The new EIS landscape: what advisers and investors need to know

EIS income tax relief stays at 30%, while VCT relief fell to 20% from 6 April 2026, and the amount a company can raise through EIS has doubled. Together, these Autumn 2025 Budget changes are the biggest reset of UK venture capital tax reliefs in over a decade. This guide covers what changed, what stayed the same, and why EverQuest believes the reforms suit Deep MakeTech companies.

What changed on 6 April 2026

For shares issued on or after 6 April 2026, the amount a company can raise through EIS and the other venture capital schemes has doubled.

The practical effect is time. Companies that once ran out of EIS headroom after two or three rounds can now keep raising from EIS investors as they grow.

Knowledge intensive companies

Knowledge intensive companies (KICs) get double the standard limits because their growth rests on research and innovation. To qualify, a company needs fewer than 500 full-time equivalent employees and a minimum level of R&D spending. It must also either be creating intellectual property it expects to drive most of its business within ten years, or have at least 20% of staff with a relevant Master’s degree or higher working on research. (HMRC, VCM8162)

For investors, KIC status lifts the annual relief limit from £1 million to £2 million, provided the excess goes into KICs. Only HMRC can confirm whether a company qualifies.

A larger balance sheet allowed

Gross assets can now reach £30 million before a share issue and £35 million after, up from £15 million and £16 million. This matters most for capital-intensive businesses. A company building pilot lines or a plant adds assets fast, and under the old ceiling it could lose EIS eligibility just as its capital needs peaked.

What did not change: EIS relief stays at 30%

The Budget cut VCT upfront relief from 30% to 20% but left EIS at 30%, on the basis that relief should reflect risk. VCTs hold larger, more diversified portfolios, while EIS backs earlier-stage companies more directly. The rest of the EIS package is unchanged:

Income tax relief. 30% on up to £1 million a year (£2 million with KICs), provided the shares are held for at least three years.

CGT exemption. Gains are generally free of CGT where income tax relief was claimed and kept.

Loss relief. Losses, net of income tax relief, can be set against income or gains.

CGT deferral. Gains on other assets can be deferred by reinvesting in EIS shares.

Inheritance tax. EIS shares may qualify for Business Relief after two years. From 6 April 2026, 100% relief covers the first £2.5 million of combined business and agricultural property, with 50% above that. (HMRC)

The scheme runs for shares issued before 6 April 2035.

EIS and VCTs after April 2026

The gap between the schemes is wider, and it cuts both ways.

On a £50,000 subscription, EIS relief is worth £15,000 and VCT relief £10,000. The better choice depends on whether a client values income, diversification and liquidity, or deferral, loss relief and inheritance tax planning. Many will hold both.

The EverQuest view

Holding EIS relief at 30% while cutting VCT relief gives EIS a clearer role: backing ambitious UK companies with patient, engaged capital.

The higher limits matter most for Deep MakeTech, companies whose advanced science and engineering change how products are made. They need substantial capital for R&D, pilot lines and scale-up, and under the old rules could outgrow EIS just as their technology proved itself. With our partner CPI, the Centre for Process Innovation, we can now keep backing them through their most capital-intensive stages.

Better rules do not make weak companies good investments, though. The new regime favours managers with sector expertise, disciplined entry pricing and a clear route to exit.

What this means for advisers

Revisit the EIS and VCT split. Clients who chose VCTs mainly for the upfront relief now receive 10 percentage points less. Some may be better served by EIS; others will still value VCT income and diversification.

Expect a wider choice of companies. Higher limits bring later-stage companies within scope, including some that have already retired technical risk.

Select managers carefully. With more capital able to flow to each company, deal flow, technical diligence and post-investment support matter more to outcomes.

Risk, an honest assessment

The reforms make EIS more flexible, not less risky. Early-stage companies often have limited revenue, and technology that works in the laboratory may fail at scale. Larger rounds can increase concentration, and investors who skip later rounds will be diluted. EIS shares are illiquid, exits may take longer than expected or not happen, and reliefs depend on ongoing conditions and rules that can change.

EIS suits investors with enough UK income tax to use the reliefs, who can accept illiquidity for several years, and for whom a total loss would not cause hardship. Suitability assessment by a qualified adviser is essential.

Conclusion

The April 2026 reforms give EIS the strongest upfront relief outside SEIS and let companies raise EIS capital for far longer. But the right question is still not “what relief can I claim?” but “what am I investing in, and why should it create value?” For EverQuest, the answer remains Deep MakeTech, backed with specialist expertise, disciplined selection and active support.

Explore the EverQuest EIS Fund. Discover EverQuest’s approach to investing in Deep MakeTech through the Enterprise Investment Scheme.

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