What is EIS (Enterprise Investment Scheme)? | 2026/27 Guide

The Enterprise Investment Scheme (EIS) is a venture capital tax initiative designed to encourage investment into early-stage, high-risk trading companies by offering substantial tax incentives to individual investors. Section 156 of the Income Tax Act 2007 (ITA 2007) establishes the statutory framework for EIS income tax relief.

For practitioners advising clients in the 2026/27 tax year, the UK government has formally secured the scheme’s future. The Finance Act 2026 amends section 157(1)(aa) of ITA 2007 to extend the EIS sunset clause from 6 April 2025 to 6 April 2035.

To fully answer what is EIS, practitioners must assess four distinct investor tax reliefs, alongside the strict new 2026/27 funding thresholds the issuing company must satisfy.

Front-End Income Tax Relief

When an individual subscribes for new qualifying shares in an EIS company, they can claim a reduction in their current year income tax liability.

Under section 158(2A) of ITA 2007, the EIS income tax relief rate is fixed at 30%.  For the 2026/27 tax year, section 158(2ZA) dictates the allowable investment amount:

• Standard Limit: An investor can claim relief on up to £1 million per tax year.  At 30%, this provides a maximum standard tax reduction of £300,000.
• Knowledge-Intensive Company (KIC) Limit: The annual limit increases to £2 million, provided the investor allocates at least £1 million of that total into Knowledge-Intensive Company shares.

“The allowable amount is— (a) if the qualifying shares do not include any KIC shares: £1 million; (b) if the amount, or the sum of the amounts, subscribed for qualifying shares that are KIC shares is £1 million or more: £2 million…”

Investors can also elect to carry back the relief, treating all or part of the subscription as if the company issued the shares in the preceding tax year, subject to that previous year’s maximum limits.

Capital Gains Tax (CGT) Disposal Exemption

A chargeable gain accruing on a qualifying disposal of EIS shares is entirely exempt from Capital Gains Tax.

Section 150A(2) of the Taxation of Chargeable Gains Act 1992 (TCGA 1992) dictates that this exemption applies only if the investor holds the shares for a minimum of three years (the termination date of Period B), and provided the investor successfully claimed and retained the initial EIS income tax relief.  Because the legislation exempts the gains, section 150A(2A) clarifies that any loss accruing on the disposal is not an allowable loss for CGT purposes.

CGT Deferral Relief (Reinvestment)

Distinct from the disposal exemption, EIS also offers an entry-side CGT deferral mechanism. Under section 150C and Schedule 5B of TCGA 1992, if an investor realises a chargeable gain on the disposal of any asset and reinvests those proceeds into EIS shares, they can defer the original CGT liability.

The gain is effectively frozen until the investor disposes of the EIS shares (or another chargeable event occurs).  Unlike the SEIS 50% exemption, EIS deferral applies to 100% of the reinvested gain, and there is no annual limit on the amount of gain an investor can defer under this provision.

Share Loss Relief

If the EIS investment fails and the investor disposes of the shares at a loss, the investor does not suffer a stranded capital loss. Under section 131 of ITA 2007, the individual can elect to offset the allowable loss against their general income for the year of the loss or the preceding year.  Practitioners must calculate this loss net of the original 30% income tax relief retained.

Company Qualifying Criteria (2026/27 Finance Act Changes)

The Finance Act 2026 overhauls the qualifying thresholds for issuing companies, vastly expanding the scope of eligible businesses from 6 April 2026.

• Gross Asset Limits: Section 186 of ITA 2007 now mandates that the value of the company’s gross assets must not exceed £30 million immediately before the relevant share issue (up from £15 million), and must not exceed £35 million immediately afterwards (up from £16 million).
• Annual Raise Limit: Under the amended section 173A, the maximum risk finance a standard company can raise annually increases to £10 million.  For Knowledge-Intensive Companies (KICs), this annual limit doubles to £20 million.
• Lifetime Raise Limit: Under the amended section 173AA, a standard company can now raise a lifetime total of £24 million in risk finance.  For KICs, the lifetime limit rises to £40 million.  Special reduced limits apply to specified Northern Ireland companies involved in goods or electricity trades.
• Employee Limits: To qualify, standard companies must have fewer than 250 full-time equivalent (FTE) employees at the time the shares are issued, whereas KICs can have up to 500 FTEs.

Summary of EIS Tax Reliefs & Conditions (2026/27)

Next steps for research: Assess the specific operating costs criteria under section 252A of ITA 2007 to determine if the target company successfully qualifies as a Knowledge-Intensive Company (KIC) to unlock the higher £20m/£40m funding thresholds.