SEIS: The Complete Guide for UK Startups (2025/26)

The Seed Enterprise Investment Scheme is the single most powerful tool in the UK for raising early-stage investment. It gives your investors 50% income tax relief, complete CGT exemption, and loss relief if things go wrong. For a startup raising its first round, SEIS can be the difference between closing your round and watching investors walk away.

This guide covers everything you need to know as a founder: what SEIS is, whether your company qualifies, how to apply, and how to avoid the mistakes that get companies disqualified.

Key Takeaways

• SEIS gives investors 50% income tax relief on investments up to £200,000 per tax year
• Your company can raise a maximum of £250,000 in total under SEIS
• Investors pay zero Capital Gains Tax on profits from SEIS shares held for at least 3 years
• Your company must be less than 2 years old, have gross assets under £350,000, and employ fewer than 25 people
• Always apply for SEIS Advance Assurance before issuing shares to investors
• You must spend at least 70% of SEIS funds before investors can claim EIS relief on later rounds

What Is SEIS?

The Seed Enterprise Investment Scheme is a UK government scheme designed to encourage investment in early-stage companies. It works by offering generous tax breaks to individual investors who buy new shares in qualifying startups.

SEIS was introduced in 2012 and has been instrumental in the UK startup ecosystem. The tax reliefs are deliberately generous because early-stage investing is inherently risky. The government wants to reduce that risk for investors so more capital flows into new businesses.

As a founder, you don't receive the tax relief directly. Your investors do. But the reliefs make your company dramatically more attractive to angel investors, because they significantly reduce the downside risk of investing in an unproven business.

Why SEIS Matters for Your Fundraise

Consider this from an investor's perspective. They invest £100,000 in your startup. With SEIS:

• They immediately get £50,000 back as income tax relief (50% of their investment)
• Their true money at risk is only £50,000, not £100,000
• If your company succeeds and they sell their shares for a profit, they pay zero CGT
• If your company fails completely, they can claim loss relief on the remaining £50,000

For a higher-rate taxpayer, the combination of income tax relief and loss relief means they could recover up to 86.5p of every £1 invested even if your company goes to zero. That changes the risk calculus dramatically.

Investor Tax Reliefs Explained

50% Income Tax Relief

The headline benefit. An investor who subscribes for new shares in a SEIS-qualifying company can deduct 50% of the investment from their income tax bill for the year.

The maximum investment that qualifies is £200,000 per tax year. That means up to £100,000 of tax relief per investor per year.

The relief can be set against the tax year in which the shares are issued, or carried back to the previous tax year. This carry-back provision is valuable for investors who have already filed but want to reduce their previous year's bill.

Important: the investor must have sufficient income tax liability to offset. SEIS relief cannot create a tax refund beyond the tax already paid.

CGT Exemption

Any gain on the disposal of SEIS shares is completely exempt from Capital Gains Tax, provided:

• The shares have been held for at least 3 years
• The income tax relief was claimed and not withdrawn

This means if your investor puts in £50,000 and the shares are worth £500,000 three years later, the entire £450,000 gain is tax-free.

CGT Reinvestment Relief

An investor who has made a capital gain on another asset can reinvest that gain into SEIS shares and defer or eliminate the CGT on the original gain. The gain reinvested is exempt from CGT (not just deferred) provided the SEIS shares are held for at least 3 years.

The reinvestment must be made in the same tax year as, or the year before, the gain arises.

Loss Relief

If your company fails and the shares become worthless (or are sold at a loss), the investor can claim loss relief. The allowable loss is the amount invested minus any income tax relief received.

Example: An investor puts in £100,000. They received £50,000 income tax relief. The company fails and shares are worth zero. The allowable loss is £50,000 (£100,000 minus £50,000 tax relief). A 45% additional-rate taxpayer can offset this against income, recovering a further £22,500. Total recovered: £72,500 out of £100,000 invested.

Company Eligibility Criteria

Your company must meet all of the following at the time the shares are issued.

Age Requirement

Your company must have been incorporated less than 2 years before the date the shares are issued. This is measured from the date of incorporation at Companies House, not when you started trading.

If your company was incorporated on 1 March 2024, you have until 28 February 2026 to issue SEIS shares.

Gross Assets Test

Your company's gross assets must not exceed £350,000 immediately before the share issue. Gross assets means total assets before deducting liabilities. This is the figure on your balance sheet, not net assets.

After the share issue, the assets can exceed £350,000 (because the investment itself increases your assets).

