EIS, SEIS and VCT: Tax-efficient investment schemes
EIS, SEIS and VCT can offer tax-efficient investing options.
Last updated
Tax efficient investment schemes
High earners often look beyond ISAs and pensions once those allowances are full. The UK offers three government-backed venture schemes that can reduce tax while backing young companies, but each carries higher risk, long lock-ups and complex rules.
What options are there?
Enterprise Investment Scheme (EIS)
- Invest up to £1m a year (or £2m if at least £1m goes into knowledge-intensive companies).
- 30% income tax relief on the amount subscribed, provided shares are held for 3 years.
- Capital gains from other assets can be deferred if reinvested into an EIS within the qualifying window.
- Gains on the EIS shares are free of CGT after 3 years; losses can be offset against CGT or income tax.
- Qualifying shares may fall out of the estate for IHT after two years under Business Relief.
Seed Enterprise Investment Scheme (SEIS)
- Targets very early-stage companies; annual limit £200k per investor.
- 50% income tax relief up-front, even if you are already at additional rate.
- 50% of gains reinvested via SEIS can be exempt from CGT, and growth on the SEIS shares is tax free if held for 3 years.
- Loss relief works like EIS but on a smaller investment size; portfolios typically diversify across many tiny allocations.
Venture Capital Trusts (VCT)
- Listed investment trusts that pool investor money to back scale-ups; minimums often start at £3k-£5k per offer.
- 30% income tax relief on new issue subscriptions up to £200k per tax year, provided shares are held for 5 years.
- Tax-free dividends while you hold the shares, making VCTs popular for income planning.
- Shares trade on the stock market but spreads can be wide; most investors rely on limited buy-back windows from the manager.
Comparisons and considerations
| Feature | EIS | SEIS | VCT |
|---|---|---|---|
| Up-front income tax relief | 30% (up to £1m/£2m) | 50% (up to £200k) | 30% (up to £200k) |
| Holding period | 3 years | 3 years | 5 years |
| CGT on growth | 0% after holding period | 0% after holding period | Dividends and gains tax free |
| CGT deferral from other assets | Yes | 50% exemption on reinvested gains | No |
| Loss relief | Against income or CGT | Against income or CGT | No (but NAV reflects diversification) |
| IHT relief | Usually after 2 years (BPR) | Usually after 2 years (BPR) | Not typical |
| Liquidity | Very low; no early exit | Very low | Moderate (listed, but thin) |
Planning checklist
- Confirm you have paid or expect to pay enough income tax in the current or previous year to use the relief.
- Decide whether you need CGT deferral or dividend income; that often determines EIS/SEIS versus VCT.
- Budget for the cash being tied up long term; emergency funds should stay elsewhere.
- Keep every subscription certificate (EIS3, SEIS3, VCT5) because HMRC will request them when you claim relief.
Where to start
- Speak with an FCA-regulated adviser or wealth manager if you are new to venture schemes—misunderstanding qualifying rules can void all reliefs.
- Research current fundraising rounds on manager websites and review fee structures, deployment timelines and past exits.
- Use HMRC self assessment pages (SA101/SA108) to claim reliefs.
- Expect due diligence docs, cooling-off periods and staged drawdowns—plan contributions ahead of 5 April deadlines.