefore cuts your income tax liability by £3,000, provided the shares are held for at least three years.
Capital gains tax deferral
HMRC rules allow you to defer capital gains tax on gains realised up to 36 months before the EIS investment, or up to 12 months after it. The deferred gain becomes chargeable only when the EIS shares are disposed of or no longer qualify. This applies regardless of whether you claim income tax relief on the EIS shares, making it useful for investors crystallising gains from property, shares or other assets.
Capital gains tax exemption
Any gain on EIS shares is free from capital gains tax if the shares are held for at least three years and income tax relief was given and not withdrawn. This means a successful exit can be entirely tax-free on the capital gain, significantly boosting net returns.
Inheritance tax relief
EIS shares can qualify for Business Relief for inheritance tax purposes if held for at least two years and the company remains qualifying at the time of death. HMRC notes that not all EIS-qualifying companies automatically qualify for Business Relief, so investors should check the company’s trading activities before relying on this.
Loss relief
If an EIS investment fails, investors can claim loss relief against income tax or capital gains. The loss is calculated after deducting any income tax relief already received. For a 45% taxpayer, the effective loss on a failed £10,000 EIS investment can fall to roughly £3,850 after the initial 30% income tax relief and further loss relief are applied.
Who can invest under EIS
EIS is open to UK taxpayers who subscribe for new ordinary shares in cash. However, you must not be connected with the company. For EIS purposes, HMRC guidance treats you as connected if you hold, directly or indirectly, more than 30% of the company’s ordinary share capital, issued share capital, loan capital, voting rights or rights to assets on a winding up, either alone or with associates. Associates include spouses, civil partners, parents, children and business partners.
The connected-person rules also restrict directors and employees. You cannot claim EIS income tax relief if you are a paid director or employee of the company when the shares are issued. There are limited exceptions for unpaid directors or directors who receive only permitted payments, but these are narrow. This is designed to ensure the scheme benefits external risk capital rather than insiders.
What companies qualify for EIS
A company must meet several conditions to issue EIS-qualifying shares. It must be unquoted, carry on a qualifying trade, and have a permanent establishment in the UK. The company must also have fewer than 250 full-time equivalent employees at the date of issue, and gross assets must not exceed £15 million immediately before the investment or £16 million immediately after it, according to HMRC’s EIS guidance.
The trade must be a qualifying trade. Excluded activities include property development, dealing in land, financial services, coal and steel production, farming, and running hotels or nursing homes. HMRC’s EIS guidance states that the company must not have been carrying on the qualifying trade for more than seven years before the date of the first EIS investment, although this extends to 10 years for knowledge-intensive companies. These companies can raise up to £20 million in total under EIS and venture capital trusts, compared with £12 million for other companies, according to HMRC.
Knowledge-intensive companies are those carrying out research, development or innovation, and must meet additional tests around operating costs and skilled employees.
How the EIS investment process works
Before raising EIS funding, most companies apply to HMRC for advance assurance. This is not a guarantee, but it gives investors comfort that HMRC is satisfied the company is likely to qualify. Founders preparing to raise should also have a clear investment proposition; our pitch deck guide for female founders explains how to present a company to angel and EIS investors.
Once the investment is made, the company submits a compliance statement to HMRC. If approved, HMRC issues EIS3 certificates to investors, which are needed to claim tax relief through Self Assessment. Investors claim income tax relief in the tax year the shares are issued, or can treat some or all of the investment as made in the previous tax year, provided the annual limits are not exceeded. This carry-back feature can be useful for investors who want to use relief against income tax already paid.
Risks every EIS investor should weigh
EIS investments are high risk. The companies are early-stage, often pre-profit, and may have limited trading history. Equity finance remains concentrated in a small number of high-growth firms, and many early-stage companies fail entirely. The British Business Bank has repeatedly highlighted the funding challenges facing women-founded and early-stage businesses. Investors should assume they could lose all of their capital.
Liquidity is another concern. EIS shares are not listed on a stock exchange, so there is no ready market. Exits typically come through trade sales, management buyouts or, less commonly, initial public offerings. You may need to hold the shares well beyond the minimum three-year period to realise any value.
Finally, tax relief can be withdrawn if the company ceases to qualify, the shares are sold within three years, or you become connected to the company. Investors should keep records of EIS3 certificates and monitor the company’s continuing eligibility.
Action steps before you invest
- Check the company has HMRC advance assurance or a track record of EIS compliance.
- Confirm you are not a connected person and understand the 30% shareholding limit.
- Verify the company meets the employee, asset and age thresholds.
- Plan how you will use income tax relief, capital gains deferral and potential loss relief within your overall tax position.
- Take independent financial advice; EIS is complex and high risk.
The Enterprise Investment Scheme offers substantial tax advantages for UK investors prepared to back small, innovative companies. For women investors and women-led businesses, EIS for investors can be a valuable part of a diversified portfolio or funding strategy. With the right due diligence and professional advice, it can deliver both tax efficiency and exposure to high-growth UK companies.
