Tax relief on a 100,000 startup stake runs from nothing to half: five countries compared

Tax relief on a 100,000 startup stake runs from nothing to half: five countries compared

Put 100,000 into a young company in the UK under the Seed Enterprise Investment Scheme and the tax office gives you 50,000 back straight away. Put the same amount into a qualifying Irish startup that has not yet started trading and the relief is also 50,000. Do it in the United States and you get nothing up front at all, although a successful exit can be entirely free of federal tax on the gain. France gives 9,000, capped at 10,000 for a couple, and Germany pays a 15,000 cash grant.

We worked through the rules of seven schemes in five countries, using only the governments' own guidance and statutes as they stood on 14 October 2026, to see what each one is worth to an individual investor on a single 100,000 stake. The differences are large, and they change which kind of company each country's investors are encouraged to back.

This piece sets out the comparison, explains why governments pay people to take this risk, and lists the conditions that most often cost investors their relief.

How we worked it out. For each scheme we took a 100,000 investment in local currency by one individual in a company that qualifies, made after 6 April 2026 in the UK and after 4 July 2025 in the US. For the UK we assumed an additional-rate taxpayer (45 per cent income tax, 24 per cent capital gains tax for 2026 to 2027). For the US we assumed a married couple filing jointly in the 37 per cent top federal bracket. "If it fails" means the shares become worthless after the minimum holding period. Figures are our arithmetic from the rules cited; they are not advice, and state, local and personal circumstances change the result.

The comparison

Scheme	Upfront relief on 100,000	If the company fails	If it succeeds	Minimum hold
UK Seed Enterprise Investment Scheme (SEIS)	50% income tax relief: £50,000	Loss relief on the net £50,000 at 45%: £22,500 more back; net loss £27,500	Gain free of capital gains tax	3 years
UK Enterprise Investment Scheme (EIS)	30%: £30,000	Loss relief on the net £70,000 at 45%: £31,500; net loss £38,500	Gain free of capital gains tax	3 years
UK Venture Capital Trust (VCT)	20%: £20,000 (30% before 6 April 2026)	No loss relief against income	Dividends and gains tax-free	5 years
US qualified small business stock (Section 1202)	None	Section 1244 lets up to $100,000 a year on a joint return count as an ordinary loss: worth $37,000 at 37%	100% of the gain excluded after 5 years (75% after 4, 50% after 3), up to $15 million per company	3 years for any exclusion
Ireland Employment Investment Incentive (EII)	50% for a company not yet trading in any market: €50,000 (lower for older companies)	Not covered here	Not covered here	4 years
France IR-PME	18% on up to €50,000 for a single person: €9,000	Not covered here	Not covered here	To the end of the fifth year
Germany INVEST grant	15% cash grant: €15,000	Grant kept	Exit grant of 25% of the gain, capped at the first grant	3 years for the exit grant

The UK stands out on the downside. Under SEIS an additional-rate taxpayer who loses the whole stake is out of pocket by only 27,500 pounds, or 27.5 pence for every pound invested, because both the upfront relief and loss relief come back. Under EIS the figure is 38.5 pence. No other scheme we looked at cushions failure to that extent.

The US stands out on the upside. A UK investor saves capital gains tax at 24 per cent on a winning EIS or SEIS investment. A US investor holding qualified small business stock for five years can exclude the whole gain, up to 15 million dollars or ten times what they paid, whichever is greater, from federal income tax. American relief rewards the founder and early investor who hit a large exit; British relief rewards anyone who takes the risk.

The UK: the most generous at the start

The UK schemes are run by HMRC, which describes their purpose as to "encourage investment in certain newer, smaller unquoted trading companies". They are old: share loss relief dates from 1980, the Enterprise Investment Scheme from 1994, Venture Capital Trusts from 1995 and SEIS from 2012.

SEIS is for the very youngest companies. An investor can put in up to 200,000 pounds a year for 50 per cent income tax relief. The company must have carried on its trade for no more than three years, have gross assets of no more than 350,000 pounds, fewer than 25 full-time equivalent employees, and can raise no more than 250,000 pounds under the scheme. These limits were raised in April 2023 from 150,000 pounds raised, 200,000 pounds of gross assets and a two-year trading limit. Our listing of the Seed Enterprise Investment Scheme links to the HMRC pages.

EIS covers more mature companies. The investor limit is 1 million pounds a year, or 2 million pounds where at least 1 million pounds goes into knowledge-intensive companies, for 30 per cent relief. From 6 April 2026 a company can raise 10 million pounds a year and 24 million pounds in its lifetime, double the previous limits, or 20 million and 40 million pounds if it is knowledge-intensive. It must have gross assets of no more than 30 million pounds before the issue and 35 million pounds after, fewer than 250 employees, and usually be raising within seven years of its first commercial sale. EIS also lets an investor defer capital gains tax on other gains by reinvesting them. See our Enterprise Investment Scheme listing.

