- EIS tax relief gives investors 30% income tax relief on annual investments up to £1 million, or £2 million if at least £1 million goes into knowledge-intensive companies.
- To claim, investors need an EIS3 certificate from the company and must report it on their Self Assessment return or send the certificate directly to HMRC.
- Shares must be held for at least three years, and claims must be made by the fifth anniversary of 31 January following the tax year the shares were issued.
EIS tax relief gives investors 30% income tax relief on qualifying investments of up to £1 million per tax year, claimed through your Self Assessment tax return using an EIS3 certificate. The cap rises to £2 million if at least £1 million goes into knowledge-intensive companies, and the shares must be held for at least three years to keep the relief.
Most investors claim through their Self Assessment tax return, though paper claims sent directly to HMRC are also possible. Miss the paperwork or the deadline and the relief can disappear entirely.
What is EIS tax relief?
EIS tax relief is a set of tax incentives offered by HMRC to investors who back small, higher-risk UK companies through the Enterprise Investment Scheme. The scheme exists to make early-stage investment more attractive by reducing the tax investors pay on the money they put in, on the gains they make, and on any losses they take.
There are five reliefs in total, with income tax relief at 30% as the headline. For a full breakdown of what EIS is and how the scheme works at company level, read our guide to claiming EIS tax relief.
This article focuses on what investors need to do to actually claim the relief.
What are the EIS tax relief rates in 2026?
The EIS income tax relief rate is 30% of the amount invested, capped at the investor’s annual income tax liability. The annual investment limit is £1 million, doubling to £2 million if at least £1 million of that goes into knowledge-intensive companies.
Here is how that breaks down at common investment amounts:
Investment amount | EIS income tax relief at 30% | Maximum total relief possible |
£10,000 | £3,000 | £3,000 |
£50,000 | £15,000 | £15,000 |
£100,000 | £30,000 | £30,000 |
£1,000,000 | £300,000 | £300,000 |
£2,000,000 (knowledge-intensive) | £600,000 | £600,000 |
The 30% rate has not changed for the current tax year, and the scheme is currently legislated to run until April 2035. The official figures are confirmed in HMRC’s Enterprise Investment Scheme helpsheet HS341.
Which reliefs are available under EIS?
EIS offers five separate reliefs, and most investors claim more than one over the life of an investment. Each works differently and has its own conditions:
Relief | What it does | When it applies |
Income tax relief | 30% reduction in income tax liability | In the year of investment, or carried back one year |
Capital gains deferral | Defers CGT on a gain reinvested into EIS shares | When you reinvest a chargeable gain within three years |
Capital gains disposal relief | No CGT on profit when EIS shares are sold | If shares are held for at least three years |
Loss relief | Offsets losses against income or capital gains | If shares fall in value and are sold at a loss |
Inheritance tax relief | 100% relief from IHT | If shares are held for at least two years at death |
Income tax relief and loss relief tend to be the most commonly claimed. Smaller startups often raise under SEIS first, which carries a higher 50% rate but a tighter cap, before moving to EIS for follow-on rounds. Each scheme has separate paperwork and deadlines, so they need to be tracked carefully.
Who is eligible to claim EIS tax relief?
To claim EIS income tax relief, you need to be a UK taxpayer with a tax liability at least equal to the relief you want to claim. You also need to invest in a company that qualifies under EIS rules, and you must hold the shares for at least three years.
Several conditions disqualify investors:
- You are connected to the company, meaning you or an associate hold more than 30% of the shares, voting rights, or assets.
- You are a paid director or employee of the company at the time the shares are issued, unless you qualify as a “business angel” director.
- You receive value from the company within the qualifying period, such as a loan or a non-arms-length benefit.
- The shares are not ordinary shares with no preferential rights to dividends or assets on a winding up.
Investors can claim whether they live in the UK or abroad, as long as a UK income tax liability exists to set the relief against. If you are unsure whether you qualify, a tax adviser can check the rules against your personal position before you invest.
