EIS just became the smartest money in UK venture. Here's why

The UK government just made EIS significantly more attractive relative to VCTs — whether that was the intention or not. From April 2026, VCT income tax relief drops from 30% to 20%. EIS relief stays at 30%. SEIS remains at 50%. For investors allocating capital to early-stage UK companies, the relative value proposition has shifted decisively.

But the real story is on the company side. The EIS gross assets test has doubled from £15 million to £30 million. Annual investment limits have risen from £5 million to £10 million. For knowledge-intensive companies, the lifetime limit is now £40 million. These changes open EIS to a much larger pool of scaling businesses that were previously too big to qualify.

What does this mean in practice? A Series A company with £20 million in gross assets can now raise EIS-qualifying investment. That was impossible six months ago. For investors, this means access to higher-quality, more mature companies through EIS — with 30% upfront relief, CGT exemption on gains, and loss relief on failures.

The VCT cut hits approximately 24,000 investors. At 20% relief on up to £200,000 per year, the maximum annual tax benefit drops from £60,000 to £40,000. VCTs still offer tax-free dividends and no CGT on disposal, but the reduced entry incentive narrows the gap with direct EIS investment.

For founders raising capital, the message is clear: emphasise your EIS eligibility in investor conversations. The enhanced limits mean more companies qualify, and the 30% relief is a powerful sweetener for angel investors and family offices. If you have not obtained advance assurance from HMRC, do it now.

The carried interest changes add another layer. From April 2026, qualifying carried interest is taxed at an effective 34.1% under income tax, up from the previous CGT treatment. Fund managers evaluating compensation structures should factor this into their planning.

At Stertha Advisory, we help both investors and founders navigate the EIS landscape — from advance assurance applications to portfolio structuring and compliance. The rules just changed. Make sure your strategy has changed with them.