Investing in the age of AI

Unlocking Economic Growth Through EIS, SEIS, VCTs, and Business Relief

The overlooked corner of the investment landscape

In the world of personal finance, most people know the basics: ISAs, pensions, and maybe the odd stocks and shares portfolio. But tucked away in the more specialist corners of the investment landscape are some of the UK’s most powerful economic tools, ones that not only offer generous tax incentives but also have quietly driven billions into high-growth businesses, job creation, and innovation. These tools, Business Relief (“BR”), Enterprise Investment Scheme (“EIS”), Seed Enterprise Investment Scheme (“SEIS”) and Venture Capital Trusts (“VCTs”), have transformed how early-stage and privately owned companies access capital. However, a critical problem remains, which is public awareness and understanding of these schemes is woefully lacking. This lack of education isn’t just a missed opportunity for individual investors; it’s a missed opportunity for the UK economy.

How these schemes drive growth

Each of these four schemes is designed to attract private investment into the sectors and companies most critical to the UK’s future early-stage startups, scaleups, and companies in areas like renewable energy, biotech, and infrastructure. To balance the high risk of such investments, the government offers significant tax benefits, for example, EIS allowing investments up to £2 million annually, with 30% income tax relief, tax-free capital gains, deferral of existing capital gains, loss relief, and 100% inheritance tax (“IHT”) relief after two years. BR, which is often used in estate planning, offering up to 100% IHT relief after two years for investments in qualifying trading companies and VCTs, which provide 30% income tax relief on up to £200,000 per year, tax-free dividends, and no capital gains tax on the sale of shares. These are not marginal benefits, they are substantial financial advantages for those willing to support the UK’s growth engine.

The proven track record

It is important to focus on these tax-advantaged investment schemes and how they have delivered significant impact. Since 1994, EIS has channelled £32 billion into over 56,000 companies, helping create hundreds of thousands of jobs, generate £192 billion in revenue, and support nearly half of the UK’s unicorns. VCTs raised over £4.6 billion in five years, backing more than 1,100 small businesses and creating over 100,000 jobs. BR investments have also provided funding to Unlisted or AIM-listed trading businesses, supporting growth, innovation, and long-term economic activity.

The awareness gap

Despite the proven success of these schemes, public knowledge remains limited. Many investors, especially younger ones or those outside high-net-worth circles, are unaware that these options even exist. They are rarely included in mainstream financial education or widely discussed by generalist financial advisers. This disconnect means that billions in potential capital remain locked away in cash ISAs or underperforming portfolios, while thousands of early-stage businesses struggle to find funding. Moreover, the complexity of these schemes often acts as a barrier. Terms like “loss relief,” “inheritance tax mitigation,” or “capital gains deferral” can be off-putting to non-specialist investors. Without clear, accessible education and trusted advice, these investments remain in the shadows.

Real-world impact

Educating the public on these tax-advantaged schemes is not just about giving investors better tools, it’s about strengthening the UK economy. Increased awareness could unlock significantly more private capital for the businesses that are solving some of our most urgent challenges, whether it’s cancer diagnostics, AI or sustainable infrastructure. For example, EIS has helped fund companies like Open Bionics, which develops affordable bionic limbs, and NatureMetrics, which uses DNA technology to monitor biodiversity. VCT-backed firms like Transreport have made travel more accessible for millions of passengers with disabilities. These are real businesses making a tangible difference and they were made possible by investors who were informed enough to act.

Barriers to entry

Barriers such as minimum subscription amounts, changing legislation, illiquidity, investment risk and administrative burden pose a significant obstacle to investors. When looking at minimum subscriptions, Unlisted BR services have an average minimum subscription of approximately £27,000 across 25 offerings, excluding Corporate BR products, which typically require significantly higher minimum subscriptions. AIM BR services show a higher average subscription level, with an average of approximately £66,000 across 33 offerings. EIS opportunities have an average subscription of circa £19,000 across 73 offers (including Knowledge Intensive funds), while VCTs report a lower average subscription of circa £4,000 across 43 offers, with these high minimum thresholds likely having a larger impact on younger investors. As an example of ever-changing legislation, in the Autumn Budget of October 2024, the UK Government announced proposed changes to IHT and BR rules such as freezing of IHT thresholds, inclusion of pension assets in IHT and the capping of Business Relief, which will all impact estate planning and business succession strategies. Additionally, these investments are typically long-term and not easily sold which could be tricky for investors in greater need of accessing capital more urgently. Finally, claiming tax relief (such as EIS certificates for HMRC) can be costly and involve complex documentation.

The case for better education

Tax-advantaged investments such as BR, EIS, SEIS and VCTs have already made a substantial contribution to the UK’s economy; however, they remain underutilised, largely because they’re under-taught. With better education, guidance, and promotion, particularly to younger investors, advisers, and entrepreneurs, the UK could unlock an even greater wave of capital into high-growth sectors. The impact of this would be a more dynamic economy, more jobs, more innovation, and a stronger, more resilient nation. However, these are typically high-risk investments and so may not be suitable for everyone.

Get in touch: 

anna@duo.consulting
cara@duo.consulting

Press Office:
defaqto@duo.consulting

For further insights or due diligence tools, MICAP offers comprehensive platform-based comparisons of EIS, SEIS, VCT, and BR products to support financial advisers in making well-informed recommendations. For more information visit https://micap.com/