EIS & SEIS CGT Exemption

Key facts

EIS shares held for 3+ years are completely exempt from CGT on disposal.
Gains from any asset can be deferred by reinvesting into EIS-qualifying shares.
SEIS shares held for 3+ years are also CGT-exempt on disposal.
SEIS reinvestment relief exempts 50% of the reinvested gain in the 2025/26 tax year.
Maximum EIS investment: £1 million per year (or £2m if investing in knowledge-intensive companies).

Overview of EIS and SEIS

The Enterprise Investment Scheme (EIS) and Seed Enterprise Investment Scheme (SEIS) are government-backed venture capital schemes designed to encourage investment in small, high-risk trading companies. Both schemes offer generous tax reliefs to investors, including significant CGT benefits.^[1]

Feature	EIS	SEIS
Income tax relief	30%	50%
Maximum annual investment	£1m (£2m for KICs)	£200,000
Minimum holding period	3 years	3 years
CGT exemption on disposal	Yes	Yes
CGT deferral (reinvestment)	Yes (unlimited)	Yes (50% of gain)
Loss relief available	Yes	Yes

EIS: CGT Exemption on Disposal

When you dispose of EIS-qualifying shares, any gain is completely exempt from CGT, provided:^[4]

You claimed EIS income tax relief on the shares and it has not been withdrawn
You held the shares for a minimum of 3 years
The company continued to meet EIS qualifying conditions throughout the 3-year period

If the shares are sold at a loss, you can claim loss relief — the allowable loss is reduced by the amount of EIS income tax relief retained, and can be set against either capital gains or income.

EIS: CGT Deferral Relief

EIS deferral relief allows you to defer a chargeable gain from any asset by reinvesting an amount equal to the gain into EIS-qualifying shares. Key points:^[3]

The gain can arise on any type of asset (property, shares, other business assets)
The EIS shares must be acquired in the period from 1 year before to 3 years after the disposal that gave rise to the gain
There is no upper limit on the amount of gain that can be deferred
You do not need to hold a minimum percentage of the company
Deferral relief is available even if you do not claim EIS income tax relief

When does the deferred gain crystallise? The deferred gain becomes chargeable when you dispose of the EIS shares, if the company ceases to qualify, or if you become non-UK resident within 3 years. If you hold the shares for 3+ years and qualify for CGT exemption, the gain on the EIS shares themselves is exempt — but the deferred gain from the original asset still becomes chargeable.

SEIS: CGT Benefits

SEIS offers similar CGT benefits to EIS, with one important addition — SEIS reinvestment relief:^[2]

SEIS CGT Exemption on Disposal

As with EIS, gains on SEIS shares are exempt from CGT if the shares are held for at least 3 years and income tax relief has been claimed and retained.

SEIS Reinvestment Relief

If you make a chargeable gain in the same tax year that you invest in SEIS shares, 50% of the amount invested (up to the maximum SEIS investment of £200,000) is exempt from CGT. This is a permanent exemption, not a deferral.

For example, if you realise a £100,000 gain and invest £100,000 in SEIS shares in the same tax year, £50,000 of the gain (50% of £100,000) is exempt. The remaining £50,000 is taxable at normal CGT rates.

Qualifying Company Conditions

For investors to receive CGT benefits, the company must meet strict conditions throughout the qualifying period:^[1]

Must be an unquoted company (AIM-listed companies can qualify for EIS)
Must carry on a qualifying trade (most trades qualify, but excluded activities include property development, financial services, and legal services)
Must have fewer than 250 employees (EIS) or 25 employees (SEIS)
Gross assets must not exceed £15 million (EIS) or £350,000 (SEIS) before investment
The company must have been trading for less than 7 years (EIS) or 3 years (SEIS) from first commercial sale

Practical Planning Points

Timing: You can invest in EIS shares before making the disposal that creates the gain, provided the disposal occurs within 3 years of the EIS investment.
Carry back: EIS income tax relief can be carried back to the previous tax year, but CGT deferral relief relates to the tax year in which the gain arose.
Connected persons: You cannot be connected to the company (broadly, you and your associates cannot control more than 30% of the company).
Advance assurance: Companies can apply to HMRC for advance assurance that they meet EIS/SEIS conditions before shares are issued.

Tip: EIS deferral relief is particularly powerful when combined with CGT exemption. If you defer a £500,000 gain by investing in EIS shares, hold them for 3+ years, and the EIS company succeeds, the gain on the EIS shares is exempt. The deferred £500,000 gain still crystallises, but you may then defer it again into further EIS investments — potentially rolling gains forward indefinitely.

Frequently Asked Questions

Do I pay CGT when I sell EIS shares?

No, provided you held the shares for at least 3 years and claimed (and retained) EIS income tax relief. If you sell within 3 years, the income tax relief is withdrawn and normal CGT rules apply.

How does EIS CGT deferral work?

If you make a chargeable gain on any asset, you can defer that gain by reinvesting an amount equal to the gain into EIS-qualifying shares. The deferred gain crystallises when you dispose of the EIS shares, or if the company ceases to qualify, or if you become non-UK resident.

Can I claim both EIS income tax relief and CGT deferral?

Yes. These are separate reliefs. You can claim 30% income tax relief on the amount invested, CGT exemption on the eventual disposal of the EIS shares, and CGT deferral on a gain from another asset — all on the same investment.

What is the maximum I can invest through SEIS?

The maximum SEIS investment eligible for income tax relief is £200,000 per tax year. The company can raise a maximum of £250,000 through SEIS in total.

Sources

Enterprise Investment Scheme — GOV.UK
Seed Enterprise Investment Scheme — GOV.UK
Capital Gains Manual: EIS deferral relief — HMRC
Tax relief for investors using venture capital schemes — GOV.UK