A complete guide to the Enterprise Investment Scheme (EIS)

What is the Enterprise Investment Scheme?

The Enterprise Investment Scheme (EIS) is a government initiative that provides a valuable source of funding to early-stage companies while offering tax benefits to investors. This guide marks out which companies qualify, the benefits, how to invest, risks, tax relief and transferral or inheritance of EIS shares. 

The case for early investment

One of the best ways to significantly increase personal wealth is to make an early investment into shares of a small business that goes on to achieve big growth. The earlier you invest, the more value can flow to you as a shareholder. However, you should keep in mind EIS investments are high risk. The value of an investment can rise as well as fall, potentially to zero.

Launched in 1994, the Enterprise Investment Scheme (EIS) makes investing in shares in early-stage businesses even more attractive. When an early-stage business is EIS-qualifying, you can claim a number of tax reliefs alongside your investment, including upfront income tax relief, tax-free capital gains, and loss relief on each investment that returns less than you invested. Please remember tax rules may change in the future, and the value of tax reliefs depends on your individual circumstances. 

Why EIS exists

The government offers EIS tax reliefs to encourage people to invest in early-stage businesses with high growth potential. They do this because smaller businesses that mature into successful, established companies create jobs and stimulate economic growth in the UK. 

Since EIS was launched, more than 53,000 qualifying early-stage businesses have benefitted from £30 billion of investment.¹ In 2021-22 alone, £2.3 billion was raised by companies that qualify for EIS. 

By making an EIS-qualifying investment, you have the potential to grow your own wealth – and to support future UK economic growth too. 

Introduction to EIS-qualifying companies

This section explains the rules for EIS eligibility and how invested funds must be used. 

Income tax, capital gains tax and inheritance tax

Learn the basics about income tax, capital gains tax and inheritance tax, and how they relate to EIS investments.

Transferring or inheriting EIS shares

If you want to transfer ownership of an EIS investment, there are certain rules that apply to the tax reliefs. These rules define how the original investor and beneficiary are affected, which depends on whether the EIS investment is a gift or inheritance.