--- title: "EIS rules and benefits for investors explained" id: "43192" type: "post" slug: "eis-rules-investors" published_at: "2023-04-11T07:52:34+00:00" modified_at: "2025-03-11T01:00:00+00:00" url: "https://seedlegals.com/resources/eis-rules-investors/" markdown_url: "https://seedlegals.com/resources/eis-rules-investors.md" excerpt: "Invest in EIS-eligible companies to get generous tax relief. We set out the rules and benefits for investors." taxonomy_category: - "SEIS EIS" - "Investor Hub" --- 4 min read Expert reviewed This article has been fact-checked by a SeedLegals subject matter expert. [Meet our experts](https://seedlegals.com/authors-and-experts/) and learn more about our review process and quality assurance in our [editorial policy](https://seedlegals.com/editorial-policy/) . # EIS rules and benefits for investors explained Published: Apr 11, 2023 Updated: Mar 11, 2025 Contents [What are the EIS benefits for investors?](#what-are-the-eis-benefits-for-investors) [What are the EIS rules for investors?](#what-are-the-eis-rules-for-investors) [SeedLegals for Investors](#seedlegals-for-investors) [CopywriterKaylin SullivanSenior Copywriter](https://seedlegals.com/resources/author/kaylin/) [SEIS/EIS SpecialistZlatina TrifonovaCX Associate - Funding Rounds](https://seedlegals.com/resources/author/zlatina-trifonova/) The UK government created the Enterprise Investment Scheme (EIS) to encourage private investors to invest in early-stage, medium-sized companies. The scheme gives investors significant tax benefits, to make investing in qualifying companies more attractive. In this article, we’ll cover the EIS benefits and rules so you can better understand whether you could claim tax relief for your investment. To learn more about how the scheme works, read our comprehensive guide, [EIS explained: the UK startup’s guide to the Enterprise Management Scheme.](https://seedlegals.com/resources/eis-scheme/#eis-rules-investors) **In this post:** - [What are the EIS benefits for investors?](#eis-benefits-investors) - [What are the EIS rules for investors?](#eis-rules-investors) ## What are the EIS benefits for investors? **Important:** Your situation is unique, so make sure to get tax advice from a qualified expert to fully understand how EIS tax benefits will affect you. The EIS benefits for investors include various types of tax relief. We’ve covered them all below. **Income Tax relief** - Up to 30% Income Tax relief. For example, if you make an investment of £100,000 that qualifies for EIS, you can claim an Income Tax reduction of £30,000 **Capital Gains Tax relief** - No CGT on any gains from the EIS investment, as long as shares are held for at least 3 years - CGT can be deferred if the gain is re-invested in EIS-qualifying shares after one year has passed since the original gain (and before three years have passed) **Loss relief** - If a business doesn’t do well and you end up selling your EIS shares at a loss, you can claim EIS loss relief – there’s more about this in our post, [EIS loss relief](https://seedlegals.com/resources/eis-seis-loss-relief/) **Inheritance Tax relief** - There’s no Inheritance Tax on EIS shares as long as they are held for at least 2 years ### Calculate my SEIS/EIS tax relief Exploring tax-saving opportunities? Just enter the investment amount, forecast the return and see how SEIS/EIS could maximise your potential gains. [Try SEIS/EIS calculator](https://seedlegals.com/seis-eis-tax-relief-calculator/) ## What are the EIS rules for investors? **1. The company must be eligible** First and foremost, the company you invest in must be eligible for EIS for you to claim tax benefits. To be eligible for EIS, a company must meet certain criteria, such as: - be a UK-based company - have fewer than 250 employees - not have more than £30 million in gross assets before shares are issued, and not more than £35 million after shares are issued Read the full criteria in our article[EIS explained](https://seedlegals.com/resources/eis-scheme/) and make sure you check that the company you are considering investing in meets these criteria before investing – ask if they have [Advance Assurance](https://seedlegals.com/start/seis-eis/) . > Advance Assurance gives you the security you need to make an investment and know that the company you’re investing in meets the eligibility criteria of the EIS scheme. This is a very important element of your due diligence – investing in companies without Advance Assurance puts you at risk of not getting the tax relief. > > [Zlatina Trifonova](https://seedlegals.com/resources/author/zlatina-trifonova/) > SEIS/ EIS Specialist, > > [SeedLegals](https://seedlegals.com) > > - [https://www.linkedin.com/in/zlatina-trifonova-b7628412b/](https://www.linkedin.com/in/zlatina-trifonova-b7628412b/) **2. You must be liable for UK income tax** You don’t need to be a UK resident to claim EIS, but to claim Income Tax relief, you must have income which is liable for UK Income Tax. **3. No substantial interest in the company** You must not have any ‘substantial interest’ in the company you’re investing in, at any time from the incorporation of the company until the third anniversary of the date of the share issue. **What's ‘substantial interest’?