Parkwalk CEO Moray Wright features in FT Adviser, discussing the upcoming expansion of the Enterprise Investment Scheme (EIS) and what it means for advisers, investors and UK scale‑ups.
From April, the Enterprise Investment Scheme will be significantly expanded. It will shift from being primarily a seed and early stage funding tool to a credible source of growth capital for scale ups. Both the annual investment cap and the lifetime funding limit will double, meaning standard companies can raise up to £24m through EIS in total, and up to £40m for “knowledge intensive” businesses developing proprietary intellectual property. This is a real step up in scale that will change how advisers, investors and entrepreneurs use the scheme.
For early-stage firms, the higher limits are transformative. Take a life sciences spinout from a leading university, developing technology with the potential to change treatment for a major disease. The journey from lab to market is long and capital intensive, typically involving multiple funding rounds over many years.
Under the previous regime, EIS investors could participate in the earliest rounds but, constrained by the cap, were in effect excluded from backing the same company through its later growth stages.
Entrepreneurs can now plan multi-round fundraisings within the EIS framework, keeping early backers with them through scale up, market launch and potentially exit.
That creates a more viable path for knowledge-intensive businesses in fields such as AI, quantum computing and life sciences, where long development cycles and heavy capital requirements have historically made scaling difficult. The effect should be deeper pools of growth capital, and a clearer route to building globally competitive UK companies — that stay here to scale.
As for the impact on investors and advisers, the benefits are equally significant. Higher limits allow investors to keep backing their strongest performers through later funding rounds, capturing value over the full life cycle of a business rather than exiting early.
They can do so while still accessing EIS tax advantages, including, where conditions are met, 30 per cent income tax relief, deferral of capital gains tax on other assets reinvested via EIS, and exemption from inheritance tax on shares held for more than two years.
These changes also fundamentally reshape where EIS sits in client portfolios. It can now occupy a more central role in long-term planning at a time when its appeal is boosted by shrinking capital gains allowances elsewhere and tighter pension limits for higher earners.
These opportunities as well as risks must be explained clearly under the consumer duty, including who qualifies, how the reliefs and CGT deferral work, and the implications of higher risk and limited liquidity.
Advisers must also make clear that early stage and knowledge‑intensive companies can and do fail. While EIS reliefs help mitigate the impact, investors remain exposed to the risks associated with backing businesses before they reach commercial maturity.
This level of risk exposure is not for every investor and whilst diversified EIS portfolios can also help manage risk, the reality is that some EIS-backed companies will not succeed.
This latest shift in EIS rules aligns with the UK’s global advantage in producing knowledge-intensive companies, many built out of the country’s world leading university and research base.
These businesses are frequently founded on validated science in areas that will define the future economy. They are breakthrough companies developing medical devices and therapies that will change healthcare, advanced computing infrastructure that will underpin productivity, and applied AI that can turn hype into growth.
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