This article was originally published by Professional Advisers, written by Parkwalk’s CEO Moray Wright; you can read the full article here.
‘As pensions lose some of their tax advantages, EIS is coming to the fore in estate planning conversations’
Moray Wright looks at pension reform and IHT through the lens of EIS…
With unused pensions set to fall into the inheritance tax (IHT) regime, the Enterprise Investment Scheme (EIS) is emerging as a leading tax-efficient option for advisers when estate planning, all the while playing a vital role in UK innovation.
For years, advisers and investors have relied on the IHT exemption for pension pots as a foundation of estate planning. But this will soon change. From 2027, untouched pensions will fall inside the IHT net.
At Parkwalk, we are now seeing a marked increase in advisers getting in touch with us who are looking to reallocate a proportion of their clients’ capital from pensions into EIS portfolios. Their clients still want tax efficiency, but also to invest in high-growth sectors with exposure to innovative companies – that to date, most pension plans have shied away from.
Now in its fourth decade, the EIS is one of the last meaningful government-backed tax incentives still offering substantial benefits.
EIS in a changing estate planning landscape
EIS provides five key tax benefits: 30% income tax relief, tax-free capital growth, deferral of capital gains, loss relief and IHT exemption through Business Relief (BR), once held for two years.
In the current tax year, investors can commit up to £1m (£2m if the second million is invested in knowledge-intensive companies) and claim up to £600,000 in income tax relief. Gains on the sale of other assets can be deferred, while growth in EIS shares is tax-free if held for three years.
The BR point is especially relevant now. Although changes announced in the 2024 Autumn Budget will, from April 2026, cap BR at £1m per individual, the first £1m of an investor’s BR-qualifying portfolio will remain free of IHT and any excess will still receive 50% relief, effectively creating a 20% IHT charge on qualifying assets above the cap, versus the 40% IHT payable on pensions from April 2027.
EIS has long been viewed as a potential supplementary retirement planning tool for clients exceeding their pension annual allowance or the since-abolished lifetime allowance. Like pensions, investors into EIS receive tax relief on entry and tax-free growth within their portfolio. Whilst EIS investment is higher risk, loss relief on any failures is available to offset against both income and capital gains. The proposed changes to the IHT treatment of pensions serve to make EIS an even more compelling option, particularly for clients with large pension pots.
Backing innovation while planning wisely
EIS offers more than tax benefits – it supports the UK’s most innovative, high-growth businesses across life sciences, artificial intelligence (AI), cleantech, deeptech and more. Parkwalk is the UK’s largest growth EIS manager, with over £500m under management, having backed more than 180 companies.
We specialise in research-led spinouts across the UK, from universities including Oxford, Cambridge, Imperial College London, as well as the Northern Arc of Universities. Our recent partnership with Northern Gritstone through the launch of the Northern Universities Venture Fund adds preferred access to spinouts and deep science opportunities from the Universities of Leeds, Liverpool, Manchester and Sheffield, offering a compelling new way to combine EIS tax advantages with exposure to some of the UK’s most exciting innovation.
Whether it’s the chance to invest in a world leader in quantum computing, a Cambridge company developing therapies to target hard-to-treat cancers, or another whose breakthrough hydrogen electrolyser technology that could make low cost green hydrogen a reality – the opportunities through EIS are endless.
Whilst the government is making changes to tax allowances, they are also aiming to fundamentally reshape the pension investment market. The chancellor is strongly committed to unlocking the power of this nation’s vast pension pools to fuel economic growth. The Mansion House accord has seen many of the largest pension providers commit 5% to UK assets. Once this capital starts to flow, it will boost liquidity in the growth economy with many businesses backed by EIS investment set to have greater access to scale-up capital. For those investing in EIS now, that should all contribute to the potential for higher growth and higher potential returns.
EIS as a tool for intergenerational planning
As pensions lose some of their tax advantages, EIS is coming to the fore in estate planning conversations. Advisers are looking to reposition client portfolios for both growth and tax efficiency. EIS offers a rare combination of upfront tax relief, long-term IHT benefits, and the opportunity to support homegrown innovation.
In a landscape where fewer tax incentives remain and reform is ongoing, EIS offers stability, potential and impact. It may well be the last substantial government-backed tax incentive available to UK investors. That makes it more relevant than ever.
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 August 2025.
