How EIS investment trends compare to previous years

New HMRC statistics show EIS funding fell by 20% in 2023/24, continuing a downward trend. While EIS remains a powerful tool for raising capital in the UK’s early-stage market, it’s a highly specialised investment area, and one that comes with considerable risk. 

EIS funding dips for a second year 

The Enterprise Investment Scheme (EIS), a long-standing part of the UK government’s strategy to support early-stage business growth, raised £1.575 billion across 3,780 companies in 2023/24, which is a 20% drop from the previous tax year and the second consecutive annual decline. 

Investor participation also fell, with 35,150 individuals claiming income tax relief under EIS, down from 40,470 the year before. It follows a broader pattern of caution across alternative investment markets, possibly influenced by rising interest rates and the increased appeal of the newly expanded Seed Enterprise Investment Scheme (SEIS).

Fewer companies, but more capital per deal 

Despite the decline in overall activity, the data suggests that larger individual investments remain a feature of the EIS landscape. In 2023/24, there were 50 investments of between £1 million and £2 million, totalling £74 million. Deals over £500,000 represented 17% of all EIS-claimed investment. 

These figures may reflect a shift toward a smaller pool of experienced investors making larger, targeted investments, especially in Knowledge Intensive Companies (KICs), which benefit from higher allowable limits.

High risk, high complexity 

EIS is not a mainstream investment. The Government views schemes like EIS as a key lever for business growth, but recognises they come with risks that go well beyond those of traditional funds such as Unit Trusts or OEICs. 

To compensate for this, EIS offers a range of generous tax incentives, including:

• Income tax relief (up to 30%)
• Capital Gains Tax (CGT) deferral
• Potential exemption from Inheritance Tax (IHT) after two years. 

These benefits can be attractive for high earners or individuals with substantial capital gains, but they come with caveats. EIS investments are typically concentrated in a single unquoted trading company, and there is often no liquid market to sell shares. Failure of the investee company is a real possibility. 

As such, these opportunities are generally considered suitable only for sophisticated investors with the experience and financial resilience to tolerate significant losses. 

Not a substitute for financial planning

For most individuals, traditional tax wrappers such as pensions and ISAs should be prioritised first. EIS planning is only appropriate where the client has explicitly agreed to receive information about higher-risk products and where it's clear that they understand the implications. The tax treatment also depends on individual circumstances and may change in future, especially if policy shifts occur or the company no longer qualifies under EIS rules. 

A useful scheme - but only in the right hands 

The Enterprise Investment Scheme remains a valuable tool for supporting innovation and growth in the UK. However, it’s also complex, high-risk, and far from suitable for all investors. The recent decline in funding could be interpreted as a return to more selective, strategic use of the scheme - particularly among those with the appetite and financial capacity to participate at scale. 

As always, anyone considering this kind of investment should seek expert, regulated advice before proceeding. 

Planning of this nature is generally only appropriate for the more sophisticated investor who has agreed to receiving information about this type of product, and can afford to take substantial risks with their money. The tax treatment depends on the individual circumstances of each client and may be subject to change in future and after investing. 

Enterprise Investment Schemes (EISs) are very high-risk investments. An EIS investment is usually concentrated in one single unquoted trading company. Often there is no market for the shares and it may therefore be very difficult to make a disposal. There is a strong possibility of the chosen company failing. As such, these types of investments are not suitable for all clients and expert advice should always be sought prior to investing.

Investment returns are not guaranteed, and you may get back less than you originally invested. 

Past performance is not a guide to future returns.

This article is intended for general information only, it does not constitute individual advice and should not be used to inform financial decisions.

The information in this article is correct as of 28/05/2025.