VCT, EIS, SEIS income tax relief — how it works, and what changes from April '26

Posted: January 15 2026

Venture Capital Trusts (VCTs), the Enterprise Investment Scheme (EIS) and the Seed Enterprise Investment Scheme (SEIS) are long-standing UK “venture capital schemes” designed to encourage individuals to back higher-risk, growth-focused businesses. In return, investors can access generous up-front income tax relief — but only if the investment and the investor meet a number of conditions, and only if the shares are held for the required period.

This article explains (1) how the income tax relief works across VCT, EIS and SEIS and (2) the key changes announced to take effect from 6 April 2026.

1) What income tax relief is available for these schemes?

In simple terms, the income tax relief reduces your UK income tax bill by a percentage of the amount you invest in newly issued shares that qualify for the relevant scheme.

A few practical points apply across all three regimes:

You must have enough UK income tax liability to use the relief – relief can only be set against UK income tax due;
You generally can’t carry unused relief forward. If you don’t use it, you lose it;
The investment must be in qualifying, newly issued shares paid for in cash and meeting “full risk” requirements (broadly, ordinary shares with no protection/exit arrangements);
There is a minimum holding period — and if it’s broken (or the company ceases to qualify within the period), the income tax relief can be withdrawn (termed “clawback”).

2) How the schemes compare (rates and annual limits)

The current headline income tax reliefs can be summarised as follows:

EIS: relief at 30%, on up to £1m per tax year (or £2m if at least £1m is invested in “knowledge-intensive companies”);
SEIS: relief at 50%, on investments of up to £200,000 per tax year;
VCT: relief at 30%, on investments of up to £200,000 per tax year — and VCT dividends are income tax-free.

Worked examples under current rules

EIS: £100,000 invested in qualifying EIS shares – potential income tax reduction of £30,000 (30%).
SEIS: £50,000 invested in qualifying SEIS shares – potential income tax reduction of £25,000 (50%).
VCT: £200,000 invested in new VCT shares – potential income tax reduction of £60,000 (30%).
These examples assume you have sufficient UK income tax liability to use the relief.

3) Timing — when can you claim?

For EIS and SEIS, you can generally claim relief either:

in the tax year you invest, or
by treating some or all of the investment as having been made in the previous tax year (commonly referred to as “carry back”).

This can be valuable where (for example) you had a large income tax liability last year, or you want to secure relief sooner.

For VCTs, the rule is tighter: you can only claim income tax relief in the tax year you invest (no carry back is available).

4) Holding periods — what triggers clawback?

The income tax relief is conditional on you holding the shares for a minimum period:

EIS and SEIS: you must keep the investment for at least 3 years to retain the full relief.
VCT: you must keep the investment for at least 5 years to retain the income tax relief.

If shares are disposed of before the end of the qualifying period, or the company ceases to meet the scheme requirements within the relevant period, the income tax relief is withdrawn (either fully or partly as appropriate).

5) Investor eligibility — the “connected persons” trap (EIS/SEIS)

For EIS and SEIS, investors can be disqualified from income tax relief if they are “connected” with the company — for example, if they (together with associates) control more than 30% of the company or are employed by it (with some limited exceptions, such as certain director roles).

This is one of the most common areas where relief can be denied or later clawed back, so it’s worth checking carefully before investing (and before taking up any role in the business).

VCT rules operate differently because you’re investing in a listed trust rather than directly into a trading company.

6) How do you actually claim the relief?

In practice, you claim once you have the relevant certificate(s):

For EIS/SEIS, the claim is usually made via Self Assessment (or via an adjustment to PAYE coding in-year), supported by the EIS/SEIS certificate issued to the investor;
For VCTs, HMRC notes you should claim income tax relief in your Self Assessment return for the year the shares are issued, and you can also ask HMRC to adjust your tax code or issue a refund rather than waiting for the return.

HMRC also sets time limits for making claims (for example, up to 5 years after the 31 January following the year of investment for EIS/SEIS, and up to 4 years after the end of the relevant year for VCTs).

7) What changes from 6 April 2026?

The 2025 Budget announcements include two major changes affecting VCTs and EIS from 6 April 2026:

A) VCT income tax relief will reduce from 30% to 20%

From 6 April 2026, the income tax relief rate for individuals investing in a VCT will fall from 30% to 20%.

What this means in practice:
A £200,000 VCT subscription currently offers up to £60,000 income tax relief (30%). From 6 April 2026, that will fall to £40,000 (20%).

B) Company limits for EIS and VCT qualifying companies will increase

Also from 6 April 2026, the rules will increase the size and fundraising capacity thresholds for companies receiving investment under EIS or VCT, including:

Gross assets test: increased to £30m immediately before the share issue (from £15m) and £35m immediately after (from £16m);
Annual investment limit: increased to £10m per year (from £5m) and £20m for knowledge-intensive companies (from £10m);
Lifetime investment limit: increased to £24m (from £12m) and £40m for knowledge-intensive companies (from £20m).

The government’s stated intention is to support not only start-ups but also companies “scaling up”, while rebalancing VCT incentives, given that VCTs also offer income tax-free dividends.

Note: the HMRC policy paper also flags that these increased limits do not apply to certain categories (including specified Northern Ireland and certain goods/electricity activities), which remain on existing limits.

What about SEIS from April 2026?

The headline income tax relief rate (50%) and annual limit (£200,000) for SEIS remain as currently with the Budget 2025 changes above being focused on EIS and VCT.

How RJP LLP can help

These regimes can be highly attractive, but the detail matters: investor “connection” tests, share conditions, claim timing, and the impact of the April 2026 VCT relief reduction are all affected by individual circumstances.

If you’d like support modelling the after-tax outcomes, planning investments around tax years, or reviewing qualifying conditions, RJP LLP can help.

Contact: partners@rjp.co.uk