** If an investor directly or indirectly possesses or is entitled to acquire more than 30% stake in the company, this is classed as a substantial interest. The 30% includes shareholdings of associates (see below). **4. You can’t be an employee of the company you’re investing in** You and any of your associates must not be an employee of the company you’re investing in – but you can be a director. Unpaid directors are eligible for EIS relief. Paid directors could also be eligible, as long as they meet certain criteria. For more details, read our post [SEIS/EIS rules for directors.](https://help.seedlegals.com/en/4476764-seis-eis-rules-for-investor-directors) **What's an ‘associate’?** An associate includes business partners, trustees, and relatives (spouses, civil partners, parents, children, etc). Brothers and sisters are not considered associates for EIS purposes. Read the full details in [HMRC’s Venture Capital Schemes Manual.](https://www.gov.uk/hmrc-internal-manuals/venture-capital-schemes-manual/vcm11070) **5. No linked loans** No loans should be made to you (or your associates) by the company you’re investing in. This applies from the date of incorporation of the company until the third anniversary date of the share issue. If shares are issued more than two years after the company is incorporated, the start date for this condition will be at two years before the shares were issued and also lasts until the third anniversary date of the share issue. There are more rules within this condition. You can read the full details on [HMRC’s website](https://www.gov.uk/hmrc-internal-manuals/venture-capital-schemes-manual/vcm11030) . **6. No tax avoidance** To be eligible for EIS relief, an investment must be made for genuine commercial reasons and not as part of a scheme or arrangement intended to avoid tax. **7. Your investment must be less than £1 million** You can invest a maximum of £1 million per tax year to benefit from EIS relief, or £2 million if at least £1 million of that is invested in [knowledge-intensive companies](https://www.gov.uk/guidance/use-the-enterprise-investment-scheme-eis-to-raise-money-for-research-development-or-innovation#:~:text=To%20qualify%20as%20a%20knowledge,from%20this%20within%2010%20years) . **8. You must keep the shares for at least three years** If you sell or dispose of your shares in a company before the third anniversary of your share issue, your EIS relief can be withdrawn or reduced. You must hold your shares for a minimum of three years to receive the full EIS tax benefits. If you transfer the shares to a spouse or civil partner, it doesn’t count as disposal for EIS. **9. You must pay for your shares upfront** To receive the full EIS tax benefits, you must pay for your shares upfront in full and the shares issued must be ordinary shares. **10. You must not receive value from the company for three years** Your EIS relief could be withdrawn or reduced if you receive **value** from the company or from a person connected with that company at any time from the incorporation of the company to the third anniversary of the share issue date. An investor is considered to have received **value** from the company if: 1. the company repays, redeems or repurchases any of its share capital belonging to the investor 2. the company repays a debt owed to the investor 3. the company provides a benefit or facility to the investor **11. No put option or call option for three years** Your EIS relief could be withdrawn or reduced if there’s a put option or call option over the shares at any time before the third anniversary of the date the shares are issued. Read the definition of put and call options in [HMRC’s tax manual.](https://www.gov.uk/hmrc-internal-manuals/capital-gains-manual/cg12301#:~:text=A%20PUT%20OPTION%20is%20an,binding%20the%20grantor%20to%20sell.) ## SeedLegals for Investors Want to work smarter and manage your deals seamlessly? We can help you: - [Negotiate and carry out deals](https://seedlegals.com/investors/deal-manager/) on one easy-to-use platform - Download[S/EIS tax relief](https://seedlegals.com/investors/investor-seis/) certificates - See up-to-date [shareholding](https://seedlegals.com/investors/exit-modelling/) across your investments Learn more about our [tools for investors.](https://seedlegals.com/investors/) - Article Sources 1. [Tax relief for investors using venture capital schemes](https://www.gov.uk/guidance/venture-capital-schemes-tax-relief-for-investors#wont-get-tax-relief-on-investments) | HMRC – accessed 20 March 2023 2. [Capital Gains Manual](https://www.gov.uk/hmrc-internal-manuals/capital-gains-manual/) | HMRC – accessed 20 March 2023 From our experts to your inbox Sign up for upcoming events, new ebooks, templates and more. ## Related posts [5 min readSEIS for investors: Deduct up to 50% of your next investment from your UK income taxInvest in SEIS eligible companies to get generous tax relief. We set out the rules and benefits for investors. Kaylin Sullivan](https://seedlegals.com/resources/seis-rules-investors/) [3 min readSeedLegals Deal Manager: send your next investment proposal easilyDeal Manager is the fastest and easiest way to create investment proposals, negotiate deal terms and close funding round... Vasu Sarin](https://seedlegals.com/resources/using-seedlegals-deal-manager-to-send-your-next-investment-proposal/) [4 min readSEIS and EIS loss relief: What is it and how can your investors claim it?Startup not working out? Haven’t been able to raise investment? Here’s how to make sure the SEIS/EIS investors who’ve su... Suzanne Worthington](https://seedlegals.com/resources/eis-seis-loss-relief/)