The UK's tax-advantaged investment market is shifting towards earlier-stage businesses, according to analysis of the latest HMRC data by venture fund manager SyndicateRoom, as the Seed Enterprise Investment Scheme (SEIS) gathers pace while the larger Enterprise Investment Scheme (EIS) shows signs of maturing.

HMRC's latest statistics, covering the 2024-25 tax year, show companies raised £1.58bn through EIS, broadly unchanged from the previous year. However, the total remains below both the pre-pandemic level of £1.89bn in 2019-20 and the £2.3bn peak recorded in 2021-22.

The headline figure also masks a decline in participation. The number of EIS subscriptions fell for a third consecutive year to 169,190, the lowest level since 2016-17, while the number of investors claiming income tax relief declined 7 per cent to 33,220.

At the same time, investment has become increasingly concentrated. Companies raising more than £2m accounted for just 4 per cent of EIS recipients but secured 27 per cent of total capital. Knowledge-intensive businesses, which receive enhanced support under the scheme, attracted £494m across a record 525 companies.

By contrast, SEIS recorded its strongest year since its launch. Investment reached a record £276m across 2,430 companies, supported by a record 57,780 subscriptions. The increase follows reforms introduced in April 2023 that raised the maximum amount companies can raise under the scheme from £150,000 to £250,000 and doubled the annual investment limit for individuals.

HMRC has suggested the higher limits are encouraging some investors to allocate capital to SEIS that might previously have been invested through EIS. Almost two-thirds of SEIS investment now exceeds the scheme's former funding cap.

The data also points to a gradual shift away from London. The capital's share of EIS investment has fallen from 51 per cent to 45 per cent over the past two years, while investment in the East of England increased to £158m.

Graham Schwikkard, chief executive of SyndicateRoom, said the latest figures suggested risk capital was moving towards younger companies. He said the reforms to SEIS appeared to be achieving their intended effect by directing more investment to businesses at the earliest stages of development.

Looking ahead, advance assurance applications, often viewed as an indicator of future fundraising activity, rose 24 per cent for SEIS to a record 4,085 in 2024-25, compared with a 4 per cent increase for EIS, suggesting momentum remains strongest at the earliest stage of the investment market.