Unveiling the Key Benefits of EIS for Inheritance Tax Planning

The pension landscape is set to change. From April 2027, unused pension funds will be included in a deceased’s estate for IHT, making them taxable. Even after IHT is paid, beneficiaries inheriting pensions face further taxation – as a result, higher-rate taxpayers could see up to 45% income tax on withdrawals. As a result, Financial Advisers are increasingly turning to tax-efficient schemes like EIS to help their clients.

In this exclusive interview, Ewoud Karelse, Evelyn Partners and Kealan Doyle, CEO & Co-Founder at Symvan Capital, discuss how EIS inheritance tax planning could increasingly play a vital role following changes in the Autumn Budget 2024.

Watch the 8 minute video here. 

EIS and inheritance tax

Inheritance tax is charged at 40% on the value of an estate above the available nil-rate bands, and for many families it can materially reduce what is ultimately passed on. EIS inheritance tax planning is one way some investors look to address this, alongside its more commonly discussed income tax and capital gains benefits. 

EIS shares are shares in unquoted trading companies, and as such they may qualify for Business Relief, a long-standing provision that can remove some or all of an asset’s value from an estate for IHT purposes. This can make EIS a consideration for investors who want their capital to continue working towards growth while also addressing part of their long-term estate position, subject to their individual circumstances.

As with all EIS investments, this potential benefit sits alongside genuine investment risk. Underlying companies are early-stage and may fail, and any tax treatment depends on the investor’s personal circumstances and the rules in force at the time.

EIS IHT relief

This is what’s generally referred to as EIS inheritance tax relief, and it works through Business Relief rather than a scheme-specific mechanism. 

Since 6 April 2026, the rules governing Business Relief have changed. Each individual now has a £2.5 million allowance for assets that qualify for 100% relief, covering business and agricultural assets combined. This allowance is transferable between spouses and civil partners, meaning a couple may, between them, shelter up to £5 million of qualifying assets from IHT at the full rate.

Qualifying value above that allowance receives 50% relief rather than 100%, which at the standard 40% IHT rate produces an effective rate of 20% on the excess.

For most private investors, EIS holdings are unlikely to approach the £2.5 million threshold on their own. But advisers and investors with significant existing business or agricultural assets should consider how an EIS allocation interacts with the total figure, since the allowance is shared across all qualifying assets rather than applied separately to each type.

How EIS shares are treated for IHT

To benefit from Business Relief, EIS shares generally need to have been held for at least two years at the time of death, and the underlying company must continue to meet the qualifying conditions throughout that period. 

If shares are sold and the proceeds are reinvested into another qualifying EIS company within three years, the two holding periods may be combined toward the two-year requirement, rather than the clock restarting from zero. The precise mechanics depend on individual circumstances and current HMRC guidance. 

Where the conditions are met, qualifying EIS shares held at death can be excluded from the estate’s value for inheritance tax purposes (within the allowance described above), meaning beneficiaries may inherit them without an IHT charge on that portion of the estate. This is separate from, and in addition to, the income tax and capital gains reliefs available to EIS investors during their lifetime. 

Because Business Relief depends on the shares still qualifying at the point of death, ongoing monitoring of a portfolio’s EIS status matters. A company that has grown, changed its trade, or been acquired may no longer meet the qualifying conditions, which is one reason estate planning through EIS is generally considered alongside professional advice rather than as a standalone decision.

Ewoud Karelse, Specialist-Product at Evelyn Partners, started his career in financial services with Allenbridge in 2000 and joined Towry Law in 2008 before joining Tilney in 2016, and Evelyn Partners in 2022. Ewoud is responsible for the research and selection of Venture Capital Trusts; (Seed) Enterprise Investment Schemes; Business Relief for Inheritance Tax Planning (AIM and non-AIM), and Social Investment Tax Relief products. He is also well versed in the use of Business Investment Relief for International clients.

Kealan Doyle is CEO and co-founder of Symvan Capital. He has worked with venture capital firms for over 15 years, both in a corporate finance advisory capacity and as a fund manager. Before his involvement in venture capital investing, Kealan previously led a structured equity products team at HSBC and has worked at Deutsche Bank, Merrill Lynch and UBS. Kealan holds degrees from the London School of Economics and the University of Toronto.

Considering how EIS inheritance tax planning might fit within a client’s or your own estate strategy?  Get in touch with our team to discuss how Symvan Capital’s approach to EIS investing addresses both growth potential and long-term tax planning considerations. 

Disclaimer 

Please note this podcast/interview does not constitute a financial promotion and is provided for informational purposes and should not be construed as an invitation or offer to buy or sell any investments. Please be aware that investments in unquoted companies are high-risk, long-term, and illiquid.  Your capital is at risk. Past performance is not a reliable indicator of future performance.  Target returns are not guaranteed, and forward-looking statements are illustrative only and must not be relied upon. Investors should invest only after reading the full offer documentation. Listeners must make their own independent decisions and obtain their own independent advice regarding any information, projects, securities, tax treatment or financial instruments mentioned herein. 

Risk warning: Capital is at risk. EIS and SEIS investments are high-risk, illiquid, and intended for investors who understand the risks of investing in early-stage companies. Tax reliefs depend on individual circumstances and current legislation, which may change. This document is provided for information only and should not be regarded as investment or tax advice.