The Enterprise Investment Scheme (EIS) has long been the UK's flagship tax-advantaged route to raising equity for growing companies. From 6 April 2026, the regime is significantly more generous: the annual fundraising cap doubles, lifetime limits double, and the gross asset and employee headcount thresholds rise sharply.
The Enterprise Investment Scheme (EIS) gives investors 30% income tax relief on investments up to £1 million per tax year (£2m if the company is ‘knowledge-intensive’), plus CGT exemption on gains if shares held 3+ years and CGT deferral on other gains rolled into EIS. Companies must have under £15m gross assets and fewer than 250 employees at investment.
For founders considering a raise in 2026/27, the message is straightforward: more companies now qualify, for longer, and can raise more capital. This guide explains how EIS works, what changed in April 2026, and how to use the regime effectively.
🆕 Key Changes from 6 April 2026 — At a Glance
- Annual fundraising cap: £5m → £10m (£10m → £20m for KICs)
- Lifetime cap: £12m → £24m (£20m → £40m for KICs)
- Gross assets threshold: £15m → £30m
- Maximum employees: 250 → 500 (500 → 750 for KICs)
What Is EIS?
EIS is a UK government scheme designed to encourage investment in early-stage and growing companies. It works by offering a package of tax reliefs to individuals who invest in qualifying EIS shares — making your fundraising more attractive to investors than a comparable raise without tax relief.
For a founder, EIS is not a direct tax benefit — it is a fundraising advantage. Your investors receive substantial tax reliefs, which means they are willing to invest in higher-risk early-stage companies they might otherwise pass on, and often at better terms than in a non-EIS raise.
EIS Tax Reliefs for Investors in 2026/27
📈 Five Tax Reliefs Available to EIS Investors
- 30% Income Tax Relief: on investments up to £1 million per tax year (or £2 million if at least £1 million is in Knowledge Intensive Companies)
- CGT exemption: any gain on EIS shares held for at least three years is completely free of Capital Gains Tax
- CGT deferral relief: gains on other assets can be deferred by reinvesting in EIS shares within prescribed time limits
- Loss relief: if the investment fails, losses (net of income tax relief already claimed) can be set against income or capital gains at the investor's marginal rate
- IHT relief: EIS shares typically qualify for 100% Business Property Relief after two years — subject to the new £1m BPR cap from April 2026
The combined effect is powerful. An investor putting £100,000 into an EIS company receives £30,000 back as income tax relief immediately, reducing their effective cost to £70,000. If the company succeeds and they sell after three years, any gain is tax-free. If it fails, loss relief further reduces the after-tax cost.
What Changed from 6 April 2026
| EIS Limit | Pre-6 April 2026 | From 6 April 2026 |
|---|---|---|
| Annual company fundraising cap | £5 million | £10 million ↑ |
| Annual cap (Knowledge Intensive Companies) | £10 million | £20 million ↑ |
| Lifetime fundraising cap | £12 million | £24 million ↑ |
| Lifetime cap (KICs) | £20 million | £40 million ↑ |
| Gross assets at investment | £15 million | £30 million ↑ (proposed) |
| Maximum employees | 250 (500 for KICs) | 500 (750 for KICs) ↑ (proposed) |
These doubled limits widen EIS eligibility from a 'start-up only' scheme to one that genuinely supports scale-up companies. If you are mid-raise and approaching previous thresholds, consider the timing benefit of completing some allocations after 6 April 2026.
💡 What Is a Knowledge Intensive Company (KIC)?
- A company where at least 20% of employees are engaged in research, development or innovation activities — or at least 15% over three years
- Or a company that has incurred R&D expenditure of at least 15% of operating costs in one of the three preceding years
- KICs benefit from higher EIS limits and the extended 10-year trading history window
- Tech companies, life sciences, AI and engineering businesses frequently qualify as KICs
Raising via EIS or Investing in EIS?
Advance assurance applications, EIS3 certificates and post-investment compliance.
