A record £2.3bn was invested into start-ups last year under EIS, according to accountancy firm UHY Hacker Young.
The figure is a 39 per cent increase on the £1.7bn raised the previous year.
The number of start-ups that raised money through EIS also reached an all-time high of 4,480 in the year ending April 2022, up 19 per cent from 3,765 in 2021.
The technology sector led the funding, raising £785m – an increase of 38 per cent from £569m in the 12 months prior.
The UK tech sector leads Europe and ranks third in the world, with a combined market value of £1 trillion – which could raise to $4 trillion by 2032, according to Tech Nation. However, a recent study found foreign investment into UK tech businesses dropped 23 per cent in 2022.
EIS is the government’s flagship tax incentive to encourage private investors to back early-stage start-ups and scale-ups. Under the scheme, investors can invest up to £1m a year – or £2m for knowledge-intensive companies – and receive tax incentives in return.
The government recently confirmed that the EIS scheme is going to be extended past 2025.
Elliott Buss, a partner at UHY Hacker Young, said: “The big jump in the EIS activity shows there is a really healthy appetite to invest in UK SMEs. That’s good news considering the sharp rise in the cost of borrowing that SMEs are now facing. With interest rates rising so sharply, attracting equity investment is going to become even more important in the funding of fast growth smaller businesses.”
“The rise in the amount of money going into technology SMEs through EIS shows that the UK can both create and fund exciting growth companies.”