EIS vs SEIS: Which Tax Relief Scheme Is Right for Your Company?

Last updated: April 2026

The Seed Enterprise Investment Scheme (SEIS) and the Enterprise Investment Scheme (EIS) are the UK government's two main tax incentive programmes for startup investment. Both offer investors significant income tax relief, capital gains tax benefits, and loss relief. Both require the company to meet qualifying conditions and issue new ordinary shares.

But they are different schemes with different rules, different limits, and different qualifying criteria. Choosing the wrong one, or failing to plan the transition from SEIS to EIS, can cost your investors thousands in lost relief and cost your company credibility with future backers.

This guide compares every aspect of SEIS and EIS, explains when to use each, and walks through the practical process of graduating from SEIS to EIS as your company grows.

Full side-by-side comparison

When to use SEIS

SEIS is the right choice when your company is very early stage and raising a small amount. The specific situations where SEIS is the better option:

You are raising £250,000 or less. SEIS has a hard cap of £250,000 total fundraising. If your round is under this amount, SEIS is almost always preferable because of the higher relief rate.

Your company is under 3 years old. SEIS requires the company to be within 3 years of its first commercial sale. If you are older than this, SEIS is not available regardless.

Your investors are putting in less than £250,000 each. The per-investor SEIS cap is £250,000 per tax year. For most angel investors writing cheques of £10,000 to £100,000, SEIS gives them 50% relief compared to EIS's 30%.

You have fewer than 25 employees and under £350,000 in gross assets. These are the SEIS thresholds. Most pre-seed and seed stage companies meet them easily.

Your investors have capital gains to shelter. SEIS offers a unique benefit: 50% CGT exemption on gains reinvested into SEIS shares. If an investor sells an asset and reinvests the gain into your SEIS shares, half the gain is exempt from CGT entirely (not just deferred, as with EIS).

When to use EIS

EIS becomes the right choice once your company has grown beyond SEIS limits, or when you need to raise more capital.

You are raising more than £250,000. EIS allows up to £5 million per year (£10 million for knowledge-intensive companies). Any round above £250,000 requires EIS.

Your company is between 3 and 7 years old. If you have passed the 3-year SEIS window, EIS is your only venture capital scheme option (up to 7 years, or 10 for KICs).

You have more than 25 employees. Once you exceed 25 FTE, you cannot use SEIS. EIS allows up to 249 FTE.

Your gross assets exceed £350,000. After receiving SEIS investment and growing, many companies blow through the £350,000 asset threshold quickly. EIS allows up to £15 million.

Your investors want to defer large capital gains. EIS CGT deferral is unlimited in amount. An investor who has made a £5 million gain can defer the entire amount by investing in EIS shares. SEIS only exempts 50% of the gain.

You are raising from institutional investors. VCs and larger angel syndicates typically invest amounts that exceed SEIS limits. EIS accommodates larger cheques.

The investor's perspective: which is better value?

From a pure tax relief standpoint, SEIS is more generous. An investor putting £100,000 into a SEIS-qualifying company receives:

The "maximum downside" calculation assumes the investor claims income tax relief and loss relief at the additional rate (45%). For a basic rate (20%) taxpayer, the numbers are different:

SEIS gives investors a lower maximum downside in every scenario. However, EIS allows much larger investments, so investors seeking to deploy more capital prefer EIS. A high-net-worth investor wanting to invest £500,000 cannot do so through SEIS.

CGT treatment: exemption vs deferral

This is one of the most important differences between the two schemes.

SEIS CGT reinvestment relief: If an investor reinvests a capital gain into SEIS shares, 50% of that gain is exempt from CGT. Not deferred. Exempt. It disappears entirely. The other 50% remains chargeable. This is an extremely generous relief, and it is unique to SEIS.

EIS CGT deferral relief: If an investor reinvests a capital gain into EIS shares, the full gain is deferred. It is not taxed at the time of investment. However, the deferred gain becomes chargeable when the investor sells the EIS shares (or in certain other circumstances). It is a deferral, not an exemption.

In practice, many investors use EIS deferral to push gains into future years, sometimes indefinitely. If the investor dies while still holding the EIS shares, the deferred gain is extinguished entirely. This makes EIS deferral extremely powerful for estate and inheritance planning.

The company's perspective: which is easier to get?

SEIS advance assurance is generally faster and simpler to obtain than EIS. The qualifying conditions are less complex, the amounts involved are smaller, and HMRC's review process is more straightforward.

The "risk to capital" condition applies only to EIS. HMRC assesses whether the investment genuinely carries a risk of loss. This does not apply to SEIS, which makes the SEIS application process marginally simpler.

