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

If you're raising investment for your UK startup, you'll almost certainly encounter two acronyms: SEIS and EIS. Both schemes give your investors tax relief for backing your company. But they work differently, have different limits, and suit different stages of growth.

Choosing the right scheme -- or the right combination of both -- can meaningfully affect how much you raise and how quickly your round closes. This guide puts them side by side and helps you decide which is right for your situation.

Key Takeaways

• SEIS is for very early-stage companies: less than 2 years old, raising up to £250,000, with gross assets under £350,000
• EIS is for growth-stage companies: up to 7 years old (10 for KICs), raising up to £5 million per year
• SEIS offers higher investor relief (50% vs 30%), making it more attractive per pound invested
• Most startups should use SEIS first, then transition to EIS for subsequent rounds
• You can use both in sequence, but must spend 70% of SEIS funds before issuing EIS shares
• The decision is often made for you by your company's age, size, and how much you need to raise

Quick Comparison Table

When SEIS Is the Better Choice

You're Raising a Small First Round

If you need £50,000 to £250,000 to validate your idea, build an MVP, or get to first revenue, SEIS is the obvious choice. The 50% income tax relief is a significantly stronger incentive for investors than EIS's 30%.

For an investor putting in £50,000:

• Under SEIS: £25,000 immediate tax relief (50%), effective risk of £25,000
• Under EIS: £15,000 immediate tax relief (30%), effective risk of £35,000

That difference matters to angel investors weighing multiple deals.

You're Pre-Revenue

SEIS is designed for companies that haven't proven their model yet. If you're pre-revenue and pre-traction, the higher relief rate compensates investors for the additional risk. Many angels have a policy of only investing under SEIS at the pre-revenue stage.

Your Company Is Brand New

If your company was incorporated within the last 2 years, you're within the SEIS window. Use it. You can always move to EIS later, but you can't go back to SEIS once the 2-year window closes.

You Want to Maximise CGT Benefits for Investors

SEIS CGT reinvestment relief is arguably more valuable than EIS CGT deferral. Under SEIS, an investor can reinvest a capital gain and that gain becomes exempt (not just deferred) if SEIS shares are held for 3+ years. Under EIS, the original gain is only deferred until the EIS shares are sold.

When EIS Is the Better Choice

You Need More Than £250,000

This is the most common reason companies use EIS. If your round is £500,000, £1 million, or more, you've exceeded SEIS limits and need EIS. Many companies raise £250,000 under SEIS and then raise the remainder of a larger round under EIS.

Your Company Is Older Than 2 Years

Once your company passes its second anniversary, it's no longer eligible for SEIS. EIS gives you until the 7th anniversary (or 10th for Knowledge-Intensive Companies).

Your Gross Assets Exceed £350,000

If your balance sheet has grown beyond £350,000 in total assets (perhaps because of a successful first year of trading or a previous investment round), you've outgrown SEIS eligibility. EIS allows assets up to £15 million.

You Have More Than 25 Employees

SEIS caps at 25 FTEs. If you've been hiring, EIS allows up to 250 employees.

You're AIM-Listed

Companies listed on AIM cannot use SEIS but can use EIS. This makes EIS the only game in town for AIM-listed growth companies.

Your Investors Want CGT Deferral

EIS CGT deferral has no upper limit. An investor who has sold a property for a £2 million gain can defer the entire amount by reinvesting in EIS shares. This is a major draw for high-net-worth investors with recent gains to shelter.

Using Both Schemes Together

The most common approach for UK startups is to use SEIS first and then transition to EIS. This maximises the total tax-advantaged funding available and gives investors the best possible relief at each stage.

The Typical Sequence

1. Pre-seed/seed round: Raise up to £250,000 under SEIS (50% relief for investors)
2. Spend at least 70% of SEIS funds on qualifying business activity
3. Series seed or Series A: Raise up to £5 million under EIS (30% relief for investors)

The 70% Spend Rule

This is the critical bridge between SEIS and EIS. Before your company can issue EIS-qualifying shares, at least 70% of SEIS funds must have been spent on qualifying business activity. This means if you raised £250,000 under SEIS, you need to have spent at least £175,000 before issuing EIS shares.

Qualifying spend includes salaries, development costs, marketing, rent, and equipment -- anything that's genuinely part of running the trade. It does not include the costs of raising further investment.

Planning Your Timeline

Be realistic about how long it takes to spend 70% of your SEIS funds. If you raised £250,000 and your monthly burn is £20,000, it will take approximately 9 months to clear the threshold. Don't promise investors an EIS round timeline you can't meet.

Can You Issue SEIS and EIS Shares Simultaneously?

Not for the same investor in the same company at the same time. However, different investors can invest under different schemes in the same round, provided the company qualifies for both. In practice, this is uncommon -- most companies transition cleanly from one scheme to the other.

The Investor Perspective

Understanding what investors prefer helps you structure your round effectively.

Why Angels Prefer SEIS

• Higher relief: 50% vs 30% means less money at risk
• Better CGT treatment: Reinvestment relief (exempt) vs deferral
• Maximum downside protection: Up to 86.5p in the pound recoverable for additional-rate taxpayers if the company fails
• Simplicity: SEIS is straightforward; fewer connected-person complications for small rounds

Why Investors Accept EIS

• Larger cheques: Investors who want to put in £500,000+ can only do so under EIS
• CGT deferral: No cap on the gain that can be deferred, which matters for large disposals
• Portfolio approach: VCs and angel syndicates invest across many EIS-eligible companies
• AIM investments: Some investors specifically target AIM-listed EIS-eligible companies

What Sophisticated Investors Actually Look For

Experienced angels will ask for SEIS Advance Assurance before they commit. They know the scheme rules and will check:

• That the company genuinely qualifies
• That their investment won't make them a connected person
• That the compliance filing process is handled professionally
• That SEIS3 or EIS3 certificates will be issued promptly

Delays or uncertainty around SEIS/EIS compliance can kill a fundraise. Get your Advance Assurance early.

