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The UK offers three government-backed schemes that reward investors for backing smaller UK companies: the Enterprise Investment Scheme (EIS), the Seed Enterprise Investment Scheme (SEIS), and Venture Capital Trusts (VCTs). All three offer tax relief, but they suit different investors. In short:
EIS - for higher relief on larger sums, deferring a capital gain, loss relief and estate planning, with concentrated, illiquid risk.
SEIS - for the highest relief on smaller sums, in exchange for very early-stage risk.
VCT - for tax-free income, diversification and listed shares, where the investor can hold for five years.
This guide compares all three on the 2026/27 rules, including the company-level changes that took effect in April 2026. It is written for financial advisers and individual investors considering tax-efficient investments in UK growth companies.
What is EIS?
The Enterprise Investment Scheme was introduced in 1994 to encourage private investment into smaller, higher-risk UK trading companies. It offers up to 30% income tax relief on subscriptions of up to £1 million per tax year (£2 million where the additional amount is invested in knowledge-intensive companies), along with capital gains tax deferral, CGT-free growth, inheritance tax relief, and loss relief if a company fails.
Investors can invest directly into individual qualifying companies or through a managed EIS fund, where a professional investment manager builds a portfolio on their behalf. EIS shares must be held for at least three years to retain the income tax relief. Following the April 2026 reforms, EIS can now back companies further into their growth.
What is SEIS?
The Seed Enterprise Investment Scheme was introduced in 2012 as a companion to EIS, targeting the very earliest stage of a company’s life. SEIS offers 50% income tax relief on investments of up to £200,000 per tax year, reflecting the greater risk of backing businesses that are often pre-revenue or at prototype stage.
Investors also receive 50% capital gains reinvestment relief on gains invested into SEIS shares, CGT-free growth, inheritance tax relief after two years, and loss relief. Shares must be held for a minimum of three years. SEIS-qualifying companies must have gross assets below £350,000, fewer than 25 employees, and must have been trading for less than three years. The Autumn Budget 2025 did not change any SEIS limits.
What are VCTs?
Venture Capital Trusts were introduced in 1995 and take a different approach. A VCT is a publicly listed investment company, traded on the London Stock Exchange, that pools capital and deploys it into a diversified portfolio of qualifying small UK businesses. Investors do not choose individual companies — a professional fund manager makes those decisions, so a single subscription gives instant diversification.
From 6 April 2026, VCT investors receive 20% income tax relief on new subscriptions of up to £200,000 per tax year (reduced from 30%). Dividends from VCTs are tax-free, and there is no capital gains tax on disposal — tax-free income is now the heart of the VCT case. VCTs do not offer CGT deferral, loss relief, or inheritance tax relief. Shares must be held for at least five years, and although they are listed, they often trade at a discount to net asset value.
Feature | EIS | SEIS | VCT |
|---|---|---|---|
Upfront income tax relief | 30% | 50% | 20% |
Annual investment qualifying for relief | £1m (£2m with the excess in KICs) | £200,000 | £200,000 |
Minimum holding period | 3 years | 3 years | 5 years |
Carry back to prior year | Yes | Yes | No |
Dividends | Taxable | Taxable | Tax-free |
Gains on disposal | Free of CGT if relief kept | Free of CGT if relief kept | Free of CGT |
Help with an existing gain | Deferral of the whole gain | Exemption for 50% of the gain reinvested | None |
Loss relief | Yes | Yes | No |
Inheritance tax Business Relief | Yes, after 2 years | Yes, after 2 years | No |
Portfolio and liquidity | Concentrated, unquoted | Concentrated, very early stage, unquoted | Diversified, listed, often at a discount |
For the companies they back
EIS and VCT | SEIS | |
|---|---|---|
Gross assets | £30m before and £35m after the share issue | £350,000 |
Employees | Fewer than 250, or 500 if knowledge intensive | Fewer than 25 |
Company age | Within 7 years of first commercial sale, 10 if knowledge intensive | Trading for less than 3 years |
Amount a company can raise | £10m a year and £24m in total, or £20m and £40m if knowledge intensive | £250,000 in total |
EIS and VCT company limits doubled for shares issued from 6 April 2026. SEIS limits are unchanged since April 2023.
The downside if every holding fails
Loss relief is what separates EIS and SEIS from VCTs when an investment goes wrong. The table shows a 45% additional rate taxpayer investing £10,000 and losing it entirely.
