Income-tax relief plus loss relief means even a total loss costs surprisingly little. The upside is uncapped and CGT-free.
After income tax relief and (where relevant) loss relief.
Downside-capped. A total loss costs much less than the gross amount once income-tax relief and loss relief are stacked. The higher your marginal rate, the smaller the net loss.
Illustrative figures only, 2025/26 reliefs. EIS / SEIS investments are highly illiquid and most fail. Not advice. For your situation, consult a qualified adviser.
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If your EIS or SEIS investment makes a loss, you can offset that loss against either capital gains tax or income tax in the year of disposal. For a higher-rate taxpayer offsetting against income, that is another 40-45% recovery on the lost capital, stacked on top of the original income-tax relief, the after-tax cost of a total loss is much smaller than the gross.
No. These are illiquid investments in early-stage companies. Most fail. The reliefs only help if you have income tax to relieve in the first place, basic-rate taxpayers get less benefit, and non-taxpayers get nothing. The schemes are designed for sophisticated investors who can absorb total losses on individual positions.
EIS funds spread investment across 10-30+ companies, smoothing the inevitable failures. Direct investment in a single company concentrates the risk dramatically. For most retail investors, funds are the sensible default; direct is for people who want to back specific founders.