Venture Capital Trusts, the Enterprise Investment Scheme and the Seed Enterprise Investment Scheme are designed to encourage investment into smaller and growing UK companies.
Each scheme offers tax advantages, but they also come with different rules, risks and holding periods. For investors, business owners and company directors, it is important to understand how the schemes compare before making decisions.
This guide from Accounting People Ltd explains the main tax differences between VCT, EIS and SEIS for 2026/27.
What are VCT, EIS and SEIS?
A Venture Capital Trust, or VCT, is an HMRC-approved investment company that invests in qualifying smaller companies. Investors buy shares in the VCT rather than directly investing in each underlying company.
The Enterprise Investment Scheme, or EIS, allows individuals to invest directly into qualifying trading companies and receive tax relief, provided the rules are met.
The Seed Enterprise Investment Scheme, or SEIS, is aimed at very early-stage companies. It offers higher Income Tax relief than EIS, but the businesses involved are usually at an earlier and potentially higher-risk stage.
Quick comparison of VCT, EIS and SEIS in 2026/27
| Tax feature | VCT | EIS | SEIS |
| Income Tax relief | 20% | 30% | 50% |
| Maximum personal investment for Income Tax relief | £200,000 per tax year | £1 million per tax year, or £2 million where at least £1 million is invested in knowledge-intensive companies | £200,000 per tax year |
| Minimum holding period to keep Income Tax relief | 5 years | 3 years | 3 years |
| Carry back to previous tax year | No | Yes, up to 100% of the investment | Yes, up to 100% of the investment |
| Capital Gains Tax reinvestment or deferral relief | No | Yes, deferral relief may be available for gains made up to one year before or three years after the EIS investment | Yes, 50% reinvestment relief may be available |
| Capital Gains Tax on disposal | No CGT on qualifying VCT gains | No CGT after three years if conditions are met, except for deferred gains | No CGT after three years if conditions are met |
| Dividends | Tax-free | Taxable | Taxable |
| Inheritance Tax Business Relief | No | Potentially available after two years | Potentially available after two years |
Income Tax relief
The main attraction of these schemes is Income Tax relief.
For 2026/27, qualifying VCT investments can attract 20% Income Tax relief on investments of up to £200,000 per tax year.
EIS investments can attract 30% Income Tax relief on investments of up to £1 million per tax year. This can increase to £2 million where at least £1 million is invested in qualifying knowledge-intensive companies.
SEIS offers the highest headline Income Tax relief at 50%, with a maximum qualifying investment of £200,000 per tax year.
Income Tax relief is not automatic. The investment, the company, and the investor must all meet the relevant conditions. Relief can also be withdrawn if the investment is sold too early or if the qualifying conditions are breached.
Holding periods and clawback risk
Each scheme has a minimum holding period.
VCT shares must generally be held for five years to retain Income Tax relief. EIS and SEIS shares must usually be held for at least three years.
If an investor sells too early or the company stops qualifying within the relevant period, some or all the tax relief may be withdrawn. This is often referred to as claw back.
For this reason, investors should not look only at initial tax relief. The commercial risk, liquidity risk, and holding-period requirements are equally important.
Carry back rules
EIS and SEIS allow investors to treat some or all of an investment as having been made in the previous tax year, subject to the relevant limits and conditions.
This can be useful where an investor has already paid Income Tax in the previous year and wants to use available relief against that liability.
VCT investments do not have the same carry back facility. VCT Income Tax relief is claimed for the tax year in which the shares are issued.
Capital Gains Tax treatment
The Capital Gains Tax treatment differs across the three schemes.
With VCTs, gains on qualifying VCT shares are generally free from Capital Gains Tax. This applies to qualifying shares, but VCTs do not provide CGT deferral relief on other gains.
EIS can provide CGT deferral relief. This means an investor may be able to defer a gain made on another asset if the gain is reinvested into qualifying EIS shares. The EIS investment must normally be made between one year before and three years after the gain arises.
EIS shares can also be sold free of CGT after three years, provided Income Tax relief was obtained and has not been withdrawn. However, any deferred gain may still become chargeable when the EIS investment is disposed of or another chargeable event occurs.
SEIS can provide 50% CGT reinvestment relief on qualifying reinvested gains. SEIS shares may also qualify for CGT exemption on disposal after three years, provided the necessary conditions are met.
Dividends
VCT dividends are generally tax-free, which can make them attractive to some investors seeking tax-efficient income.
