If 2025 taught us anything, it is that the “wait-and-see” approach to the UK venture market is officially over, says Jon Prescott, Partner at PXN Investment. After the recalibration of 2023 and the stabilisation of 2024, we are closing this year with a clear signal: the UK’s innovation economy—specifically in the regions outside London—is decoupling from the broader stagnation of traditional indices.
For years, the Enterprise Investment Scheme (EIS) has been viewed by many advisers primarily as a tax mitigation tool. While those benefits remain potent, treating EIS solely as a tax wrapper ignores the fundamental shift occurring in the underlying asset class. As we look toward 2026, the conversation is shifting from simply accessing private markets to targeting specific growth drivers. This is where the Knowledge Intensive (KI) EIS is moving from a niche consideration to a core portfolio component.
Defining the difference: Standard vs. Knowledge Intensive
For the uninitiated, it is important to distinguish between the two main EIS structures. A Standard EIS offers broad exposure to a variety of trading companies and is excellent for general diversification.
A Knowledge Intensive EIS, however, focuses specifically on companies developing their own intellectual property. To qualify, a business must meet strict HMRC thresholds for research and development spend, demonstrating that its growth is driven by scientific or technological advancement rather than commercial replication. In practical terms, KI EIS gives investors exposure to genuinely high-growth sectors—such as Deep Tech, Life Sciences, and CleanTech—while still offering the familiar tax advantages of the EIS framework.
Crucially, these sectors are largely insulated from the volatility of consumer-facing markets. Data from the British Business Bank and Innovate UK shows that Deep Tech and Life Sciences have been among the fastest-growing categories for private capital deployment over the past three years.
Policy tailwinds
The government’s commitment to this sector was emphatically reinforced in the November 2025 Budget. The Chancellor announced that from April 2026, the amount KI companies can raise will double to £20 million annually and £40 million over a company’s lifetime.
Simultaneously, the recalibration of Venture Capital Trust (VCT) income tax relief (reduced from 30% to 20%) has altered the landscape. This policy divergence sends an unambiguous message: EIS – and KI EIS in particular – is a primary vehicle for channelling private capital into high-growth innovation.
For the sophisticated investor, the structural capacity of the KI EIS is now unmatched. Investors can deploy up to £2 million per tax year, provided that at least £1 million is allocated to Knowledge Intensive companies. Furthermore, the ability to carry back relief applies to the full amount, meaning clients may be able to offset up to £600,000 of Income Tax from the previous year in a single allocation.
Solving the ‘drip feed’ dilemma
While investment potential is paramount, administrative reality matters. In a standard EIS fund, the manager deploys capital into multiple companies over 12 to 18 months. This structure is effective for “time-averaging” into the market, but it results in tax relief being generated piecemeal as each investment is made. For clients who need to carry back relief to a specific tax year, this “drip feed” of certificates can make precise planning challenging.
The Approved Fund structure, designed specifically for Knowledge Intensive funds, solves this timing issue. In an Approved KI Fund, the tax relief is dated to the fund close date, not the individual deployment dates.
If an adviser commits a client’s capital to an Approved KI Fund that closes on 3rd April 2026, the client receives a single tax certificate (Form EIS5) for the full amount. This grants immediate certainty. The relief can be claimed for the 2025/26 tax year or carried back to 2024/25 in its entirety. For advisers, this eliminates the administrative complexity of tracking multiple tax points, providing a streamlined solution for clients with specific liability targets.
The Northern advantage
Administrative ease is valuable, but capital must be put to work in high-quality assets. PXN Investments focuses on companies building the future through deep tech: advanced sensors, grid-scale energy solutions, and medical breakthroughs.
Our track record illustrates the potential here. Current Health, a remote patient monitoring platform delivering ICU-grade accuracy at home, addressed a systemic global healthcare challenge and delivered a 5.9x return for investors. Similarly, deltaDNA, a predictive analytics platform for the gaming industry, generated a 13.4x exit by becoming indispensable to major publishers.
Looking ahead to the 2026 vintage, the pipeline is just as robust. We are currently backing companies like Neuranics and Artus, which are pioneering hardware solutions in their respective fields. In the energy transition space, we are heavily invested in companies like Verlume and Fuuse, platforms that are critical for the infrastructure of tomorrow.
These companies exhibit low correlation with public markets because their value hinges on measurable milestones—patents, regulatory approvals, prototype success—rather than sentiment cycles. Furthermore, there is a pronounced regional advantage. By sourcing opportunities across the “Northern Triangle” of Manchester, Leeds, and Edinburgh, we access high-quality IP at valuations often meaningfully lower than London equivalents.
The “traditional” economy is facing headwinds, but the innovation economy is accelerating. At PXN, we believe a robust portfolio often requires a blend of strategies. Standard EIS remains a vital tool for broad exposure, but the Knowledge Intensive EIS represents the maturation of the tax-efficient market for those seeking deep-tech exposure combined with administrative simplicity.
With the recent Budget doubling company investment limits for KI businesses, the direction of travel is clear. Next year is about funding the science and technology that will define the next decade. By utilising the Approved KI structure, advisers can deliver that growth to their clients with a level of certainty and efficiency that is hard to beat.
Disclaimer: Investing in early-stage businesses involves risks, including illiquidity, lack of dividends, loss of investment and dilution. Tax relief depends on individual circumstances and may change.
This piece featured in this year’s annual issue of Tax-Efficient Investment (TEI) Insights, which you can read here!
About Jon Prescott
Jon is a Partner at PXN Investments, overseeing the group’s product and distribution strategy. He spent over 16 years at AJ Bell working in the distribution function with a particular focus across pension and platform.
Prior to joining Praetura in 2018, he spent five years at Octopus Investments as Area Sales Director, leading the sales and distribution strategy across the North of England, Scotland and Northern Ireland. Jon brings more than 30 years of financial services experience with over 10 years working in the tax-efficient investment arena.
