If you’re a higher earner who’s already made full use of your ISA and explored what more you can put into your pension, there are some more specialist options you may not have explored.
The Enterprise Investment Scheme (EIS) lets you invest directly into smaller, unquoted UK companies. In return, you can claim Income Tax relief worth up to 30% of what you invest, subject to how much tax you actually owe that year.
The limit is £1 million a year, rising to £2 million if the amount above £1 million goes into “knowledge-intensive companies,” HMRC’s term for younger, more research- or innovation-heavy businesses.
Hold the shares for three years and keep meeting the qualifying conditions, and any growth on the shares themselves can be free of capital gains tax too, provided the original Income Tax relief hasn’t been withdrawn along the way. If you’ve already got a taxable gain sitting elsewhere, EIS can also let you defer it.
It’s worth being clear on what that actually means: deferral postpones the tax bill rather than cancelling it. The gain can come back into charge later, so think of it as a timing tool, not a way of making tax disappear.
For those willing to back even earlier-stage businesses, the Seed Enterprise Investment Scheme (SEIS) goes further still, offering 50% Income Tax relief on up to £200,000 a year. The businesses involved are younger and riskier than typical EIS companies, which is exactly why the incentive is bigger.
Venture Capital Trusts (VCTs), long the more familiar option of the three, saw their relief cut from 30% to 20% for money invested from 6 April 2026 onwards. That’s widened the tax-relief gap between VCTs and EIS. The two work quite differently in practice, though, with different rules on dividends, how easily you can get your money back out, and how long you need to hold the shares, so it’s not simply a case of picking whichever percentage is bigger.
Why this matters, and why it isn’t for everyone
We’ll say the quiet part out loud: this isn’t spare-change investing.
You’re backing small, often unlisted companies that could fail completely, and unlike mainstream investments, there may not always be an easy way to sell your shares when you want to. If an investment doesn’t work out, there’s sometimes loss relief available, meaning part of the loss can be offset against your income or gains elsewhere. That’s a helpful cushion, but it’s a consolation prize, not a reason to invest in the first place. The tax relief should make an investment case you already believe in more attractive. It shouldn’t be the reason you overlook a weak one.
There are also detailed rules around who can invest and how these schemes can be promoted, so they need considerably more scrutiny than an ISA or a mainstream pension contribution. They won’t be right for everyone, and that’s okay!
This is exactly why EIS and SEIS work best as a small, deliberate slice of a wider financial plan, never a decision made from a newsletter alone. If you’re already using your allowances well and have genuine appetite for higher risk, they’re worth putting on the table with your adviser. And if you’re not sure whether that’s you yet, that conversation is worth having too, since it might simply mean there are more efficient steps to take first.
Curious whether EIS or SEIS has a place in your plan? Get in touch on 020 8366 4400 or enquiries@cedarhfs.co.uk and we’ll talk it through properly, risks included.
This article is for general information only and does not constitute financial or tax advice. EIS and SEIS investments are high-risk: you could lose the amount you invest, and tax treatment depends on individual circumstances and may change. This communication should be reviewed against Cedar House’s compliance requirements for high-risk investment promotions before publication.