By contrast, dividends from EIS and SEIS companies are taxable. This means investors should consider the wider tax position, not just the Income Tax relief available at the point of investment.
Inheritance Tax and Business Relief
EIS and SEIS shares may qualify for Business Relief for Inheritance Tax purposes after they have been held for at least two years, provided the relevant conditions are satisfied.
VCT shares do not qualify for Business Relief.
From 6 April 2026, a new £2.5 million allowance applies to the combined value of qualifying agricultural and business property that can receive 100% relief. Qualifying assets above that allowance generally receive 50% relief.
This is a significant change for estate planning. Some unquoted shares may still qualify for 100% Business Relief within the allowance, but qualifying unquoted shares traded on a recognised stock exchange, such as AIM shares, generally receive 50% relief from 6 April 2026.
Investors should take specialist advice before relying on Business Relief as part of estate planning.
Latest VCT statistics
HMRC’s latest statistics show that VCTs issued shares worth approximately £881 million in 2024/25. This was a slight increase compared with £872 million in 2023/24.
The number of VCTs raising funds remained stable at 45, while the number of VCTs managing funds fell by three to 46.
In 2024/25, VCT investors claimed Income Tax relief on around £825 million of investment, a 1% increase on the previous year. However, the number of investors claiming relief fell by 8% to 22,430.
Most VCT investors invest relatively modest amounts. Around 80% of VCT investors claimed relief on investments of £50,000 or less, while the average individual investment was around £37,000.
However, a small number of larger investors accounted for a significant proportion of total investment. Investments between £150,000 and £200,000 represented the largest category by amount invested.
Latest EIS statistics
In 2024/25, 3,735 companies raised approximately £1,575 million through EIS. This was broadly unchanged from the previous tax year.
Around 1,145 new EIS companies raised approximately £333 million of investment.
The Information and Communication sector continued to attract the largest amount of EIS funding, accounting for around £550 million, or 35% of total EIS investment.
Companies registered in London and the South East accounted for approximately £948 million, representing around 60% of all EIS investment in 2024/25.
The number of investors claiming EIS Income Tax relief through Self Assessment fell from 35,675 in 2023/24 to 33,220 in 2024/25.
HMRC suggests this reduction may partly reflect investors favouring SEIS following the expansion of SEIS limits and the higher rate of relief available under that scheme.
Latest SEIS statistics
SEIS continued to grow in 2024/25.
HMRC figures show that 2,430 companies raised around £276 million under SEIS. This represented a 14% increase from 2023/24, when 2,310 companies raised approximately £242 million.
Around 1,775 companies raised SEIS funds for the first time in 2024/25, representing approximately £229 million of investment.
The Information and Communication sector accounted for around £115 million, or 42% of total SEIS investment.
London and the South East continued to dominate geographically, with companies registered in those regions raising around £181 million, equal to 66% of SEIS investment.
The number of investors claiming SEIS Income Tax relief increased from 10,290 in 2023/24 to 11,200 in 2024/25.
Most SEIS investors claimed relief on investments of £10,000 or less, but larger investments still made up most of the total value invested.
Which scheme is most suitable?
There is no single answer.
VCTs may appeal to investors who want exposure through a managed investment company and value tax-free dividends, but the Income Tax relief rate is lower and the minimum holding period is longer.
EIS may suit investors who are comfortable investing directly in higher-risk trading companies and who may benefit from CGT deferral relief or potential Business Relief.
SEIS offers the highest Income Tax relief and can be attractive where investors are willing to accept the risks associated with very early-stage companies.
The tax benefits should never be the only reason to invest. These are higher-risk investments and returns are not guaranteed. Investors may lose some or all of their capital.
How Accounting People Ltd can help
At Accounting People Ltd, we help individuals, business owners, company directors and entrepreneurs understand the tax implications of investment decisions.
We can support clients with tax reporting, Self-Assessment, Capital Gains Tax calculations, Business Relief considerations and general tax planning connected with VCT, EIS and SEIS investments.
However, choosing specific investments is a regulated activity. We do not recommend investments unless this is provided through an appropriately authorised adviser. Investors should seek FCA-regulated financial advice before making investment decisions.
If you have invested in VCT, EIS or SEIS shares and need help reporting the tax position correctly, Accounting People Ltd can provide practical and compliant tax support.
Contact Accounting People Ltd today to discuss your tax reporting and planning needs.
This article is for general information only and should not be treated as personal tax, investment, financial or legal advice. Tax rules can change, and the availability of relief depends on individual circumstances and the qualifying conditions being met.