However, both schemes use the same excluded trades list, the same share requirements, and the same general framework. If your company qualifies for SEIS, it will almost certainly qualify for EIS when the time comes (assuming you still meet the age, size, and trade requirements).

Graduating from SEIS to EIS

Most startups follow a predictable fundraising path: SEIS for the first round, then EIS for subsequent rounds. The transition is straightforward, but there are a few things to get right.

Step 1: Use your full SEIS allocation first

SEIS allows £250,000 total. Use this allocation completely before moving to EIS. The 50% relief rate means SEIS money is the cheapest equity capital available to UK startups. Do not leave SEIS allocation on the table.

Step 2: Check you still qualify for EIS

When you are ready for your next round, verify that your company still meets EIS qualifying conditions:

• Are you under 7 years from your first commercial sale? (10 for KICs)
• Do you have fewer than 250 FTE employees?
• Are your gross assets under £15 million?
• Are you still carrying on a qualifying trade?
• Has your total venture capital scheme fundraising (SEIS + EIS + VCT) not exceeded £12 million?

Step 3: Apply for EIS advance assurance

Submit a new advance assurance application for EIS. Even if you previously received SEIS assurance, you need separate EIS assurance. The application is similar but includes additional information about the risk to capital condition.

Step 4: Issue new shares under EIS

EIS shares must be a new issue. They can be the same class as your existing ordinary shares, or a different class. Many companies create a new share class for each funding round (for example, "Series Seed" for SEIS, "Series A" for the first EIS round).

Step 5: Submit the EIS compliance statement

After issuing shares, submit form EIS1 to HMRC. Once approved, you can issue EIS3 certificates to your investors.

Timing the transition

There is no mandatory waiting period between a SEIS round and an EIS round. You can close a SEIS round and open an EIS round the same week, provided you have the advance assurance in place.

However, plan ahead. EIS advance assurance takes 4 to 12 weeks. Apply for EIS assurance well before you expect to close your SEIS round, so there is no gap between rounds.

Can you use both SEIS and EIS at the same time?

Yes, but with careful structuring. A company can issue SEIS shares and EIS shares simultaneously, provided:

1. The company meets the qualifying conditions for both schemes
2. The SEIS shares and EIS shares are different share classes (or at minimum, clearly identified as SEIS or EIS shares)
3. The total SEIS raise does not exceed £250,000
4. The combined SEIS + EIS raise does not exceed the annual EIS limit (£5 million or £10 million for KICs)
5. The total lifetime fundraising does not exceed £12 million

In practice, simultaneous SEIS and EIS issuance is rare. Most companies exhaust their SEIS allocation first, then move to EIS. But it is technically possible for a company within 3 years of its first commercial sale, with under 25 employees and under £350,000 in gross assets, to raise (for example) £250,000 via SEIS and £750,000 via EIS in the same round.

The reason to do this: give your smallest investors (up to £250,000 each) the 50% SEIS relief, while accommodating larger investors through EIS.

The "SEIS then EIS" fundraising strategy

Here is the optimal fundraising path for a UK startup that wants to maximise tax relief for its investors.

Phase 1: Pre-seed (SEIS)

Use SEIS for your first raise. Target angel investors who have UK income tax liability and ideally capital gains to shelter. The 50% relief rate makes this the most investor-friendly equity raise available in the UK.

Phase 2: Seed/Series A (EIS)

Graduate to EIS for your next round. The 30% relief is still attractive, and CGT deferral is a major incentive for investors with gains to shelter. EIS-qualifying status is increasingly expected by UK angel syndicates and early-stage VCs.

Phase 3: Growth (EIS or non-EIS)

Continue with EIS if you are still within the age, size, and fundraising caps. If you have exceeded £12 million in total venture capital scheme funding, or your company is older than 7 years (10 for KICs), EIS is no longer available.

Worked example: TechStart Ltd's journey from SEIS to EIS

TechStart Ltd is a SaaS company founded in January 2024. It made its first sale in June 2024.

Round 1: SEIS (October 2024)

TechStart raises £200,000 from 5 angel investors. Each invests £40,000. The company has 3 employees and £50,000 in gross assets.

Investor benefits:

• Each investor receives £20,000 income tax relief (50% of £40,000)
• One investor reinvests a £30,000 capital gain: £15,000 of the gain is exempt from CGT

Round 2: SEIS top-up (March 2025)

TechStart raises another £50,000 from 2 investors, using the remaining SEIS allocation. Total SEIS raised: £250,000.

