Last updated: 14 October 2026
How can EIS investments help reduce inheritance tax now that pensions are included?
Shares in qualifying Enterprise Investment Scheme (EIS) companies usually qualify for Business Property Relief (BPR) once you have held them for 2 years. That means they can pass on death with 100% relief from inheritance tax (IHT), within the £2.5 million combined 100% BPR and agricultural relief allowance that applies from April 2026. With most unused pensions coming into IHT from 6 April 2027, some people are drawing pension money and reinvesting part of it in EIS to shelter it.
The tax reliefs on EIS
| Relief | What you get |
| Income tax relief | 30% of the amount invested, up to £1 million a year (£2 million if at least £1 million goes into knowledge-intensive companies) |
| CGT deferral | Gains reinvested in EIS can be deferred |
| CGT exemption | Gains on EIS shares are free of CGT if held for 3 years and income tax relief was given |
| Loss relief | Losses can be set against income |
| IHT | Business Property Relief after 2 years |
Why pensions are changing the picture
For deaths on or after 6 April 2027, most unused defined contribution pension funds and death benefits will be included in the estate. A large pension that used to pass free of IHT could now face 40% IHT, and income tax for the beneficiaries if you die after 75. Drawing more pension income during your lifetime and investing it in BPR-qualifying assets is one way to reduce this.
Example
Linda is 70, with a £600,000 pension pot and an estate already over the nil-rate bands. She draws an extra £50,000 of taxable pension income over two years and invests £50,000 in EIS. She gets £15,000 of income tax relief, which offsets much of the income tax on the withdrawal. After 2 years, the EIS shares can qualify for BPR, so the £50,000 can pass free of IHT instead of facing 40% (£20,000) as part of her pension.
The risks
- EIS companies are small, unlisted and high-risk, and you can lose your money
- The shares are hard to sell
- BPR depends on the company still qualifying at the time of death
- Income tax relief is withdrawn if you sell within 3 years
- Investments above the £2.5 million allowance get only 50% BPR
AIM shares are different
From 6 April 2026, AIM-listed shares that qualify for BPR get 50% relief, not 100%. EIS shares in unquoted trading companies can still get 100%, within the allowance.
Alternatives to compare
- Gifts out of surplus pension income, which are exempt immediately
- Lifetime gifts that fall out of the estate after 7 years
- Life insurance in trust to pay the IHT bill
- Spending or drawing the pension earlier
Frequently asked questions
Do I have to hold EIS shares for 2 years for IHT relief?
Yes, normally 2 years before death.
Does EIS relief apply if I’m over 75?
Yes. There is no age limit on EIS income tax relief or BPR.
Is SEIS also eligible for BPR?
SEIS shares can also qualify for BPR after 2 years.
Should I take financial advice?
Yes. EIS investments should be arranged with a regulated financial adviser. We can advise on the tax.
Related: reducing an estate below £2 million.
Talk to Accotax
Want this handled for you? Our team at Accotax can help with EIS and inheritance tax planning. See our inheritance tax planning service, or contact us for a free, no-obligation quote.
This page is general guidance based on HMRC rules for the 2026/27 tax year, checked against gov.uk on 14 October 2026. It is not personal advice, so speak to an accountant about your own situation.