Employee Limit

Your company must have fewer than 25 full-time equivalent employees at the time the shares are issued. Part-time employees count proportionally (someone working 20 hours in a 40-hour-week role counts as 0.5).

Directors count as employees if they work for the company, even if they don't draw a salary.

Qualifying Trade

Your company must carry on, or be preparing to carry on, a qualifying trade. Most trades qualify, but there is a list of excluded activities:

• Dealing in land, commodities, futures, shares, or securities
• Dealing in goods other than in the course of ordinary trade
• Banking, insurance, money-lending, or hire-purchase financing
• Leasing or receiving royalties or licence fees (with exceptions)
• Providing legal or accountancy services
• Property development
• Farming or market gardening
• Woodland or forestry activities
• Operating or managing hotels, guest houses, or nursing homes
• Energy generation receiving feed-in tariffs or similar subsidies
• Shipbuilding

If you're running a tech startup, SaaS business, e-commerce company, or service business, you almost certainly qualify. If your trade is near the boundary, get professional advice before applying.

UK Permanent Establishment

Your company must have a permanent establishment in the UK. This doesn't mean all your activity must be in the UK, but there must be a substantive UK presence.

Not Listed

Your company must not be listed on a recognised stock exchange. AIM-listed companies do not qualify for SEIS (though they may qualify for EIS).

No Control by Another Company

Your company must not be controlled by another company or be a subsidiary. It must be independent.

Investment Limits

Per Company

Your company can raise a maximum of £250,000 in total under SEIS. This is a lifetime limit, not annual. Once you've raised £250,000 via SEIS, you cannot raise any more under the scheme (but you can move on to EIS for larger rounds).

Per Investor

Each individual investor can invest up to £200,000 per tax year across all SEIS investments. This is not per company -- it's their total SEIS investment for the year.

The 70% Spend Rule

This is one of the most commonly misunderstood SEIS rules. Before your investors can claim income tax relief on any subsequent EIS investment in your company, at least 70% of the SEIS money must have been spent on qualifying business activity.

This rule exists to prevent companies from stockpiling SEIS cash and immediately raising more under EIS. HMRC wants to see that the seed money was genuinely used for business purposes before allowing the next tranche of tax-advantaged investment.

Qualifying business activity means expenditure on the trade itself -- salaries, development costs, marketing, rent, equipment. It does not include the cost of raising further investment or dividends.

What This Means in Practice

If you raise £250,000 under SEIS, you need to have spent at least £175,000 on qualifying activity before issuing EIS shares. Plan your fundraising timeline accordingly.

The Trading Requirement

Your company must begin trading within 2 years of the share issue, and the SEIS money must be employed for the purposes of the qualifying trade within that same window.

If you're pre-revenue, this is fine -- you can issue shares while preparing to trade. But you can't park the money indefinitely.

How to Get SEIS Advance Assurance

Advance Assurance is not mandatory, but it is effectively essential. It's a letter from HMRC confirming that your company meets the SEIS conditions, given the information you've provided. Investors will almost always require it before committing funds.

Step 1: Prepare Your Application

You'll need:

• Company details: name, number, date of incorporation, registered address
• Business plan: what you do, your market, how you'll use the funds
• Financial projections: revenue forecasts, cash flow, expected spend breakdown
• Details of the share issue: how much you're raising, share price, share class
• Articles of Association: confirming share structure
• Details of existing shareholders and directors: names, holdings, relationships
• Confirmation of qualifying trade: description of your business activity

Step 2: Submit to HMRC

Apply using HMRC's online service or by post to the Small Company Enterprise Centre (SCEC). The form is the SEIS Advance Assurance application (no specific form number; submit via letter or the digital service).

Include a covering letter explaining:

• What the company does
• How the investment will be used
• Why you believe the conditions are met
• Any circumstances that might be borderline

Step 3: Wait for a Response

HMRC aims to respond within 6 to 8 weeks, though it can take longer during busy periods. They may come back with queries. Answer promptly and fully.

Step 4: Receive Your Assurance Letter

If successful, you'll receive a letter confirming the company appears to qualify. This is what you show potential investors. It's not a guarantee (conditions must still be met when shares are actually issued), but it gives investors confidence.

Issuing SEIS-Compliant Shares

Once you've received Advance Assurance and found your investors:

1. Issue New Ordinary Shares

SEIS shares must be new ordinary shares that carry no preferential rights to dividends or assets. They must be fully paid up in cash at the time of issue. Shares issued for services or in exchange for assets don't qualify.

