How Do I Claim EIS Loss Relief? UK Tax Guide (2026/27)

When a client’s Enterprise Investment Scheme (EIS) investment fails or sells at a deficit, they can mitigate the financial damage by converting their capital loss into an Income Tax deduction. If your client asks “how do I claim EIS loss relief?”, you must navigate the statutory share loss rules, correctly calculate the retained income tax relief, and apply the specific exemptions that bypass the standard income tax cap for the 2026/27 tax year.

This guide details the precise arithmetic, statutory deadlines, and filing mechanics required to execute a valid claim.

The Statutory Basis: Qualifying for Share Loss Relief

The mechanism that allows taxpayers to offset capital losses against their general income is “share loss relief”, governed by Chapter 6 of Part 4 of the Income Tax Act 2007 (ITA 2007).

Under section 131(1) ITA 2007, an individual is eligible for share loss relief if they incur an allowable capital loss on the disposal of qualifying shares.  Primary legislation specifically confirms that shares are “qualifying shares” if EIS relief is attributable to them.

To trigger the relief, the disposal of the shares must fall within one of the strictly defined categories in section 131(3) ITA 2007:

• A sale by way of a bargain made at arm’s length.
• A distribution in the course of dissolving or winding up the company.
• A complete loss, destruction, dissipation, or extinction of the asset under section 24(1) of the Taxation of Chargeable Gains Act 1992 (TCGA 1992).
• A deemed disposal under section 24(2) TCGA 1992, which occurs when a taxpayer makes a formal claim that the value of the shares has become negligible.

Calculating the Net Allowable Loss

You cannot simply deduct the sale proceeds from the initial subscription amount to find the allowable loss. You must adjust the base cost to account for any EIS income tax relief the client retains.

HM Revenue & Customs (HMRC) enforces a strict calculation method in their Venture Capital Schemes Manual at VCM20110.  The allowable loss is reduced by the amount of income tax relief that remains attributable to the shares sold.

Arithmetic Example: A client subscribes £100,000 for EIS shares and claims 30% initial income tax relief (£30,000). In the 2026/27 tax year, the company underperforms, and the client sells the shares at arm’s length for £60,000.

1. Calculate Withdrawn Relief: The sale proceeds (£60,000) are multiplied by the original 30% EIS rate, meaning £18,000 of income tax relief is withdrawn.
2. Calculate Retained Relief: The original £30,000 relief minus the £18,000 withdrawn relief leaves £12,000 of relief still attributable to the shares.
3. Calculate Adjusted Cost: Deduct the retained relief (£12,000) from the original cost (£100,000) to find the adjusted base cost of £88,000.
4. Calculate Allowable Loss: £60,000 (Proceeds) – £88,000 (Adjusted Cost) = £28,000 allowable loss.

Bypassing the Income Tax Reliefs Cap

The most powerful feature of EIS loss relief is its immunity from the standard statutory cap on income tax reliefs.

Generally, section 24A ITA 2007 restricts the amount of relief an individual can deduct against their income to £50,000, or 25% of their adjusted total income, whichever is greater.  However, section 24A(7)(d)(i) ITA 2007 explicitly exempts deductions for share loss relief where the shares have EIS relief attributable to them.  HMRC formally acknowledges this exemption at VCM74035, confirming that investors can offset the full net loss against high-rate income without the standard restriction.

For the 2026/27 tax year, section 2 of the Finance Act 2026 fixes the main rates of income tax at 20% (basic rate), 40% (higher rate), and 45% (additional rate).  Furthermore, section 10 of the Finance Act 2026 locks the Personal Allowance at £12,570.  Because EIS loss relief completely bypasses the section 24A cap, high-earning clients can offset their entire loss against their 45% additional rate band, recovering up to 45p for every £1 lost.

The Claiming Process: Timelines and Mechanics

When deciding how to allocate the loss, the taxpayer has a statutory choice. Section 132(1) ITA 2007 dictates that an individual may claim the deduction against their net income for:

• The year of the loss;
• The previous tax year; or
• Both tax years.

If the client claims the relief across both years, section 132(2) requires them to explicitly specify which year the deduction applies to first.  The statutory deadline to make this claim is the first anniversary of the normal Self Assessment filing date for the year of the loss.  For a loss arising in the 2026/27 tax year, the normal filing date is 31 January 2028, making the absolute deadline 31 January 2029.

Execution via Self Assessment

According to HMRC’s VCM14140, the taxpayer normally executes the claim on their Self Assessment tax return.  To process the claim:

1. The client must possess a valid form EIS3 from the issuing company. HMRC explicitly states that in no circumstances can a claim be made before the investor receives this form.
2. The advisor must copy the specific details from the EIS3 certificate into the “any other information” box on the tax return.
3. The relevant boxes on the Capital Gains summary (SA108) must be completed to signal the disposal and the resulting relief claim.

If the client incurs the loss mid-year and does not wish to wait for the Self Assessment cycle, VCM14140 permits them to request a change to their PAYE tax code number using the claim section of the EIS3 form, or to claim a reduction in their payments on account.

Summary of 2026/27 EIS Loss Relief Rules

Next steps for advisors: If the target company has ceased trading but has not formally liquidated, instruct your client to execute a negligible value claim under section 24(2) TCGA 1992 to crystallise the EIS loss in the 2026/27 tax year, ensuring they hold the original EIS3 certificate before submitting the SA108.