VCTs are listed funds that invest in EIS-type companies, so the investor gets a spread of companies rather than one. From 6 April 2026 the upfront relief fell from 30 to 20 per cent. The government's Budget 2025 paper said the cut would "better balance" VCT relief against EIS, which has no dividend relief, and push money towards higher-growth companies. Dividends and gains on VCT shares remain tax-free on up to 200,000 pounds a year. See our Venture Capital Trust scheme listing.

One UK scheme has gone. Social Investment Tax Relief, which gave 30 per cent relief for investing in social enterprises, can only be used for investments made on or before 5 April 2023.

The reliefs are not cheap. HMRC's tax relief statistics, published in January 2026, put the cost of EIS income tax relief at 480 million pounds in 2024 to 2025, VCT income tax relief at 280 million pounds plus 130 million pounds for the VCT dividend exemption, and SEIS income tax relief at 130 million pounds. That is about 1 billion pounds a year of forgone tax spent on steering private money into small companies.

The US: nothing up front, everything at the exit

The US does not reward investing as such. It rewards holding.

Section 1202 of the Internal Revenue Code lets an individual exclude gain on qualified small business stock: shares bought at original issue in a US C corporation with gross assets below a limit, carrying on an active business outside excluded fields such as health, law, finance, consulting and hospitality. The July 2025 budget law changed the rules for stock acquired after 4 July 2025. The gross assets limit rose from 50 million to 75 million dollars, the per-company cap on excluded gain rose from 10 million to 15 million dollars (or ten times the investor's basis, if greater), and a tiered exclusion replaced the five-year cliff: 50 per cent after three years, 75 per cent after four and 100 per cent after five. Both limits are indexed to inflation from 2027.

On the downside, Section 1244 lets the original holder of small business stock treat a loss of up to 50,000 dollars a year, or 100,000 dollars on a joint return, as an ordinary loss rather than a capital loss, so it can be set against salary. Section 1045 lets an investor who sells qualified stock held for more than six months roll the gain into new qualified stock within 60 days and defer the tax.

A small company itself can also turn its research credit into cash before it makes a profit. A qualified small business with gross receipts under 5 million dollars and no receipts more than five years back can apply up to 500,000 dollars of research credit against its employer payroll taxes, according to the IRS instructions for Form 6765.

Ireland, France and Germany

Ireland's Employment Investment Incentive gives relief through a deduction from income, scaled by how young the company is. An initial investment in a company not yet operating in any market earns a deduction of 125 per cent of the amount, which at the 40 per cent top rate is relief of 50 per cent. For a company that has been operating for longer the relief falls to 35 or 20 per cent, and investment through a qualifying fund earns 30 per cent. An investor can claim on up to 1 million euros a year from 2025, and must hold for four years and have no prior connection with the company. A company can raise 5.5 million euros in any 12 months and 16.5 million euros in total. The scheme is due to end with shares issued on or before 31 December 2026.

France's IR-PME, often called the Madelin reduction, cuts income tax by 18 per cent of the amount invested in 2025 in a young unlisted SME, counted on up to 50,000 euros for a single person or 100,000 euros for a couple, with the excess carried forward for four years. The shares must be held to the end of the fifth year after subscription. The reduction counts towards France's overall cap on tax breaks of 10,000 euros a year, so a couple investing 100,000 euros would see 18,000 euros of reduction squeezed to 10,000 euros in the first year. A temporary 25 per cent rate ran from 2020 to 2023.

Germany's INVEST programme is not a tax relief but a cash grant from BAFA, the federal export and economic control office. An investor receives 15 per cent of the issue price, up to 100,000 euros of grant, and after three years an exit grant of 25 per cent of any gain, capped at the size of the first grant. The company must be under seven years old, have fewer than 50 full-time staff and turnover or a balance sheet of no more than 10 million euros, and show it is innovative. Applications close on 31 December 2026, and BAFA's pages show no extension.

Why governments pay for this

Every scheme here exists for the same reason: young companies are risky and illiquid, and without help many investors would put their money into listed shares or property instead. HMRC's own history of the UK schemes shows how the design has tightened since 2018 around a "risk-to-capital" condition, which requires the company to aim for long-term growth and the investor's money to be genuinely at risk, so that low-risk, asset-backed businesses do not soak up the relief.

The choice between upfront relief and exit relief is a choice about which investors to attract. Upfront relief, as in the UK and Ireland, works on income: it brings in people with large tax bills who might never back a startup otherwise, including through VCT funds sold by financial advisers. Exit relief, as in the US, works on gains: it rewards founders, employees and early investors who already hold equity and stay for five years. Germany's grant does a little of both and costs the treasury cash rather than revenue.

