The Enterprise Investment Scheme is a tax legislation framework, not an investment product. Here is how it tends to be used in practice.
The high earner with a large income tax bill
EIS gives income tax relief of 30% on investments up to £1 million per tax year. SEIS gives 50% on up to £200,000. For someone with a large income tax liability, this can be significant. The shares need to be held for a minimum of three years — sell before that and HMRC claws back the relief in full.
The investor facing a capital gains tax bill
If you have sold a business, a property, or a large shareholding and have a CGT bill coming, EIS deferral relief lets you push that liability back by reinvesting into qualifying EIS shares. It does not cancel the gain — it delays it. This tends to require close coordination with a tax adviser given the timing involved.
The estate planning angle
EIS shares held for at least two years in qualifying companies can attract Business Relief, potentially removing their value from your estate for inheritance tax purposes. Following the October 2024 Budget, this is one of the few routes that still offers full relief without the new £1 million cap that now applies to other business and agricultural assets.