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As we approach Tax Year end, there has never been a more compelling time to understand the value of the Enterprise Investment Scheme (EIS). The scheme offers investors early access to some of the brightest innovation in the UK.
This article was originally published by Professional Advisers, written by Parkwalk’s CEO Moray Wright; you can read the full article here.
With increases to capital gains tax and the global boom in technologies like Artificial Intelligence, there might never have been a better time to take advantage of the Enterprise Investment Scheme (EIS).
The Enterprise Investment Scheme offers investors five attractive tax relief benefits, including inheritance tax exemption and loss relief, whilst providing a route to investing in the UK’s most innovative, early-stage companies.
Introduced in 1994, EIS recently celebrated its 30th birthday. It had been due to end in April of this year, but Chancellor Rachel Reeves took the welcomed decision to extend it to 2035. With newfound certainty, EIS offers investors one of the most appealing, tax efficient, vehicles available – whilst making a vital contribution to the country’s start-ups.
Parkwalk is the UK’s largest EIS fund manager, investing in research and science intensive spinouts from UK universities. We help investors realise the benefits of a diversified portfolio of cutting-edge firms – those developing new medical breakthroughs, pioneering AI and building the next revolution in computing. With £500 million of assets under management, Parkwalk has invested in over 180 companies across its Parkwalk Opportunities and Knowledge Intensive EIS Funds, as well as the award-winning enterprise and innovation funds Parkwalk manages for the Universities of Cambridge, Oxford, Bristol and Imperial College.
Here is how it works and why 2025 is likely to be another successful year for the Enterprise Investment Scheme.
Tax benefits of EIS
In last year’s October Budget, rates of capital gains tax increased, and now investors face one of the highest tax burdens in 70 years. The Enterprise Investment Scheme remains a compelling tax efficient option, with up to five different relief mechanisms available when investing in an EIS-qualifying company.
Firstly, on a maximum annual income of £1 million, investors can claim up to 30% income tax relief in a single tax year, amounting to £300,000 of relief. This maximum increases to up to £2 million per tax year, providing the second million is invested into ‘knowledge intensive’ companies, allowing for £600,000 of relief.
Secondly, the scheme also offers 100% tax-free growth on investments when EIS shares are sold, meaning investors can take advantage of the potential for small, early-stage companies to grow significantly. To quality for these benefits, investors must hold their shares, and the company must remain EIS-qualifying, for at least three years.
Thirdly, capital gains made on the sale of any asset can be reinvested via the EIS with the tax deferred over the life of the investment, with no upper limit on the value of gains that can be deferred.
Currently EIS shares also qualify for Business Relief, meaning as long as they’ve been held for at least two years at the time of death, they can be left to beneficiaries free from inheritance tax.
Finally, if the value of an EIS investment declines, it is eligible for loss relief. EIS investing means taking shares in early-stage companies, and therefore the risk of these shares dropping in value can be higher than other investments. Losses can in-part be offset against an investor’s income tax or capital gains tax bill, reducing the risk from investing in early-stage firms.
Taking a stake in the future economy
Many EIS qualifying companies are rich in intellectual property and commercialising breakthroughs in critical industries, from semiconductors to life sciences and cleantech. One of the benefits of investing in technology and science startups today is that the government has earmarked them as the UK’s next economic success stories. The government is funding these industries extensively, as evidenced by the recent announcement of a new ‘arc’ between the centres of research, Oxford and Cambridge, helping to de-risk investments in frontier technologies.
Supporting early-stage, home grown businesses is key to the UK’s economic success and this government’s central growth mission. The government recognises that investing in early-stage potential, especially university spinouts which go on to scale in the UK, is essential to boosting productivity and defining our international competitiveness. This presents a degree of stability for the EIS ecosystem and its place in the current tax system.
Since launch, the EIS has provided more than £23bn of investment, in the process supporting 33,000 companies to seed and scale. By making an EIS-qualifying investment, investors have the potential to grow not only their own wealth, securing attractive returns whilst reducing their tax bill, but also to actively support UK PLC.
Parkwalk Advisors Limited (Parkwalk) is authorised and regulated by the Financial Conduct Authority: FRN 502237. Investments referred to in this news article are not suitable for all investors. Capital is at risk and investors may not get back the full amount invested. Any investment in a Parkwalk product must only be made on the basis of the terms of the full Information Memorandum. Tax treatment depends on the individual circumstances of each investor. Parkwalk is not able to provide advice as to the suitability of investing in any product. Past performance is not a reliable indicator of future results. This financial promotion was approved in February 2025.