45% taxpayer invests £10,000 | EIS | SEIS | VCT |
|---|---|---|---|
Upfront income tax relief | £3,000 | £5,000 | £2,000 |
Loss after relief | £7,000 | £5,000 | £8,000 |
Loss relief at 45% | £3,150 | £2,250 | None |
Worst-case net loss | £3,850 (38.5%) | £2,750 (27.5%) | £8,000 (80%) |
Read the final row with care. A total loss is far less likely in a VCT, which spreads risk across many companies - but it offers no loss relief. EIS and SEIS portfolios are more concentrated, which is why loss relief matters more. The example assumes an additional rate taxpayer with enough income tax liability to use the reliefs.
Tax reliefs in detail
Income tax relief
EIS offers 30% relief on up to £1 million per tax year (£2 million where the excess goes into knowledge-intensive companies). SEIS offers 50% on up to £200,000. VCTs offer 20% on up to £200,000. Both EIS and SEIS allow carry back — treating an investment as if made in the previous tax year - which VCTs do not.
Capital gains tax
EIS is the only scheme offering CGT deferral: a gain on the disposal of any asset can be deferred by reinvesting the proceeds into EIS shares, with no upper limit, until the EIS shares are sold. SEIS instead offers 50% reinvestment relief, exempting half of any gain reinvested into SEIS shares. All three schemes offer CGT-free growth on the scheme shares themselves.
Inheritance tax relief
EIS and SEIS shares qualify for Business Relief after a two-year holding period, provided the company still qualifies at the point of death. From April 2026, 100% relief applies to the first £2.5 million of combined business and agricultural property, with 50% above that, and any unused allowance can pass to a spouse or civil partner. VCT shares do not qualify for Business Relief.
Loss relief
If an EIS or SEIS company fails, the allowable loss is the amount invested minus income tax relief received, and this net loss can be set against income (not just capital gains) - as the worked example above shows. VCTs offer no loss relief.
What changed in April 2026
VCT relief fell from 30% to 20% for new shares. Tax-free dividends, tax-free growth and the five-year holding period are unchanged.
EIS and VCT company limits doubled, and the gross assets test rose from £15m/£16m to £30m/£35m, so investors can follow on into larger, later-stage companies.
Business Relief now has a £2.5m allowance at 100%, with 50% above that, and unused allowance transferable to a spouse or civil partner. AIM shares receive 50% relief and do not use the allowance.
SEIS limits were unchanged.
The net effect: EIS now has a clear advantage over VCTs on upfront relief (30% vs 20%), while VCTs retain their unique benefit of tax-free dividends.
Which scheme suits which investor?
No single scheme is right for every investor, and many use a combination. The following is general guidance, not a personal recommendation.
EIS may suit investors with a significant income tax liability who want 30% relief, hold capital gains to defer, want potential IHT relief, and are comfortable with illiquid, concentrated risk held for three or more years.
SEIS may suit investors who want the highest relief (50%), have smaller amounts to deploy, are willing to accept very early-stage risk, and have gains to shelter via reinvestment relief.
VCTs may suit investors who prefer a diversified, professionally managed portfolio, value tax-free dividend income, want some secondary-market liquidity, and are comfortable holding for at least five years.
Frequently asked questions
Can an investor use more than one scheme in the same year?
Yes. Each scheme has its own annual limit, and reliefs can be combined up to the investor’s income tax liability. The order in which reliefs are set against the liability matters, so they should be calculated together.
Which gives the most relief?
On upfront relief, SEIS (50%), then EIS (30%), then VCT (20%). But dividends, gains treatment, loss relief, holding periods and liquidity all differ, so suitability depends on objectives, not the headline rate.
Do SEIS and EIS shares qualify for Business Relief?
They can, once held for two years and if the company still qualifies at death. VCT shares do not.
Are the reliefs guaranteed?
No. They depend on the investor and the company meeting HMRC conditions and holding periods, and the rules can change.
Important information
This guide is produced by EverQuest Capital Partners LLP for general information only. It does not constitute financial, tax, or investment advice.
EIS, SEIS and VCT investments place capital at risk: investors may get back less than they invest and may lose all of it. They invest in smaller, often unquoted companies and are illiquid, and VCT shares typically trade at a discount to net asset value. Dividends are not guaranteed. Upfront relief is withdrawn on early disposal. Tax reliefs depend on individual circumstances and on investments maintaining qualifying status, and tax rules may change.
Figures reflect the 2026/27 rules and our understanding of legislation and HMRC guidance ahead of the Autumn Budget on 28 October 2026, and should be reviewed against it. Investors should seek independent financial and tax advice before investing.
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