2025 Budget Analysis from an Enterprise Investment Scheme (‘EIS’) perspective

Nov 27, 2025

2025 Budget Analysis from an Enterprise Investment Scheme (‘EIS’) perspective

Nov 27, 2025

The 2025 Budget brought very positive and welcome news for both companies looking to raise capital and investors utilising the EIS.

Within the Budget, the Government once again acknowledged that the UK’s ambitious researchers, innovators and entrepreneurs are a driving force of economic growth and job creation across the UK. Building on the UK’s world-leading innovation ecosystem and entrepreneurial spirit, the government is taking action to ensure that businesses have the support, investment, and incentives they need to innovate, scale up, and succeed globally.

The EIS has enjoyed consistent cross-party support since its introduction in 1994. Following the September 2024 extension of the EIS “sunset clause” to April 2035, the scheme now benefits from enhanced legislative certainty supporting long-term planning for companies, advisers, and investors.

In a much welcomed Budget announcement, the government further bolstered support for companies raising capital using the EIS, with the following measures:

  • The company annual EIS investment limit will increase from £5m to £10m, and from £10m to £20 million for Knowledge-Intensive EIS Companies.
  • The company’s lifetime EIS investment limits will increase from £12m to £24m, and from £20m to £40m for Knowledge-Intensive EIS Companies.
  • One of the key EIS eligibility tests for companies was that the gross assets of the company must not exceed £15m before the EIS investment, and no more than £16m after the EIS investment. This has been increased to £30m immediately before the EIS investment, and no more than £35m after the EIS investment.

Alongside this, the chancellor announced that from 6 April 2026, Venture Capital Trust (‘VCT’) Income Tax relief will decrease from 30% to 20%.

These changes will be legislated in Finance Bill 2025-26.

Existing tax reliefs of the EIS remain unchanged, including:

  • 30% Income Tax relief on annual investments up to £1m (or £2m for Knowledge-Intensive companies).
  • Carry-back facility allows an investor to treat shares as issued in the previous tax year for Income Tax relief purposes.
  • Tax-free growth where investors have also claimed Income Tax relief there is no Capital Gains Tax (‘CGT’) on gains.
  • Capital Gains Deferral from other investments, potentially indefinitely.
  • Loss Relief against investors income or other capital gains.
  • Inheritance Tax relief when shares have been held for at least two years and they are held on death.

Expected Increase in Demand for EIS Investments

With tax thresholds frozen until 2030/31, more people being pushed into higher tax bands and with Income Tax relief being reduced from 30% to 20% on VCTs from 6 April 2026 we expect increased demand for EIS Investments.

Against a high taxation backdrop, and with the extension of the EIS for a further ten years to April 2035, the EIS remains a stable and reliable source of generous tax reliefs to help mitigate the risk of investing in early-stage UK companies.

With the annual and lifetime investment limits having doubled for companies raising capital, EIS investing becomes more broadly accessible, more flexible, and even more compelling as a tax-efficient investment for investors seeking growth.

Freezing tax thresholds results in fiscal drag. Fiscal drag arises when tax thresholds and allowances—such as the personal allowance or the higher-rate threshold—are not uprated with inflation or earnings. As incomes rise, individuals are pushed into higher tax brackets or bring more of their income into charge, resulting in a higher effective tax burden.

Historically, income tax thresholds were increased annually in line with inflation. In 2021, then-Chancellor Rishi Sunak introduced a freeze from April 2022 to 2026, later extended to 2028 by the Conservative Government. The latest announcement extends the freeze further, to 2030/31.

The Office for Budget Responsibility (OBR) estimates that the freeze from 2022/23 to 2030/31 will result in:

  • 5.2 million more people paying income tax,
  • 4.8 million more entering the 40% higher rate, and
  • 600,000 more paying the 45% additional rate.

These pressures enhance the appeal of tax-efficient investment schemes such as EIS.

The increase in CGT rates in the 2024 Autumn Budget has increased the appeal of EIS investments for investors that have already deferred gains previously, where those gains are crystallising into a higher tax regime, and for investors realising new gains against a less palatable rate of CGT.

As also announced in the 2024 Autumn Budget, with BR on AIM shares reducing from 100% to 50% from 6 April 2026, investors may shift allocations from AIM-listed BR-qualifying investments towards unlisted EIS-qualifying shares, which will continue to receive:

  • 100% BR relief until 6 April 2026, and
  • 100% on the first £1m and 50% thereafter from 6 April 2026 onwards.

Conclusion

The 2025 Budget significantly strengthens the EIS environment.

Companies benefit from greater fundraising capacity, and investors retain access to one of the most generous and stable tax-efficient investment schemes available in the UK.

At a time of rising tax burdens, frozen thresholds, and heightened fiscal drag, the EIS remains an increasingly compelling tool for investors seeking growth, diversification, and meaningful tax mitigation—while supporting the UK’s innovation economy.

Glen Stewart, Head of Business Development, Committed Capital

27th November 2025