Qualifying Conditions for the Company
To issue EIS-eligible shares, the company must:
- Be UK-based with a permanent establishment in the UK
- Carry on a qualifying trade — most trades qualify, but some are excluded (financial services, property development, farming, legal services, hotels and others)
- Be no more than 7 years past first commercial sale (10 years for KICs) at the date of the first EIS / VCT investment
- Meet the gross assets and employee tests (revised limits above)
- Use the funds raised within 24 months for a qualifying business activity
- Issue ordinary shares with no preferential rights to dividends or assets on a winding-up
❌ Excluded Trades — These Do Not Qualify
EIS is not available for companies carrying on excluded activities including: banking, insurance and financial services; property development; farming and market gardening; legal services; hotels and guesthouses; nursing homes; energy generation (with some exceptions). If your business has a mix of qualifying and non-qualifying activities, the non-qualifying element must be insignificant.
Qualifying Conditions for the Investor
- Must be a UK taxpayer — income tax relief is limited to the investor's UK income tax liability
- Cannot be a connected party — broadly, must not be an employee, paid director, or hold more than 30% of the company
- Must hold the shares for at least three years to retain the income tax relief and qualify for CGT exemption
- There is a 'Risk to Capital' condition: HMRC must be satisfied that the company is genuinely growth-focused and the investment carries real risk — paper schemes designed purely to generate tax relief will not qualify
How to Apply: Advance Assurance and Compliance
Most investors will not commit until they see HMRC's Advance Assurance — confirmation in principle that the company qualifies. The process has four steps:
📋 The Four-Step EIS Process
- Step 1 — Advance Assurance application: submit company information, business plan, share structure, and details of any prior State Aid received, via the HMRC online portal. Allow 6–12 weeks for a response.
- Step 2 — Issue EIS shares: after assurance, issue the qualifying ordinary shares to investors and receive the funds.
- Step 3 — Submit form EIS1: the compliance statement, filed once you have been trading for at least four months (or have spent at least 70% of the funds raised).
- Step 4 — HMRC issues EIS2 and EIS3 certificates: investors use the EIS3 to claim their income tax relief via self-assessment.
⚠️ Common EIS Compliance Mistakes
- Issuing shares with preferential rights — even a small liquidation preference disqualifies the shares
- Returning capital to investors within three years — buybacks, reductions and even some dividend payments can trigger clawback
- Changing the qualifying trade — a significant change in business activity after the share issue can breach the conditions
- Poor documentation of fund use — HMRC enquiries focus heavily on how raised funds were actually deployed
✅ Key Takeaways — EIS in 2026/27
- From 6 April 2026, EIS limits doubled — your company may now qualify even if it did not before the changes
- Get Advance Assurance before approaching investors — it signals credibility and protects them from a failed claim
- Avoid disqualifying events: no preferential shares, no capital returns within three years, no significant trade changes
- Track use of funds carefully and document the qualifying business activity — this is where HMRC enquiries focus
- If your company is in the £15m–£30m gross assets range, the new limits are a particularly meaningful change
- Knowledge Intensive Companies now benefit from £40m lifetime limits — a genuine scale-up funding tool
- Allow 6–12 weeks for Advance Assurance — contact us early if you are planning a raise in 2026/27
Frequently Asked Questions
What are the EIS limits for 2026/27?
From 6 April 2026, the annual EIS fundraising cap doubled to £10 million (£20 million for Knowledge Intensive Companies). The lifetime cap doubled to £24 million (£40 million for KICs). Gross asset threshold increased to £30 million and maximum employees to 500 (750 for KICs).
What tax relief do EIS investors get?
EIS investors receive 30% income tax relief on investments up to £1 million per tax year, CGT exemption on gains after 3 years, CGT deferral relief, loss relief if the investment fails, and IHT relief through Business Property Relief after 2 years.
What is EIS Advance Assurance?
Advance Assurance is confirmation in principle from HMRC that your company qualifies for EIS. Most investors require this before committing. The application is submitted via the HMRC online portal and typically takes 6-12 weeks.
📚 Related reading
- Employee Share Schemes 2026/27 — EIS investors often combine with EMI option schemes — both shape your cap table over time.
- Group Structures: 2026/27 Tax Benefits — EIS-funded companies often build out group structures as they scale — key tax implications explained.
Shamim advises UK founders and investors on EIS eligibility, Advance Assurance applications, share structure design and ongoing compliance. He holds the CTA — the UK's highest tax qualification — and specialises in growth-stage business tax planning.
Are you a growth-stage tech or software business?
This article connects to our Technology & Software specialism — tax-led advisory for growth-stage SaaS, AI/ML, IT services and platform businesses. R&D claims defensibly prepared, EMI scheme design, US-UK structuring. Led by a Chartered Tax Adviser with senior in-house corporate tax experience.