EIS vs SEIS vs VCT: Which tax-efficient investments work best for high earners in the UK?

When you start earning at a higher level, the question isn’t just about making more money; it’s about keeping it working for you. For many successful professionals and business owners, the real challenge is managing tax efficiently while growing their wealth.

That’s where EIS, SEIS and VCTs come in. These government-backed investment schemes reward investors who help UK small businesses thrive, offering generous tax incentives in return. Read this blog to know more about which tax-efficient investments work best for you.

Why high earners turn to tax-efficient investments

If you’ve already made full use of your (Individual Savings Account) ISA and pension allowances, you’ve probably noticed how quickly those limits can cap your savings. For high earners, that’s often the point when it might make sense to explore more flexible, tax-smart ways to invest.

If you’ve already used your ISA and pension limits, schemes like EIS, SEIS and VCTs offer another way to invest. They provide valuable tax benefits while supporting ambitious UK businesses with growth potential.

What is the Enterprise Investment Scheme (EIS)?

The Enterprise Investment Scheme helps growing UK businesses attract funding. In return, investors enjoy generous tax breaks that soften the risks of supporting smaller companies.

Under the EIS, you can invest up to £1 million per tax year or £2 million if at least half goes into knowledge-intensive firms, and receive income tax relief of 30% of the amount invested. Hold the shares for at least three years, and any growth is free from Capital Gains Tax.

If things don’t go as planned, you can claim loss relief, offsetting the loss against income or capital gains. After holding EIS shares for two years, they can also qualify for inheritance tax relief under business relief, which makes them an excellent option for long-term estate planning.

What is the Seed Enterprise Investment Scheme (SEIS)?

SEIS focuses on very early-stage businesses where the risks are higher and the tax benefits are more generous.

You can invest up to £200,000 a year and claim 50% income tax relief, regardless of your tax rate. Hold the shares for at least three years, and any gains are exempt from Capital Gains Tax.

There’s also a 50% CGT reinvestment relief if you reinvest gains from other assets into SEIS shares. And like EIS, if the company fails, you can claim loss relief.

SEIS is for small start-ups that are often still testing their business models. 

What are Venture Capital Trusts (VCTs)?

Venture Capital Trusts take a slightly different approach. Instead of investing directly in start-ups or private companies, you invest in a listed fund that does it for you.

VCTs are managed by professional fund managers who spread your investment across a portfolio of smaller, unquoted UK businesses. This diversification reduces individual company risk, and because VCTs are traded on the stock market, they’re more liquid than EIS or SEIS shares.

The tax benefits are:

• 30% income tax relief on investments up to £200,000 per tax year.
• Tax-free dividends, providing regular income.
• No Capital Gains Tax on any profits when you sell your VCT shares.

To retain the income tax relief, you’ll need to hold your shares for at least five years. For many investors, VCTs offer a practical way to generate tax-free income while supporting smaller UK businesses.

What is the difference between EIS, SEIS, and VCT?

Here’s a clear look at how the three schemes differ:

Each scheme serves a slightly different purpose. SEIS offers the largest relief but the highest risk. EIS provides a balanced blend of tax efficiency and potential growth. VCTs are better suited for those seeking steady, tax-free dividends and diversification.

How can I invest in a tax-efficient way in the UK?

Tax-efficient investing for high earners usually involves a mix of different schemes. Here’s how you might approach it:

1. Allocate a small amount to SEIS, giving you exposure to high-risk, high-reward, high-potential start-ups.
2. Add EIS for established growth companies with strong expansion plans.
3. Include VCTs to generate tax-free income and diversify your exposure.

This mix allows you to balance risk, reward and liquidity, while maximising reliefs across multiple tax years.

It’s also wise to reinvest proceeds from previous gains. Both EIS and SEIS let you roll over or reinvest capital gains to defer or reduce future liabilities. Over time, these savings can compound significantly.

Of course, these investments carry risk — including the possibility of losing all or part of your capital — so professional advice is essential before investing.

What are the tax benefits of VCTs compared with EIS and SEIS?

VCTs stand out for their tax-free dividends. That’s a major advantage if you’re seeking regular, tax-efficient income rather than long-term capital growth.

While EIS and SEIS focus on upfront relief and exit exemptions, VCTs reward patience with steady, tax-free payouts. Many investors use them as part of an income strategy in retirement or alongside pension withdrawals.

They also tend to be more liquid, since they’re listed on the London Stock Exchange. If flexibility and income matter more to you than control or high growth, VCTs are often the better fit.

Final thoughts

At Fairview Financial Management, we help high earners make sense of complex tax-efficient investments like EIS, SEIS and VCTs. Our advisers take the time to understand your goals, risk tolerance and financial plans before recommending a strategy that fits you best — helping you grow your wealth efficiently while making the most of every available tax benefit.

Taxation, including inheritance tax planning is not regulated by the Financial Conduct Authority.

The value of investments and any income from them can fall as well as rise and you may not get back the original amount invested.

Don’t invest unless you’re prepared to lose all your money. This is a high-risk investment.

You could lose all your money and are unlikely to be protected if something goes wrong.