Skip to content
You can now search across every topic, entity and event.What's new
UK Startups and Innovation
14JUN

Angel base shrank 7% before the cut

3 min read
16:35UTC

HMRC's first hard figures show the number of investors claiming EIS relief fell 7% to 33,220, with the same pot of money now concentrated in fewer hands.

← Back to London startup raises Britain's own AI modelJump to analysis ↓
TechnologyDeveloping
Key takeaway

Britain's angel base fell 7% in a year, before a tax change set to shrink it further.

HM Revenue and Customs (HMRC) published the 2024/25 figures for EIS (the Enterprise Investment Scheme) in May, and the headline is the people, not the pounds. The count of investors claiming EIS relief fell 7% to 33,220, down from 35,675 1. The money those angels put in held flat at £1,575m across 3,735 companies, so the same pot is now concentrated in fewer hands and a first-time founder has fewer doors to knock on to assemble early cheques.

This erosion pre-dates the April 2026 cut to VCT (Venture Capital Trust) income-tax relief, which fell from 30% to 20% and sat outside this reporting year . The 2,455 angels who dropped out did so before that cut even bit. EIS and SEIS sit at different points on the risk curve, and they moved in opposite directions.

One tier below, SEIS (the Seed Enterprise Investment Scheme) went the other way. Companies raised £276m, up 14%, and applications for advance assurance rose 24% to 4,085 2. So 800-odd more companies queued for the earliest cheques in the same year that 2,455 angels stopped writing the next one up. A widening mouth and a narrowing neck describe the same funnel. London and the South East took 60% of EIS money, down from 63% a year earlier and 65% the year before that, a slow drift of seed capital out of the capital.

Deep Analysis

In plain English

The UK government runs two tax relief programmes to encourage people to invest in small startups. The Enterprise Investment Scheme (EIS) gives investors back 30p for every £1 they put in, via a reduction in their income tax bill. SEIS does the same for even earlier-stage companies, giving back 50p per £1. HMRC published data in May 2026 showing that the number of individual people using EIS fell by 7% in 2024/25. The total money invested stayed roughly flat at £1.575bn. That sounds like a contradiction, but it reflects a shift from individual angels writing small cheques to professional fund managers pooling money from multiple investors into single fund structures. The very-early-stage SEIS market is growing faster, with investment up 14%.

Deep Analysis
Root Causes

The 7% fall in EIS investor count predates the April 2026 VCT relief cut and has three structural causes independent of any single policy change.

First, the FCA's Consumer Duty, effective July 2023, raised the advice threshold for EIS recommendations from suitability to active demonstration of consumer benefit. Advisers at retail wealth managers responded by reducing EIS on model portfolio lists, cutting the distribution channel that accounts for roughly a third of EIS subscriptions per Resolution Foundation's 2024 household wealth survey.

Second, inflation in 2022-24 raised the effective tax cost of the EIS two-year minimum holding period. An investor in the 40% band who put £20,000 into EIS in 2022 received £6,000 back via income tax relief but faced 9% cumulative CPI erosion over the hold period before any capital gain, which eroded the net-of-inflation return below the advertised 30% headline relief.

Third, the rise of institutional SEIS and EIS fund managers (Octopus Ventures, Triple Point, Calculus Capital) since 2020 has steadily displaced individual angel cheques in the data, while keeping total investment flat. An Octopus Ventures EIS deployment counts as one investor in the HMRC statistics regardless of how many underlying investors the fund aggregated.

What could happen next?
  • Risk

    The April 2026 VCT relief cut will compound the EIS investor-count decline in 2025/26 data, and Wealth Club projects a 65% fall in VCT fundraising to circa £320m, removing a significant channel for Series A follow-on capital.

    Short term · Assessed
  • Opportunity

    The 14% SEIS rise and 24% advance assurance jump indicate founders have internalised SEIS eligibility as a funding design criterion, which should sustain the £276m level even in a quieter angel market.

    Medium term · Suggested
  • Meaning

    London and South East EIS share fell from 63% to 60%, a three-point shift that, if sustained, represents roughly £47m in annual EIS flow redirected toward non-Golden-Triangle companies.

    Short term · Reported
Sources:HMRC
Mentions:Enterprise Investment Scheme →Venture Capital Trusts →Cosine →London →HMRC →British Business Bank →
First Reported In

Update #8 · London startup raises Britain's own AI model

HMRC· 14 Jun 2026
Read original →
Causes and effects
Caused by
VCTs hit £917.7m record, brace for 65% fall
HMRC's 7% EIS angel-count decline precedes the April 2026 VCT relief cut, which ran through this HMRC reporting year and is expected to accelerate the contraction.
Occurred 14 Apr 2026
Read story →
This Event
Angel base shrank 7% before the cut
The angel funnel that seeds the next Cosine was already eroding in the year before the April VCT relief cut landed, leaving first-time founders with fewer doors to knock on.
Different Perspectives
European VC (Atomico, Plural, Highland Europe as PhysicsX / Lumen adjacents)
European VC (Atomico, Plural, Highland Europe as PhysicsX / Lumen adjacents)
European growth funds have backed three of the week's largest UK rounds via follow-on positions and co-investments; the PhysicsX cap table includes Atomico (European-domiciled, Skype-founded) and Siemens (German industrial), both returning investors who view UK physical-AI as a supply-chain multiplier across Continental manufacturing. European LP capital is filling the growth tier UK state vehicles have not yet reached.
UK regulated-industry coalition (Lloyds, BAE Systems, LSEG via Lumen Sovereign)
UK regulated-industry coalition (Lloyds, BAE Systems, LSEG via Lumen Sovereign)
Thirteen of Britain's most heavily regulated companies backed Cosine not as a philanthropic gesture but to acquire a data-compliant AI tool that replaces costly US API alternatives; each partner provides proprietary data in exchange for early access. Their participation signals that regulated incumbents, not venture funds, may be the structural customer base that sustains the UK's sovereign model tier.
US growth investors (General Catalyst, Intrepid Growth Partners)
US growth investors (General Catalyst, Intrepid Growth Partners)
US and allied growth investors followed Temasek into PhysicsX's Series C; General Catalyst also returned in the round after backing Geordie the previous week. The absence of any US-led domestic-capital equivalent is a structural reading: American funds enter at growth stage where returns are clearest, ceding seed and Series A economics to UK vehicles that are themselves contracting.
Temasek (Singapore sovereign fund)
Temasek (Singapore sovereign fund)
Temasek led PhysicsX's $300m Series C, its second major UK deep-tech cheque in six weeks after co-investing in Isomorphic's Series B with the SAIU; its thesis runs through Southeast Asian advanced-manufacturing adjacencies, not bilateral UK policy. Singapore's sovereign capital is now the default lead for British scale-ups above £200m that fall outside the BBB's priority sectors.
UK Government (DSIT / Liz Kendall)
UK Government (DSIT / Liz Kendall)
DSIT published its first sector scorecard on 10 June setting a £8.3bn 2025 baseline, and the Sovereign AI Unit's compute allocation enabled Cosine's Lumen Sovereign launch. The scorecard's own barbell figure, more capital in fewer rounds, exposes the policy gap DSIT has not yet addressed: no instrument currently leads venture rounds in industrial AI simulation sectors.
Spanish state finance (COFIDES, CDTI)
Spanish state finance (COFIDES, CDTI)
Spain's COFIDES and CDTI have co-invested alongside UK deep-tech rounds in prior cycles and track the British Business Bank's direct-investment activity as a benchmark for state-capital deployment in innovation. BBB's two direct co-investments in one week set a pace reference for Iberian equivalents.