Round 3: EIS (November 2025)

TechStart has grown to 15 employees and £800,000 in gross assets (above the SEIS £350,000 threshold, but well within EIS limits). It raises £1.5 million from an angel syndicate and a small VC.

The largest investor puts in £500,000 and receives £150,000 income tax relief (30%). They also defer a £500,000 capital gain from a property sale.

Combined fundraising: £250,000 (SEIS) + £1,500,000 (EIS) = £1,750,000. Well within the £12 million lifetime cap.

Round 4: EIS Series A (September 2026)

TechStart raises £3 million. Total venture capital scheme fundraising is now £4.75 million. The company has 45 employees and is still within its 7-year window (first commercial sale was June 2024).

This leaves £7.25 million of EIS headroom for future rounds.

Loss relief comparison

Both SEIS and EIS offer loss relief if the company fails, but the calculations differ because of the different income tax relief rates.

SEIS loss relief example

An investor puts £50,000 into SEIS shares and claims £25,000 income tax relief (50%). The company fails. Net loss: £50,000 minus £25,000 = £25,000. At 45% income tax, loss relief is £11,250. Total recovered: £25,000 + £11,250 = £36,250. Maximum downside: £13,750 (27.5% of the original investment).

EIS loss relief example

An investor puts £50,000 into EIS shares and claims £15,000 income tax relief (30%). The company fails. Net loss: £50,000 minus £15,000 = £35,000. At 45% income tax, loss relief is £15,750. Total recovered: £15,000 + £15,750 = £30,750. Maximum downside: £19,250 (38.5% of the original investment).

Loss relief comparison table

SEIS provides a lower maximum downside at every tax rate. This is another reason to use SEIS when your company qualifies for both schemes.

Advance assurance: practical differences

While both schemes use the same general advance assurance process, there are practical differences worth understanding.

SEIS advance assurance

SEIS applications tend to be simpler because the amounts are smaller and the company is earlier stage. HMRC reviewers expect less detailed financial information and are accustomed to companies with limited trading history. A clear business plan, basic financial projections, and a description of the qualifying trade are usually sufficient.

Typical SEIS assurance timeline: 4 to 8 weeks.

EIS advance assurance

EIS applications receive more scrutiny, particularly around the risk to capital condition (introduced in 2018). HMRC wants to see that the investment carries genuine commercial risk and that the company is not structured to preserve capital. Companies with significant assets, property holdings, or predictable revenue streams may face additional questions.

For knowledge-intensive company (KIC) applications, you must also provide evidence of R&D spending (at least 10% or 15% of operating costs) and, where applicable, details of qualified employees.

Typical EIS assurance timeline: 4 to 12 weeks. Complex cases (especially those involving mixed trades or KIC status) can take longer.

Documentation comparison

Tax planning: combining SEIS and EIS across tax years

Sophisticated investors use both schemes strategically across multiple tax years to maximise relief. Here is how.

Strategy 1: SEIS carry-back plus current year EIS

An investor makes a £200,000 SEIS investment in May 2026 (tax year 2026/27) and carries back the full amount to 2025/26. They receive £100,000 income tax relief against their 2025/26 liability.

In the same month, they invest £500,000 in EIS shares in the same company (or a different one). They claim £150,000 EIS income tax relief against their 2026/27 liability.

Total income tax relief across two years: £250,000 from £700,000 invested.

Strategy 2: Staggered investments for continuous relief

An investor puts £250,000 into SEIS in Year 1, £1,000,000 into EIS in Year 2, and £1,000,000 into EIS in Year 3. Each year, they claim relief against that year's income tax liability (with carry-back if beneficial). Over three years, they shelter £2,250,000 from tax and receive £725,000 in income tax relief (£125,000 SEIS + £300,000 EIS + £300,000 EIS).

Strategy 3: CGT management

An investor with a £300,000 capital gain from a property sale invests £250,000 in SEIS (exempting £150,000 of the gain) and £50,000 in EIS (deferring the remaining £150,000). The SEIS exemption is permanent. The EIS deferral buys time.

These strategies require careful planning around tax year boundaries, carry-back elections, and the specific qualifying dates of each investment.

Common mistakes to avoid

Mistake 1: Using EIS when SEIS is still available

If your company qualifies for SEIS, use it first. The 50% relief rate and 50% CGT exemption are significantly more valuable to investors than EIS's 30% relief and CGT deferral. Do not skip SEIS because you think EIS sounds more "serious."

Mistake 2: Not applying for advance assurance early enough

Both SEIS and EIS advance assurance take weeks to obtain. If you wait until you have a signed term sheet, you will create a gap between the investor being ready and the shares being issuable. Apply for assurance 2 to 3 months before you expect to close.

