Glossary · UK
What is EIS Income Tax Relief?
A 30% income tax relief available to UK investors who subscribe for shares in qualifying EIS companies, up to GBP 1 million per tax year.
Full Definition
The Enterprise Investment Scheme (EIS) offers investors tax relief on investments in qualifying small UK companies. Income tax relief: 30% of the amount invested is deductible from the investors income tax bill. Maximum investment: GBP 1 million per tax year (GBP 2 million if at least GBP 1 million is invested in knowledge-intensive companies). The relief can be carried back one tax year. Qualifying conditions: the investor must not be an employee or director (except a paid director) of the company. The shares must be held for at least 3 years. CGT deferral: gains from other disposals can be deferred by investing in EIS shares. The deferred gain crystallises when the EIS shares are sold. CGT exemption: EIS shares held for 3+ years are exempt from CGT on disposal if the income tax relief was claimed and not withdrawn. Loss relief: if EIS shares are sold at a loss, the loss (net of income tax relief) can be set against other income at the marginal rate. EIS advance assurance from HMRC confirms the company qualifies before investors commit capital.
How EIS Income Tax Relief is calculated
Tax Relief = Investment Amount x 0.30- Investment Amount
- Amount subscribed for qualifying EIS shares (max GBP 1,000,000 per tax year).
- 0.30
- 30% EIS income tax relief rate.
Worked example: An investment of GBP 50,000 in a qualifying EIS company generates GBP 15,000 of income tax relief, reducing a GBP 40,000 tax bill to GBP 25,000.