The conditions that cost investors their relief

The schemes are generous, but they are withdrawn as easily as they are given. The traps that recur in the official guidance:

1. Selling too early. The relief is clawed back if the shares are sold before the minimum period: three years for SEIS and EIS, five for VCTs, four in Ireland, the end of the fifth year in France. In the US, stock sold within three years gets no Section 1202 exclusion at all.
2. Claiming before the company is ready. A UK SEIS company cannot issue the compliance certificate investors need until it has traded for four months or spent 70 per cent of the money, so relief cannot be claimed in the meantime.
3. The wrong kind of company. Excluded trades, gross asset limits and age limits apply everywhere. In the US the company must be a C corporation, so investors in an LLC or S corporation get nothing under Section 1202. UK companies can ask HMRC for advance assurance before the round to settle the question.
4. Being too close to the company. Ireland excludes investors with a prior stake in the company, and France excludes existing shareholders except for follow-on rounds. The UK has similar connected-person rules, which advance assurance also covers.
5. Missing a deadline. Ireland's scheme and Germany's INVEST grant both end for new investments at the end of 2026 unless they are renewed.

Programmes in our catalogue

Our startup funding programmes page lists the three UK investor reliefs alongside UK R&D tax relief, the company-side relief that pays young companies back for research spending, and the public co-investment schemes that work beside them. For founders, the practical point is that a tax relief is something investors claim, but the company has to qualify first; checking that before the round is the founder's job.

Related on TrustList:

• Most public startup money cannot be applied for directly: how co-investment works

Sources

• HMRC, Venture Capital Schemes Manual VCM2010 and VCM2020 (VCM2020 updated 30 July 2026): https://www.gov.uk/hmrc-internal-manuals/venture-capital-schemes-manual/vcm2020
• HMRC, Venture capital schemes: tax relief for investors (updated 6 April 2026): https://www.gov.uk/guidance/venture-capital-schemes-tax-relief-for-investors
• HMRC, Apply to use the Seed Enterprise Investment Scheme: https://www.gov.uk/guidance/venture-capital-schemes-apply-to-use-the-seed-enterprise-investment-scheme
• HM Treasury and HMRC, Increasing the limits of the Seed Enterprise Investment Scheme (15 March 2023): https://www.gov.uk/government/publications/venture-capital-schemes-expansion-of-the-seed-enterprise-investment-scheme-seis/increasing-the-limits-of-the-seed-enterprise-investment-scheme
• HMRC, Apply for the Enterprise Investment Scheme (updated 6 April 2026): https://www.gov.uk/guidance/venture-capital-schemes-apply-for-the-enterprise-investment-scheme
• HMRC, Venture Capital Schemes Manual VCM12032 (updated 30 July 2026): https://www.gov.uk/hmrc-internal-manuals/venture-capital-schemes-manual/vcm12032
• HM Treasury, Venture Capital Trusts and Enterprise Investment Scheme: investment limit increase and restructure (26 November 2025): https://www.gov.uk/government/publications/enterprise-investment-scheme-eis-and-venture-capital-trusts-vct-changes/venture-capital-trusts-enterprise-investment-scheme-investment-limit-increase-and-restructure
• HMRC, Apply to use Social Investment Tax Relief: https://www.gov.uk/guidance/venture-capital-schemes-apply-to-use-social-investment-tax-relief
• HMRC, Tax relief statistics (22 January 2026): https://www.gov.uk/government/statistics/tax-reliefs
• GOV.UK, Income Tax rates and Personal Allowances (read 14 October 2026): https://www.gov.uk/income-tax-rates
• GOV.UK, Capital Gains Tax rates (read 14 October 2026): https://www.gov.uk/capital-gains-tax/rates
• Public Law 119-21 (signed 4 July 2025), section 70431: https://www.govinfo.gov/content/pkg/PLAW-119publ21/html/PLAW-119publ21.htm
• IRS, Publication 550, Investment Income and Expenses (reviewed 30 April 2026): https://www.irs.gov/publications/p550
• IRS, Instructions for Form 6765 (December 2025): https://www.irs.gov/instructions/i6765
• IRS, Federal income tax rates and brackets (reviewed 27 July 2026): https://www.irs.gov/filing/federal-income-tax-rates-and-brackets
• Revenue, Employment Investment Incentive (23 April 2026) and Tax and Duty Manual Part 16-00-03: https://www.revenue.ie/en/personal-tax-credits-reliefs-and-exemptions/investment/relief-corporate/employment-investment-incentive.aspx
• Impots.gouv.fr, Investing in a company and the tax reduction (modified 8 July 2026): https://www.impots.gouv.fr/particulier/questions/si-jinvestis-dans-une-entreprise-ai-je-droit-une-reduction-dimpot
• BOFiP, update of 27 August 2026: https://bofip.impots.gouv.fr/bofip/15199-PGP.html/ACTU-2026-00156
• BAFA, INVEST Zuschuss für Wagniskapital (read 14 October 2026): https://www.bafa.de/DE/Wirtschaft/Beratung_Finanzierung/Invest/invest_node.html
• BAFA, INVEST guideline of 6 March 2024: https://www.bafa.de/SharedDocs/Downloads/DE/Wirtschaft/invest_richtlinie.pdf?__blob=publicationFile&v=4