EIS, SEIS, VCT and UK investment tax reliefs explained

What tax reliefs are available for investing in UK businesses?

The UK tax system offers various tax reliefs intended to encourage investment in UK businesses.

The way in which tax relief is given, and the conditions that must be met, are specific to the relevant relief. Generally, however, an investor can only get relief if they invest in shares in an unquoted trading company (which for these purposes usually includes an AIM listed company) and hold them for a prescribed period.

This guide highlights the key tax reliefs but doesn’t cover all the conditions in detail.

What changes to UK investment tax reliefs take effect in April 2026?

From 6 April 2026, the company limits for EIS and VCT investment will be increased, which means more scaling businesses can qualify for funding under these venture capital schemes. From the same date, the rate of VCT income tax relief is reduced to 20% (from 30% before 6 April 2026). For many investors, a key benefit remains the exemption from capital gains tax (CGT) on the sale of EIS or VCT shares, where the conditions are met.

If the investor previously used the remittance basis, Business Investment Relief (BIR) may allow them to bring foreign income and gains to the UK without a tax charge if the funds are invested in a qualifying company. Transitional rules apply to pre‑6 April 2025 foreign income and gains until 5 April 2028, and from 6 April 2028 it will not be possible to claim BIR on new investments or reinvestments. For more information, read our article on Business Investment Relief.

Income tax and capital gains tax relief

Enterprise Investment Scheme (EIS)

What is EIS?

EIS gives 30% income tax relief on investments up to £1 million annually in qualifying companies. If an investor invests at least £1 million in qualifying ‘knowledge-intensive’ companies, the limit increases to £2 million. Where income tax relief has been claimed (and is not withdrawn), shares will be free of capital gains tax (CGT) on disposal. An investor can also defer capital gains on other assets by investing them in an EIS investment, with the deferred gain becoming due when they sell the EIS shares.

In addition, losses made on EIS shares can often be set against income (rather than only against capital gains). This can mean that, if maximum tax relief is obtained, over 60% of the cost of the investment can be covered by tax relief if the investment fails (30% income tax relief and 45% income tax relief for the remainder).

What are the eligibility rules for EIS?

Both the investor and the company receiving the investment must meet certain qualifying conditions for EIS income tax and CGT reliefs to be available. The conditions include:

• Shares must be issued fully paid in cash (an important point, which can easily be overlooked),
• The shares must be held for at least three years,
• The investor cannot be connected with the company, such as being an employee or director, unless they are a “business angel” or unpaid director,
• The company must carry on, or be preparing to carry on, a qualifying trade.
• Certain trades don’t qualify, including financial and banking activities, legal and accountancy services, property development, and farming,
• For shares issued on or after 6 April 2026, the company’s gross assets must be no more than £30 million immediately before issuing EIS shares (£15 million before 6 April 2026) and no more than £35 million immediately afterwards (£16 million before 6 April 2026)
• The company must have fewer than 250 full time equivalent employees when the shares are issued (500 for knowledge-intensive companies),
• A company generally has seven years from its first commercial sale to obtain EIS funding,
• For shares issued on or after 6 April 2026, the annual amount a company can raise under EIS is £10 million (£5 million before 6 April 2026), or £20 million for knowledge‑intensive companies (£10 million before 6 April 2026).
• Funds raised through EIS must be used to grow or develop the business.

How much can a company raise under EIS?

For shares issued on or after 6 April 2026, the lifetime amount a company can raise increases to £24 million (£12 million before 6 April 2026), or £40 million for knowledge‑intensive companies (£20 million before 6 April 2026). This means that companies that had previously reached the old lifetime cap may have additional headroom for EIS-qualifying fundraising from that date.

Seed Enterprise Investment Scheme (SEIS)

What is SEIS and what companies are eligible?

SEIS is similar to EIS, but it’s designed for smaller companies. To qualify a company must have gross assets of up to £350,000 and fewer than 25 employees. Reflecting the higher-risk nature of investing in these businesses, investors can obtain 50% income tax relief on up to £200,000 of investment annually.

SEIS shares are exempt from CGT when sold if certain conditions are met and not subsequently withdrawn. Up to 50% of the amount invested (up to a £200,000 investment cap) can also be set against other capital gains arising in the year of investment, effectively reducing the gain subject to tax.

Many of the conditions for SEIS relief are similar to those which apply for EIS. There are differences, however, including:

• The trade must be less than three years old to qualify, and
• The company must not have previously issued EIS or VCT shares.

How much can a company raise under SEIS?

The maximum investment a company can raise under SEIS is £250,000. The company can subsequently raise further investment under EIS, but the timing of such future EIS investments and share issues is important and so specific advice should be sought at such a time.

Venture Capital Trusts (VCT) relief

What is a VCT?

