How April 2026’s EIS Expansion Doubles UK Startup Investment Limits to £24 Million

The UK government’s Seed Enterprise Investment Scheme (SEIS) and Enterprise Investment Scheme (EIS) are tax incentive programs that encourage residents to invest in early-stage and scaling British startups. These schemes offer substantial income tax relief and capital gains tax exemptions to investors, making them valuable for founders trying to raise capital and for angels and accredited investors diversifying their portfolios.

From April 6, 2026, the EIS limits roughly doubled, significantly expanding what companies can raise and who qualifies. For US-based founders considering UK expansion or US investors evaluating UK opportunities through these tax-efficient vehicles, understanding these rules is essential.

How SEIS Works for Early-Stage Startups

SEIS targets the riskiest end of the venture spectrum. The scheme is reserved for companies under three years old with fewer than 25 employees and gross assets below £350,000. Companies can raise a maximum of £250,000 in total under SEIS.

Investors in SEIS-qualifying shares receive 50% income tax relief on investments up to £200,000 per tax year. This is the highest relief rate offered by the UK government across its main venture capital schemes. An investor putting £100,000 into a qualifying SEIS company could claim £50,000 back against their income tax bill, provided they have sufficient UK tax liability.

To qualify for relief, investors must hold the shares for a minimum of three years.

SEIS vs. EIS Quick Comparison
SEIS: 50% income tax relief on up to £200,000 per investor per year; companies can raise maximum £250,000 total; for companies under 3 years old with fewer than 25 employees. EIS: 30% income tax relief on up to £1 million per year (£2 million for knowledge-intensive); from April 2026, companies can raise £10 million annually and £24 million lifetime (£20 million and £40 million for knowledge-intensive companies).

EIS: The Workhorse for Scaling Companies

The Enterprise Investment Scheme reaches further up the growth curve than SEIS, targeting companies generally within seven years of their first commercial sale, with under 250 employees. EIS provides 30% income tax relief on investments up to £1 million per investor per tax year. The relief limit rises to £2 million per year if at least £1 million of that total is invested in knowledge-intensive companies.

Before April 2026, companies could raise £5 million annually and £12 million over their lifetime under EIS. From April 6, 2026, these limits doubled: companies can now raise £10 million per year and £24 million lifetime. For knowledge-intensive companies—generally research and development-intensive businesses—the limits are even higher: £20 million annually and £40 million over the company’s life.

EIS also increased its gross assets threshold, the test that determines whether a company is still considered small enough to qualify. Before April 2026, companies had to have assets under £15 million before issuing new shares and under £16 million immediately after. From April 6, 2026, these thresholds doubled to £30 million and £35 million respectively. This change allows established scaling businesses with more substantial balance sheets to tap EIS funding.

The April 2026 Expansion: Who Benefits

The April 2026 changes were designed to help knowledge-intensive companies access larger amounts of EIS-qualifying investment as they grow. Knowledge-intensive companies that had already reached the old £20 million lifetime cap may now have additional headroom to raise up to £40 million lifetime under the new rules.

The higher gross assets thresholds also matter. A Series B company with £20 million in assets and revenue would have been ineligible for EIS before April 2026. Under the new rules, it remains eligible as long as it stays under £30 million in assets before the EIS share issuance.

However, these changes do not affect SEIS. Companies raising through SEIS still face the £250,000 cap and retain their tighter size restrictions. SEIS remains the pathway for true seed-stage ventures that are too early for conventional venture capital.

A UK investor getting 30% relief effectively pays £70 for every £100 of investment.

Capital Gains Tax Relief and Holding Periods

Both SEIS and EIS offer substantial capital gains tax exemptions to investors. When conditions are met, including the three-year holding period, investors owe no capital gains tax on profits from selling their shares. This is in addition to the income tax relief claimed at the time of investment.

EIS offers an additional tool: deferral relief. An investor can defer capital gains taxes on entirely separate transactions by investing the amount of those gains in EIS shares, for gains made up to three years before or one year after the EIS investment. This is useful for founders or business owners who have just sold a company or real estate and want to reinvest the proceeds tax-efficiently.

SEIS also allows investors to reduce capital gains taxes in a different way: investing in SEIS shares to a value equal to their capital gain exempts up to 50% of that gain from capital gains tax.

What US-Based Founders and Investors Should Know

Claiming relief from SEIS and EIS generally requires being a UK taxpayer: both the income tax relief and the capital gains tax benefits reduce a UK tax bill, so investors need enough UK tax liability to set the relief against. This affects US-based investors, who may not have UK tax liability to claim against.

For US founders expanding into the UK, understanding these schemes helps explain the reduced net cost of capital for UK investors: the tax incentives lower their effective cost of investing. A UK investor getting 30% relief effectively pays £70 for every £100 of investment.

Both schemes require HMRC certification before investors can claim relief. This process typically involves the company obtaining an advance assurance letter from HMRC confirming that it meets the scheme’s criteria, and then shares must be issued within certain timeframes for relief to apply.

Photo: Alvesgaspar · CC BY-SA 3.0 · via Wikimedia Commons