2. Board Resolution and Share Allotment

Pass a board resolution to allot the shares. Update your share register and file the SH01 return of allotment with Companies House within one month.

3. Receive Investment Funds

The investor must pay the full subscription price in cash. The payment date is the date of share issue for SEIS purposes.

Filing the SEIS1 Compliance Statement

After issuing shares, you must submit a SEIS1 compliance statement to HMRC. This confirms that the company met all qualifying conditions when the shares were issued.

You cannot submit the SEIS1 until your company has been trading for at least 4 months (or has spent at least 70% of the money raised, whichever comes first).

What You Need

• Company UTR (Unique Taxpayer Reference)
• Details of each investor: name, address, National Insurance number
• Number of shares issued and price paid
• Date of share issue
• Confirmation that all conditions are met

How to Submit

Use HMRC's EIS/SEIS online service to file the SEIS1. You'll need your company's Government Gateway credentials.

Issuing SEIS3 Certificates to Investors

Once HMRC processes your SEIS1, they'll issue SEIS3 certificates for each investor. These certificates are what your investors need to claim their income tax relief on their Self Assessment tax return.

Send each investor their SEIS3 certificate promptly. Delays frustrate investors and delay their tax relief.

Common Mistakes That Disqualify Companies

1. Issuing shares before incorporation is 2 years old but after the Advance Assurance expires -- Advance Assurance is typically valid for a limited period. Check the letter.

2. Exceeding the £350,000 gross assets limit -- If you've had a good trading month and your bank balance pushes assets over £350,000 just before the share issue, you're disqualified.

3. Having connected investors -- An investor who holds more than 30% of the company (including associates) cannot claim SEIS relief. Be careful with founder-investors.

4. Issuing preference shares -- SEIS shares must be ordinary shares with no preferential rights.

5. Not filing the SEIS1 on time -- There's no hard deadline, but delays mean your investors can't claim their relief. File as soon as the 4-month trading requirement is met.

6. Spending SEIS money on non-qualifying purposes -- If the money isn't used for the qualifying trade, relief can be withdrawn.

For a detailed breakdown of disqualifying mistakes, see our guide on 7 mistakes that will disqualify your company from SEIS/EIS.

2025/26 Updates

The key figures for the 2025/26 tax year remain:

SEIS was made permanent in the Autumn Statement 2023, with the increased limits (up from £150,000 company limit and £100,000 investor limit) confirmed as ongoing. There are no further changes announced for 2025/26.

How AccountsOS Helps with SEIS

Keeping clean financial records is essential for SEIS compliance. HMRC can withdraw relief if your company doesn't meet conditions at any point, and poor record-keeping makes it harder to prove compliance.

AccountsOS tracks your qualifying expenditure, monitors your gross assets position, and keeps your books audit-ready for when investors (or HMRC) ask questions. Use our SEIS/EIS eligibility checker to see if your company qualifies, or try the SEIS/EIS tax relief calculator to show investors exactly what their relief looks like.

Frequently Asked Questions

Can I invest in my own company under SEIS?

Yes, but with restrictions. You can claim SEIS income tax relief on shares in a company where you're a director or employee, provided you don't hold more than 30% of the share capital (including shares held by associates such as spouses or business partners). Founder-directors who hold a majority stake cannot claim SEIS relief on their own investment.

Can my company use SEIS and EIS together?

Yes. Most startups raise under SEIS first (up to £250,000) and then move to EIS for larger rounds. The 70% spend rule applies: you must have spent at least 70% of your SEIS money on qualifying activity before issuing EIS shares. See our SEIS vs EIS comparison for more detail.

What happens if my company doesn't qualify after shares have been issued?

If HMRC determines that conditions weren't met, the income tax relief is withdrawn from investors. They'll need to repay the relief through their Self Assessment. This is why Advance Assurance is so important -- it catches problems before money changes hands.

How long does SEIS Advance Assurance take?

Typically 6 to 8 weeks, though HMRC may take longer during peak periods or if they have queries about your application. Submit well before you plan to close your round.

Do investors need to hold shares for a minimum period?

Yes. To retain the income tax relief and qualify for CGT exemption, investors must hold their SEIS shares for a minimum of 3 years from the date the shares were issued (or the date the company began trading, if later). If they sell within 3 years, the income tax relief is clawed back proportionally and the CGT exemption is lost.