A VCT is a quoted investment fund which invests in small and medium-sized companies, broadly the sort of trading companies that qualify for EIS status.

What are the VCT rule changes in April 2026?

From 6 April 2026, an investor can obtain income tax relief for investments in the fund at 20% on up to £200,000 investment a year (30% before 6 April 2026). This relief is withdrawn where the investor doesn’t hold the VCT shares for at least five years. Dividends paid out by the VCT on investments within the £200,000 annual limit are received free of income tax, and the subsequent sale of VCT shares is free of CGT.

Note that this only applies to investments in newly issued shares. If the investor buys pre-existing shares in the VCT on the market then these reliefs will not apply.

What types of companies do VCTs invest in?

Conditions for the relief to apply include:

• The VCT must be listed on an EU regulated market,
• The VCT’s investments must be diversified with no more than 15% of its investments in a single company,
• At least 80% of its investments must be in ‘qualifying holdings’, broadly in UK-resident companies (or companies with a UK permanent establishment) carrying on a qualifying trade,
• The same expanded company limits that apply for EIS also apply for VCT investments from 6 April 2026, including the higher £30 million/£35 million gross assets thresholds and the increased annual and lifetime company investment limits (£10 million/£24 million, or £20 million/£40 million for knowledge‑intensive companies), and
• As with EIS and SEIS, certain trades are excluded.

Capital gains tax (CGT) reliefs

Investors’ Relief

What is Investors’ Relief?

Investors’ Relief reduces the rate of CGT the investor pays on gains on the disposal of qualifying shares to 18% from 6 April 2026 (14% in 2025-26), instead of the standard 24%.

Shares acquired must be new shares fully paid in cash at the date of issue and the investor must hold them for at least three years.

Who qualifies for Investors’ Relief?

Relief is only available where the investee company is a trading company (or the holding company of a trading group). The definition of ‘trading company is where the company does not carry on substantial, broadly 20%, non-trading or investment activities. The additional exclusions which apply for EIS, SEIS and VCT do not apply here.

For Investors’ Relief to be available, the investor must not be a director or an employee of the company. Limited exclusions apply where a business angel becomes an unpaid director following their investment, or where an individual becomes an employee more than 180 days after they make their investment (provided this was not reasonably expected at the time of the investment).

There are no annual limits on investments qualifying for Investors’ Relief, but a lifetime cap of £1 million of qualifying gains applies.

For more on this relief see our Investors’ Relief article.

Business Asset Disposal Relief (BADR) – previously called Entrepreneurs’ Relief

What is BADR?

Business Asset Disposal Relief (BADR) gives a reduced 18% rate of CGT on qualifying gains from 6 April 2026 (previously 14%), subject to a lifetime cap of £1 million.

How does BADR differ from Investors’ Relief?

The key difference between BADR and Investors’ Relief is that BADR is aimed at those officers or employees with an active involvement in the business.

Who can claim BADR?

BADR is available on qualifying disposals of unincorporated businesses, as well as on shares. In the case of shares, relief is only available where, throughout the two years before the disposal, the shareholder is:

• An officer or employee of the company, and
• Hold at least 5% of the ordinary share capital and voting rights, and are either:
  • Beneficially entitled to at least 5% of the company’s distributable profits and 5% of the assets for distribution to equity holders on a winding up, or
  • Beneficially entitled to at least 5% of the proceeds on a sale of the entire ordinary share capital (in determining whether this test is met at any time in the required two-year period, the whole of the ordinary share capital is deemed to be sold at its market value on the last day of that two-year period).

The company must be a trading company, or the holding company of a trading group. The EIS/SEIS/VCT restrictions don’t apply, and ‘trading’ takes its usual broader meaning (where the trading company doesn’t carry on substantial, broadly 20%, non-trading or investment type activities).

There are several quirks in the legislation which can mean that relief is inadvertently lost: ensuring that full relief is available is, therefore, a key part of corporate structuring for entrepreneurs.

For more on this relief see our BADR article.

Practical considerations

Various tax reliefs are available on investments in UK business, and the benefit can be considerable, particularly for higher-risk investments, where the tax relief can mitigate the risk for potential commercial losses. Potential investors should therefore assess which reliefs may be available when considering a new investment. It is equally important to ensure that all conditions are met both at the time of investment and throughout any qualifying period. An inadvertent breach can cause a costly withdrawal of relief.

How we can help

We advise investors and businesses on key tax reliefs, including the venture capital schemes (EIS, SEIS and VCT), Investors’ Relief and BADR. We can help potential investors understand which reliefs may be available, check eligibility and conditions, and support the structuring and documentation needed to protect relief.

To find out more, please get in touch with your usual Saffery contact, or get in touch with Sean Watts.