Model the income tax credit, CGT exemption, and downside loss relief of an investment in an Enterprise Investment Scheme (EIS) or Seed Enterprise Investment Scheme (SEIS) qualifying company. 2026/27 limits and rates.
High-risk investments. EIS and SEIS shares are illiquid, can lose 100% of value, and are only suitable for sophisticated investors who can bear total loss. Tax reliefs depend on company qualifying status — confirm before investing.
EIS and SEIS are HMRC-approved venture capital schemes that give qualifying small UK companies a way to attract investment by offering investors generous tax reliefs. Both come with strict company qualifying conditions (size, age, trade type, no controlling shareholders) and strict investor conditions (must hold for at least 3 years, no connection with the company beyond a small share).
EIS — 2026/27 reliefs
Income tax relief: 30% of the amount invested, deducted from income tax liability that year (or carried back to the previous year).
Maximum investment with relief: £1,000,000 per tax year (£2,000,000 if at least £1,000,000 goes into Knowledge Intensive Companies).
CGT exemption: Any capital gain on disposal after 3 years is entirely free of CGT.
CGT deferral: Any pre-existing capital gain can be deferred by reinvesting in EIS shares.
Loss relief: If shares lose value, the loss (after relief received) can be claimed against income or capital gains.
IHT relief: EIS shares qualify for Business Relief after 2 years, removing them from the IHT estate.
SEIS — 2026/27 reliefs
Income tax relief: 50% of the amount invested.
Maximum investment with relief: £200,000 per tax year (raised from £100,000 in April 2023).
CGT exemption: Same 3-year exemption as EIS.
CGT reinvestment relief: Half of any capital gain reinvested in SEIS shares is exempt from CGT (a partial deferral, not a deferral-then-payable).
Loss relief and IHT relief: Same as EIS.
Worst-case downside maths
Take a £20,000 EIS investment for a higher-rate taxpayer:
30% income tax relief on £20,000 = £6,000 tax saving
Net cost after relief: £14,000
If the company fails (worth £0), the £14,000 loss can be claimed against income at 40% = £5,600 of additional tax saving
Final downside: £14,000 − £5,600 = £8,400 net cost on a £20,000 investment — the taxpayer has effectively offloaded 58% of the downside risk onto HMRC.
Common mistakes
Not checking the company has Advance Assurance. A company without HMRC Advance Assurance may turn out not to qualify, retroactively losing reliefs.
Selling within 3 years. All reliefs are clawed back if shares are sold before 3 years from investment.
Becoming "connected" with the company. Owning more than 30% of share capital, or being an employee/director (with some exceptions), disqualifies you from the reliefs.
Forgetting the income tax cap. EIS / SEIS relief can only reduce your income tax liability to zero — it cannot generate a refund of tax you didn't owe.
How EIS (30%) and SEIS (50%) income tax relief plus CGT exemptions work for UK investors.
Olivia — £20,000 EIS investment, higher-rate taxpayer
EIS investment
£20,000
Income tax band
Higher rate (40%)
Total income tax owed (before EIS)
£18,000
EIS relief rate
30%
The math:
EIS income tax relief: £20,000 × 30% = £6,000
Applied against current-year tax bill OR carried back to prior year
Net cost of investment: £20,000 − £6,000 = £14,000
After 3 years of holding: any growth is CGT-exempt
Loss relief: if investment fails, the £14,000 net loss can offset income tax at 40% = £5,600 additional relief
Result: Olivia's £20,000 EIS at risk is effectively £14,000 (£8,400 with loss relief on full failure). EIS shares must be held 3+ years and the company must remain qualifying — early sale or qualifying-loss triggers clawback.
Sam — £10,000 SEIS + £30,000 EIS mixed investment
SEIS investment
£10,000
EIS investment
£30,000
Total investment
£40,000
Income tax band
Higher rate (40%)
The math:
SEIS relief: £10,000 × 50% = £5,000 income tax relief
EIS relief: £30,000 × 30% = £9,000 income tax relief
Total income tax relief: £14,000
Net cost of £40,000 investment: £26,000
SEIS reinvestment relief: 50% of any CGT crystallised in same year can be re-invested into SEIS, halving CGT bill (additional benefit)
Result: Sam invests £40,000 at effective net cost £26,000 — 35% government subsidy on entry. After 3 years all growth is CGT-exempt; on full failure, loss relief gives an additional £10,400 = total downside £15,600 (39% of original outlay). The asymmetric risk is what makes EIS/SEIS popular with higher-rate investors.
Figures use 2026/27 UK tax-year rates and thresholds. Always verify against your specific payslip or tax statement before acting.
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