Mistake 3: Exceeding SEIS limits and invalidating the round

SEIS has a hard cap of £250,000. If your company receives £260,000 of SEIS investment, the entire amount may be disqualified. Be precise about the amounts and do not exceed the cap by even a small margin.

Mistake 4: Forgetting the 3-year holding period

Both SEIS and EIS require investors to hold shares for at least 3 years. If you plan a trade sale or secondary transaction within this period, your investors will lose their relief. Structure any exit timeline with the 3-year period in mind.

Mistake 5: Mixing SEIS and EIS shares without proper documentation

If you issue both SEIS and EIS shares, ensure they are clearly distinguished in your articles of association, share certificates, and investor agreements. HMRC needs to know exactly which shares carry which relief.

Mistake 6: Ignoring the £12 million lifetime cap

The £12 million lifetime cap applies across all venture capital schemes combined. If you raised £250,000 via SEIS and £5 million via EIS in earlier rounds, you have £6.75 million remaining. Track this number carefully and communicate it to future investors.

Frequently asked questions

Can a company that has already used its full SEIS allocation still use EIS?

Yes. The £250,000 SEIS cap and the EIS annual cap are separate. After using your full SEIS allocation, you can raise up to £5 million per year (£10 million for KICs) through EIS, subject to the £12 million lifetime cap from all venture capital schemes combined. The SEIS amount counts toward the £12 million total.

Can the same investor hold both SEIS and EIS shares in the same company?

Yes. An investor can hold SEIS shares from an earlier round and EIS shares from a later round. They can also invest in both SEIS and EIS shares in the same round, if the company is issuing both simultaneously. The tax reliefs apply independently to each set of shares, subject to the per-investor annual limits for each scheme.

What happens to SEIS shares when the company graduates to EIS?

Nothing changes. SEIS shares remain SEIS shares and retain their tax relief status, provided the 3-year holding period is maintained and the company does not lose qualifying status. The fact that the company later issues EIS shares does not affect existing SEIS shares.

Is the CGT deferral under EIS better or worse than the 50% exemption under SEIS?

It depends on the investor's situation. SEIS exempts 50% of the gain permanently. EIS defers 100% of the gain, but the deferred gain becomes payable when the shares are sold. For investors who plan to hold EIS shares for a very long time (or until death, which extinguishes the deferred gain), EIS deferral can be more valuable. For investors who expect to sell within 5 to 10 years, the SEIS exemption is often better. There is no single correct answer.

Can a company lose SEIS status but still qualify for EIS?

Yes. This happens commonly. A company might exceed the SEIS gross assets threshold (£350,000) or the employee threshold (25 FTE) while still being well within EIS limits. In this case, the company can no longer issue SEIS shares but can issue EIS shares. Existing SEIS shares are not affected, provided the company was qualifying when they were issued.

How does the knowledge-intensive company (KIC) status affect the choice between SEIS and EIS?

KIC status only applies to EIS. SEIS does not have a separate KIC category. If your company qualifies as knowledge-intensive, the main benefits are: EIS company age limit extends from 7 to 10 years, annual investment cap rises from £5 million to £10 million, and per-investor annual limit rises from £1 million to £2 million. This makes EIS significantly more attractive for R&D-heavy companies. However, if you are still within SEIS limits, use SEIS first regardless of KIC status.

Do I need separate advance assurance for SEIS and EIS?

Yes. SEIS advance assurance and EIS advance assurance are separate applications submitted to HMRC. If you received SEIS assurance for your first round, you must apply separately for EIS assurance before issuing EIS shares. The application process is similar, but the EIS application includes additional questions about the risk to capital condition. Apply for EIS assurance well before you need it, as processing times vary from 4 to 12 weeks.

What if my company raises more than £250,000 but some investors want SEIS relief?

You can structure the round so that the first £250,000 is raised under SEIS and the remainder under EIS. This requires issuing two classes of shares (or clearly designating which shares are SEIS and which are EIS) and having advance assurance for both schemes. It is administratively more complex but maximises relief for smaller investors.

Further reading

For a complete overview of EIS qualifying conditions, excluded trades, and the advance assurance process, read EIS Qualifying Companies: Who Can Use the Enterprise Investment Scheme?.

For a full guide to the Enterprise Investment Scheme covering all aspects from both company and investor perspectives, read the Enterprise Investment Scheme: Complete Guide for UK Companies.

To calculate the tax relief available on a specific investment, use the SEIS and EIS Tax Relief Calculator.