How to claim EIS tax relief step by step
Claiming EIS tax relief follows a defined process that depends entirely on receiving an EIS3 certificate from the company you invested in. Here is the step-by-step process most investors use:
- Wait for your EIS3 certificate. The company must trade for at least four months before it can submit form EIS1 to HMRC. HMRC then issues the EIS3 certificate to investors.
- Decide which tax year you want to claim in. You can claim in the year of investment or carry back to the previous tax year if your tax liability was higher then.
- Complete the Additional Information sheet (SA101) on your Self Assessment return. Enter the company name, the amount invested, the date of share issue, and the HMRC reference shown on your EIS3 certificate. Our SA101 form guide walks through the box-by-box detail.
- File your Self Assessment return as normal. HMRC processes the EIS claim alongside your other tax calculations and adjusts your liability. Our guide on how to file a Self Assessment tax return covers the full process if you have not done one before.
- Or use the paper claim on the EIS3. If you do not file Self Assessment, complete the claim form on the back of the EIS3 certificate and post it to your tax office.
Keep your EIS3 certificate even after the claim is filed. HMRC can request to see it for up to four years after the end of the tax year you claimed in.
When does HMRC pay your EIS relief?
HMRC does not pay EIS income tax relief as a standalone refund unless you have already paid the tax. The relief is applied against your income tax liability for the year, reducing what you owe rather than triggering a separate payment.
If you have already paid the tax through PAYE or a previous Self Assessment payment, HMRC issues a refund once your return is processed. This typically takes between two and eight weeks from filing, though complex cases can take longer.
For paper claims using the EIS3, expect a longer wait. HMRC handles these manually, and processing can take 12 weeks or more during busy periods around the 31 January deadline.
Can you carry back an EIS claim to the previous tax year?
Carrying back an EIS claim lets you treat the investment as if it were made in the previous tax year, which is useful if you had a higher tax bill the year before. The carry-back option is unique to EIS and SEIS and can substantially increase the value of the relief if your tax liability dropped between years.
The carry-back is claimed by ticking the relevant box on your Self Assessment return or by writing to HMRC with the carry-back request. The previous year’s tax position is then recalculated, and any overpayment is refunded.
There is one important constraint: you cannot carry back more than your unused EIS allowance for that previous tax year. If you already claimed the £1 million limit the year before, no further carry-back is possible.
What is the EIS3 certificate?
The EIS3 is the certificate HMRC issues to investors confirming that their investment qualifies for EIS relief. Without an EIS3, no claim can be made, no matter how clearly the investment appears to fit the scheme.
The company you invested in is responsible for triggering this. After trading for at least four months, the company submits form EIS1 to HMRC. HMRC reviews the application and, if approved, issues form EIS2 to the company along with EIS3 certificates to pass to investors.
Most investors receive their EIS3 between four and twelve months after investing, depending on how quickly the company starts trading and applies. Some companies secure advance assurance from HMRC before raising, which confirms eligibility upfront but is separate from the EIS3 process that comes after the investment.
What happens if you sell EIS shares before three years?
Selling EIS shares within three years of issue cancels the income tax relief, and HMRC will reclaim the relief through your tax return or by direct assessment. The same applies if the company loses its qualifying status during this period or if you become connected to the company.
The three-year clock starts on the later of two dates: the date the shares were issued, or the date the company started its qualifying trade. For most investors, this is simply the share issue date.
If shares are sold at a loss after the three-year holding period, loss relief is still available. The loss, net of the income tax relief already claimed, can be offset against income or capital gains in the year of disposal. This is one of the most valuable features of the scheme, since it cushions the downside on investments that do not pay off.
Common mistakes that delay or invalidate EIS claims
Investors and accountants both make the same handful of errors when claiming EIS, and most are avoidable with careful filing. Watch for the following:
- Claiming before the EIS3 certificate has been issued. HMRC will reject the claim.
