What Is SEIS and EIS?
SEIS and EIS are UK tax relief schemes that make investing in startups significantly more attractive for investors. Essential knowledge for any UK founder raising capital.
Key Takeaways
- SEIS gives investors 50% income tax relief on investments up to £200,000 per year
- EIS gives investors 30% income tax relief on investments up to £1 million per year
- Both schemes also provide Capital Gains Tax exemption on any profit from qualifying shares
- SEIS/EIS advance assurance from HMRC is a powerful fundraising tool — get it early
What SEIS and EIS are
The Seed Enterprise Investment Scheme (SEIS) and Enterprise Investment Scheme (EIS) are UK government programmes that provide substantial tax reliefs to individuals who invest in qualifying small companies. They exist to make early-stage investing more attractive by reducing the risk to investors through generous tax breaks. For UK founders raising capital from angel investors, SEIS and EIS availability can be the difference between closing a round and not — the tax benefits are significant enough to meaningfully change the economics of early-stage investing.
SEIS: the details
SEIS is designed for very early stage companies — typically pre-revenue or early revenue. Investors can invest up to £200,000 per tax year and claim 50% income tax relief — so a £100,000 investment costs the investor only £50,000 after tax relief. Additionally, any gain on SEIS shares held for at least 3 years is free of Capital Gains Tax. If the investment fails entirely, the investor can claim loss relief against income tax on the remaining 50% — making the worst-case scenario a very small net loss. For a higher-rate taxpayer, the downside risk of an SEIS investment is around 13.5p per pound invested.
EIS: the details
EIS covers larger investments in slightly more established companies — those that have not received more than £5 million in EIS funding in the last 12 months and are under 7 years old (10 years for knowledge-intensive companies). Investors can invest up to £1 million per year (£2 million for knowledge-intensive companies) and claim 30% income tax relief. EIS shares held for 3 years are CGT-free on gains. EIS loss relief is available on the net at-risk amount. For many angels, EIS-qualifying status is a prerequisite for investing.
Getting advance assurance
Before raising under SEIS or EIS, founders should apply to HMRC for advance assurance — a letter confirming that the company and the planned investment structure qualify for the relevant scheme. Advance assurance does not guarantee relief (the investor's individual tax position still matters) but it confirms the company-side eligibility, which is the most common source of uncertainty. Investors will almost always ask for advance assurance before committing. Applications typically take 4-6 weeks and should be made before starting to raise.
Common disqualifications
Not all companies qualify for SEIS or EIS. Excluded activities include banking, insurance, legal services, property development, farming, and energy generation. The company must be UK-based and not listed on a recognised stock exchange. There are limits on company age, size, and the amount previously raised under the schemes. If you have taken on any professional funding (including from many angel syndicates) before applying for SEIS, you may have already used up your SEIS eligibility. Always take specialist advice before assuming you qualify.