Are VCT and EIS investments suitable for late-career tax planning?
Venture capital schemes offer Income Tax relief in exchange for investing in small, illiquid, high-risk companies. EIS gives 30% relief on up to £1 million a year, SEIS 50% on up to £200,000, and VCTs 20% on up to £200,000 — and the relief is only worth having if you can afford to lose the investment.
- EIS: 30% Income Tax relief on up to £1 million a year, minimum three-year hold.
- SEIS: 50% relief on up to £200,000 a year, minimum three-year hold.
- VCT: 20% relief on up to £200,000 a year, minimum five-year hold, tax-free dividends.
- The risk: small unquoted companies, illiquid, and capable of losing everything.
01 What the reliefs are
The Enterprise Investment Scheme gives 30% Income Tax relief on investments of up to £1 million a year, or £2 million where at least £1 million is in knowledge-intensive companies, with a minimum holding period of three years. Gains on EIS shares can be free of Capital Gains Tax, and gains elsewhere can be deferred into an EIS investment.
The Seed Enterprise Investment Scheme gives 50% relief on up to £200,000 a year, also with a three-year minimum hold, reflecting the earlier stage and higher risk of the companies involved.
Venture Capital Trusts give 20% relief on up to £200,000 a year with a five-year minimum hold, and dividends from them are free of Income Tax. Relief is clawed back if the shares are sold within the holding period.
Shows: the net cost of an investment after Income Tax relief, and what a total loss would cost after it. Ignores: capital gains treatment, dividends, clawback on early sale, and the probability of loss.
On the defaults above, the worked example shows £35,000. Relief of £15,000 means a total loss would cost you £35,000 rather than £50,000.
02 Where they fit, and where they do not
These sit after the pension and ISA allowances rather than alongside them. A pension contribution gives relief at your marginal rate on a diversified portfolio; an EIS investment gives 30% on a single small company. Nobody should be in the second while allowance remains in the first.
They suit a specific case: someone who has used the annual allowance and carry-forward, has an income tax liability to relieve, and can genuinely afford to lose the money. That is a narrow group, and it is smaller than the marketing suggests.
For someone whose pension allowance is tapered to £10,000, the case is stronger, because the alternative routes to relief are closed. That is the most common legitimate use.
03 The risk the relief is paying for
These are small, unquoted, often loss-making companies. A meaningful proportion of them fail, which is why the relief exists — the government is buying investment in businesses that would otherwise struggle to raise capital.
Illiquidity is the second risk. EIS shares often have no secondary market at all, and VCT shares typically trade at a discount to net asset value. Selling inside the holding period also claws the relief back.
The Inheritance Tax angle has also changed: business relief on qualifying shares is now capped by the £2.5 million allowance and applies at 50% to AIM-quoted holdings, so estate planning built on full relief no longer works as it did.
Source: Summary of reforms to agricultural property relief and business property relief
The relief is real and the risk is real, and the order matters more than either. Nobody should hold an EIS portfolio while pension annual allowance and carry-forward remain unused, because a pension gives relief at the same rate or better on a globally diversified portfolio rather than on one small company. Where these genuinely earn a place is for someone whose pension allowance is tapered to £10,000 and who has income to relieve. And check the current terms rather than an article — VCT relief is 20%, not the 30% most write-ups still quote.
FAQ
What relief do VCTs give?
20% Income Tax relief on up to £200,000 a year, with a minimum five-year holding period and tax-free dividends. Selling inside the five years claws the relief back.
How do EIS and SEIS differ?
EIS gives 30% relief on up to £1 million a year, or £2 million where at least £1 million goes to knowledge-intensive companies. SEIS gives 50% on up to £200,000, reflecting the earlier stage and higher risk. Both require a minimum three-year hold.
Should I use these instead of a pension?
No. A pension gives relief at your marginal rate on a diversified portfolio, and these give relief on individual small companies that can fail entirely. They are for money left over once pension and ISA allowances are used, and only where the loss is affordable.
Sources
Regulator references
- Venture capital schemes: tax relief for investors · HM Revenue and Customs · 2025The relief rates, holding periods and clawback conditions on EIS, SEIS and VCT.Last verified: 2026-09-07
- Annual allowance on pension savings · GOV.UK · 2025The annual allowance, the money purchase allowance and how they interact.Last verified: 2026-09-07
- Summary of reforms to agricultural property relief and business property relief · HM Revenue and Customs · 2026The £2.5 million allowance for the 100% rate from 6 April 2026, and the 50% rate above it.Last verified: 2026-09-07
Calculator unit tests · the assertions this page's worked example is checked against, and their last result
Changelog
- 2026-09-07 — initial publish (new format)
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Jordan Reeves
Founder of Talk Through Wealth. A software engineer for over a decade before turning to retirement planning, Jordan built the projection engine after watching family members get fragmented, country-by-country advice that never reconciled. He writes about retirement the way the engine computes it: month-by-month, lifetime-long, and skeptical of any rule of thumb that hasn't been run through the math.