- Entering the wrong HMRC reference number from the EIS3. The number must match exactly.
- Missing the five-year time limit, which runs to 31 January five years after the end of the tax year the shares were issued.
- Forgetting to tick the carry-back box when intending to claim against a previous year’s liability.
- Selling shares early and not declaring the cancellation of relief on the following year’s return.
- Claiming relief on shares that do not qualify, such as preference shares or shares acquired through a connected party.
If you spot a mistake after filing, you can usually amend a Self Assessment return within 12 months of the filing deadline. Beyond that, you would need to write to HMRC and explain. For the wider picture of how EIS fits alongside other reliefs, our UK tax relief guide covers the schemes that often work in combination.
How Sleek helps with EIS tax relief claims
EIS claims sit at the intersection of personal tax, investment paperwork, and HMRC deadlines, and a small error on the SA101 or the wrong tax year can wipe out thousands of pounds of relief. Most investors only file one or two EIS claims a year, which means it is rarely a process people get fluent in.
Sleek’s accountants handle EIS claims end to end, checking your EIS3 certificates, applying carry-back where it pays, and making sure every relief you qualify for ends up on the return correctly the first time.
Disclaimer: The preceding information is not legal advice. This content is aimed to provide general guidance. For more formal or legal advice, contact Sleek directly.
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FAQs on EIS tax relief
Is EIS tax relief worth it?
For most higher-rate taxpayers with capacity to absorb early-stage risk, yes. The 30% income tax relief, CGT deferral, and downside loss relief combine to soften the impact of failed investments significantly. A £10,000 investment can effectively cost as little as £3,850 after relief if the company fails completely, compared to losing the full amount on a standard share investment with no scheme attached.
Can non-UK residents claim EIS tax relief?
Yes, but only against a UK income tax liability. Non-residents who pay UK income tax on rental income, employment income, or other UK-source earnings can claim EIS relief up to the amount of that liability. If you have no UK tax to pay, there is no liability for the relief to offset, so the EIS3 certificate has no practical value while you remain non-resident.
Does EIS tax relief favour higher-rate taxpayers?
No, the 30% rate applies regardless of your income tax band. Higher-rate and additional-rate taxpayers benefit indirectly because they have larger tax liabilities to offset. The relief is capped at your actual tax bill, so basic-rate taxpayers with smaller liabilities cannot always claim the full 30% on large investments. The detail on bands is covered in our UK tax brackets guide.
Can you claim EIS relief through a PAYE tax code adjustment?
Yes, but only for claims relating to a previous tax year. HMRC can adjust your tax code to deliver the relief through reduced PAYE deductions rather than issuing a refund. Most investors prefer the lump-sum refund route via Self Assessment, since tax code adjustments spread the benefit across the rest of the tax year and tie the value to continued PAYE income.
How does HMRC verify EIS claims?
HMRC cross-checks the EIS3 reference number on your return against the EIS2 record submitted by the company. If the numbers match and the company is on HMRC’s qualifying list, the claim usually processes without query. Random compliance checks happen occasionally, and HMRC can request to see your EIS3 certificate for up to four years after the end of the tax year you claimed in.
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Venture capital trusts or EIS, which gives better tax relief?
Both offer 30% income tax relief, but the structure differs. VCTs are listed funds that hold a portfolio of qualifying companies, while EIS is a direct investment into a single company. VCTs allow tax-free dividends and have a five-year hold period. EIS allows loss relief and CGT deferral but no tax-free dividends. The right choice depends on income needs and risk tolerance.
What happens if an EIS company goes bust?
If the failure happens after the three-year hold period, you keep the 30% income tax relief and can apply loss relief to the net loss against income or capital gains. If failure happens before three years, HMRC reclaims the income tax relief, but loss relief on the remaining capital loss is still available. For additional-rate taxpayers, total tax recovery can reach 61.5% on a failed investment.