Real-World Scenarios

Scenario 1: Solo Founder, First Round

Situation: You incorporated 6 months ago. You have an MVP. You're raising £150,000 from angels.

Best approach: SEIS only. You're well within the limits. Your investors get 50% relief. No need to touch EIS.

Scenario 2: Two Founders, Raising £500,000

Situation: Company is 18 months old. Gross assets are £200,000. You need £500,000 for your next stage.

Best approach: Raise £250,000 under SEIS, spend 70% of it, then raise the remaining £250,000 under EIS. Your first investors get 50% relief; your second tranche investors get 30%. This may mean closing your round in two stages, which some founders find cumbersome but investors generally accept.

Scenario 3: Company Is 3 Years Old, Raising £2 Million

Situation: You've been trading for 3 years. Revenue is growing. You need £2 million for expansion.

Best approach: EIS only. You're past the 2-year SEIS window. EIS gives you the capacity you need. If you qualify as a Knowledge-Intensive Company, each investor can put in up to £2 million.

Scenario 4: Post-SEIS, Now Raising Series A

Situation: You raised £250,000 under SEIS 18 months ago. You've spent 85% of it. You're now raising £1.5 million.

Best approach: EIS. You've cleared the 70% spend threshold. File for EIS Advance Assurance and proceed. Your SEIS investors keep their relief; new investors get EIS relief at 30%.

Decision Flowchart

Work through these questions in order:

1. Is your company less than 2 years old?

• No: EIS only (or neither if older than 7 years and not a KIC)
• Yes: Continue

2. Are your gross assets under £350,000?

• No: EIS only
• Yes: Continue

3. Do you have fewer than 25 employees?

• No: EIS only
• Yes: Continue

4. Are you raising £250,000 or less?

• Yes: SEIS only
• No: SEIS for the first £250,000, then EIS for the remainder (subject to the 70% spend rule)

5. Have you already raised £250,000 under SEIS?

• Yes: EIS only (after meeting the 70% spend rule)
• No: Start with SEIS up to the limit, then consider EIS

Common Misconceptions

"EIS is just a bigger version of SEIS"

Not exactly. The relief rates are different (30% vs 50%), the CGT treatment differs (deferral vs exemption on reinvestment), and the connected-person rules interact differently. They're related schemes with distinct characteristics.

"You have to use SEIS before EIS"

There's no legal requirement to use SEIS first. If your company qualifies for EIS but not SEIS (perhaps because it's older than 2 years), go straight to EIS. The "SEIS first" approach is a best practice, not a rule.

"SEIS and EIS are only for tech startups"

Any qualifying trade can use these schemes. Restaurants, manufacturers, retail businesses, and service companies all potentially qualify. The excluded trades list is specific; if your trade isn't on it, you're likely eligible.

"Investors can claim both SEIS and EIS relief on the same shares"

No. Each share issue is either SEIS or EIS, never both. An investor can hold SEIS shares from one round and EIS shares from a later round in the same company, but each investment is under one scheme.

"You'll lose SEIS relief if you later raise under EIS"

No. Existing SEIS relief is not affected by a subsequent EIS round, provided the SEIS conditions continue to be met (particularly the 3-year holding period). The two sets of shares are treated independently.

How AccountsOS Helps

Navigating between SEIS and EIS requires accurate financial data. You need to know your gross assets position, track the 70% spend threshold, and maintain records that satisfy HMRC.

AccountsOS tracks all of this automatically. Ask your AI accountant where you stand on SEIS eligibility, how much of your SEIS funds have been spent, and when you'll be ready to issue EIS shares. Try our SEIS/EIS eligibility checker to see which scheme fits your company, or use the tax relief calculator to model investor benefits under each scheme.

Frequently Asked Questions

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

Yes. An investor can hold SEIS shares from an earlier round and subscribe for new EIS shares in a later round. Each set of shares is treated independently for tax relief purposes. The investor must meet the conditions for each scheme separately (including the connected-person test for EIS).

Does SEIS investment count towards the £12 million EIS lifetime limit?

Yes. The £12 million lifetime limit applies to all tax-advantaged venture capital scheme investment combined, including SEIS. If you raised £250,000 under SEIS, you can raise up to £11,750,000 under EIS over the company's lifetime.

What if my company qualifies for both SEIS and EIS right now?

If your company meets the eligibility criteria for both schemes, you should generally use SEIS first because it offers higher investor relief (50% vs 30%). Raise up to £250,000 under SEIS, meet the 70% spend rule, then switch to EIS for additional capital. There's no advantage to skipping SEIS if you qualify.

How long does it take to transition from SEIS to EIS?

It depends on your burn rate. You need to spend 70% of SEIS funds on qualifying activity before issuing EIS shares. If you raised £250,000 and spend £25,000 per month, that's approximately 7 months. Factor this into your fundraising timeline so you don't leave a gap between rounds.

Can I raise under SEIS and EIS in the same tax year?

Yes, provided you meet the conditions for each scheme when the respective shares are issued and you've met the 70% SEIS spend threshold before issuing EIS shares. There's no restriction on both happening in the same tax year, though the practical requirements (particularly the spend rule) mean there's usually a gap between the two.