EIS shares held for at least two years qualify for 100% Business Property Relief (BPR) — meaning they fall entirely outside your estate for inheritance tax purposes. Combined with the 30% income tax relief and CGT-free growth, this makes EIS one of the most tax-efficient investment structures available in the UK.
This guide explains how the IHT relief works, what the conditions are, what changed in April 2026, and how to think about EIS within an estate planning strategy.
How EIS IHT relief works
Business Property Relief is an existing IHT exemption that was originally designed to allow family businesses to pass to the next generation without being broken up to pay an IHT bill. EIS shares in unlisted trading companies qualify for BPR at 100% — the full value of the shares is excluded from your taxable estate.
The conditions are: you must have held the shares for at least two years at the date of death (or at the date of any earlier disposal), the shares must be in a qualifying unlisted trading company, and the company must not have ceased to trade.
Two years is meaningfully shorter than the seven-year survival period required for gifts to fall outside the estate. For investors in their sixties or older who are concerned about IHT, the two-year horizon makes EIS a practical planning tool rather than a distant aspiration.
The 2026 changes — what applies to EIS
The Autumn Budget 2025 introduced a £2.5 million combined cap on 100% BPR and APR, above which relief is limited to 50%. It also cut AIM share BPR from 100% to 50%. These changes have caused significant concern among estate planners.
The key question for EIS investors: does the £2.5 million cap apply to EIS shares? The position requires careful consideration. The Budget changes primarily target business owners with trading companies and agricultural landowners — the traditional BPR taxpayers. Individual EIS investors holding minority shares in multiple companies are in a different position from a business owner holding the entire value of a trading company. Always confirm the current position with a tax adviser at the time of any EIS investment made specifically for IHT purposes.
EIS vs AIM for IHT planning
Before April 2026, AIM portfolios were often preferred over EIS for IHT planning because they combined BPR eligibility with stock market liquidity — you could sell the shares at any time, unlike EIS which is illiquid. After the cut from 100% to 50% BPR on AIM shares, the balance has shifted. EIS retains 100% relief; AIM is now only 50% effective for IHT. The illiquidity premium required to hold EIS instead of AIM shares is now compensated by double the IHT relief.
Practical estate planning with EIS
A typical use case: an investor in their mid-sixties with a £2 million estate that exceeds the IHT threshold. They have £200,000 of investable capital outside their pension and ISA. Investing this in EIS generates: £60,000 income tax relief immediately (30%), IHT relief on the full £200,000 after two years (saving £80,000 at 40%), and CGT-free growth on any gains. Total tax benefit potential on a £200,000 investment: £140,000, before considering any investment returns.
This is not a guarantee of investment success — EIS companies can fail, and the capital is at risk. But the tax case for using EIS as part of an IHT strategy is genuinely compelling for investors who have the financial resilience to accept the illiquidity and investment risk.
Working with an adviser
IHT planning with EIS should always involve an independent financial adviser with specific experience in this area. The interaction between EIS, BPR, the estate, and other planning measures (trusts, gifts, pension nominations) is complex, and the consequences of getting it wrong can be significant. The investment risk of EIS also needs to be assessed in the context of the overall estate — not as a standalone decision.
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