The Complete SEIS & EIS Guide for UK Startups 2025/26

SEIS (Seed Enterprise Investment Scheme) and EIS (Enterprise Investment Scheme) are UK government-backed schemes designed to encourage investment in small, high-risk companies. They work by offering significant tax incentives to individual investors who buy new shares in qualifying companies.

SEIS was introduced in 2012 to target the earliest stage of company life. It offers the most generous tax relief because early-stage investing carries the highest risk. Companies must be under 3 years old, have gross assets below 350,000, and have fewer than 25 full-time equivalent employees.

EIS has been running since 1994 and covers a broader range of companies. It targets businesses that are still relatively young (under 7 years from their first commercial sale, or 10 years for knowledge-intensive companies) but may have moved beyond the seed stage. The asset and employee limits are higher, and companies can raise substantially more under EIS.

Both schemes require the company to be carrying on a qualifying trade and to issue new ordinary shares to investors. The shares must be held for a minimum of 3 years for SEIS/EIS relief to be retained.

The core appeal of SEIS and EIS is the tax relief offered to investors. These benefits significantly reduce the downside risk of investing in early-stage companies, which is why many angel investors will only consider SEIS/EIS-qualifying opportunities.

Income Tax Relief

Under SEIS, investors receive 50% income tax relief on investments up to 200,000 per tax year. This means an investor putting 100,000 into a SEIS-qualifying company can reduce their income tax bill by 50,000 in the same year. The relief can also be carried back to the previous tax year.

Under EIS, investors receive 30% income tax relief on investments up to 1,000,000 per tax year (2,000,000 if investing in knowledge-intensive companies). An investor putting 100,000 into an EIS-qualifying company can reduce their income tax bill by 30,000.

Capital Gains Tax (CGT) Exemption

If the investor holds SEIS or EIS shares for at least 3 years, any gain on disposal is completely exempt from CGT. Given that CGT rates can be up to 24% on gains (after the 2024 Autumn Budget changes), this represents a significant saving on successful exits.

CGT Deferral (EIS only)

Under EIS (not SEIS), investors can defer CGT on gains from other assets by reinvesting those gains into EIS-qualifying shares. The gain becomes payable when the EIS shares are disposed of. This is particularly attractive for investors who have recently sold property or other investments.

CGT Reinvestment Relief (SEIS)

For SEIS, investors can claim a 50% CGT exemption on capital gains reinvested into SEIS shares in the same tax year. So if an investor has a 100,000 capital gain and invests 100,000 into SEIS shares, 50,000 of that original gain is exempt from CGT.

Loss Relief

If the company fails, investors can claim loss relief. The allowable loss is the amount invested minus the income tax relief already received. This loss can be offset against either capital gains or income, depending on the investor's preference. For a higher-rate taxpayer, this further limits the downside.

Use our SEIS/EIS tax relief calculator to see the exact figures for any investment amount.

Not every company qualifies for SEIS or EIS. Both schemes have strict eligibility criteria that the company must meet at the time shares are issued. Failing any single test can disqualify the company entirely.

SEIS Eligibility

• The company must be under 3 years old (from the date of incorporation or the date it began trading, whichever is earlier)
• Gross assets must not exceed 350,000 at the time shares are issued
• Fewer than 25 full-time equivalent employees
• The company must not have raised more than 250,000 in total under SEIS
• The company must not have previously raised money under EIS or from a VCT
• Must be carrying on a qualifying trade (or preparing to do so)
• Must be a UK company (incorporated in the UK) or have a permanent establishment in the UK

EIS Eligibility

• The company must be under 7 years old from first commercial sale (10 years for knowledge-intensive companies)
• Gross assets must not exceed 15 million before the investment and 16 million after
• Fewer than 250 full-time equivalent employees
• The company must not have raised more than 12 million in total under EIS, SEIS, and other venture capital schemes (20 million for knowledge-intensive companies)
• Must be carrying on a qualifying trade
• Must not be listed on a recognised stock exchange (AIM qualifies)
• Must not be controlled by another company

Use our SEIS/EIS eligibility checker to see if your company is likely to qualify.

To qualify for SEIS or EIS, your company must carry on a qualifying trade. HMRC defines this by exclusion: most trades qualify unless they appear on the list of excluded activities. If more than 20% of your company's trade involves an excluded activity, the company will not qualify.

Excluded Trades

The following trades and activities are excluded from both SEIS and EIS:

• Dealing in land, commodities, futures, or shares
• Dealing in goods other than in the course of an ordinary trade of wholesale or retail distribution
• Banking, insurance, money-lending, debt-factoring, or hire-purchase financing
• Leasing or receiving royalties or licence fees (unless directly related to the company's own IP)
• Legal or accountancy services
• Property development
• Farming or market gardening
• Woodland or forestry activities
• Operating or managing hotels, guest houses, or nursing/care homes
• Coal or steel production
• Generating electricity, heat, or other forms of energy (including from anaerobic digestion)
• Shipbuilding

Common Grey Areas

Technology companies, SaaS businesses, e-commerce, manufacturing, creative industries, and professional services other than legal/accountancy generally qualify. However, there are grey areas. For example, a software company that licenses its product could potentially fall under the royalties exclusion. In practice, HMRC usually accepts software licensing as a qualifying trade if the company also provides support, updates, and development. If your trade sits in a grey area, applying for Advance Assurance is essential.

Here is a side-by-side comparison of the key differences between the two schemes. Understanding these differences is crucial for planning your fundraising strategy.

KIC = Knowledge-Intensive Company

The SEIS/EIS application process involves several stages. While the company drives the process, investors will expect you to have this well organised before they commit.

Step 1: Apply for Advance Assurance (Optional but Recommended)

Before issuing shares, you can ask HMRC to confirm that your company qualifies. Submit form SEIS/EIS Advance Assurance via HMRC's online portal. You will need to provide your company details, business plan, articles of association, details of the proposed share issue, and information about the trade. HMRC typically responds within 6 to 8 weeks.

Step 2: Issue New Shares

Once you have Advance Assurance (or decide to proceed without it), issue new ordinary shares to your investors. The shares must be full-risk ordinary shares with no preferential rights to assets on winding up. The company must receive the money before or at the time shares are issued.

Step 3: File the Compliance Statement

After shares are issued, submit a compliance statement to HMRC. For SEIS, use form SEIS1. For EIS, use form EIS1. This must be filed within 2 years of the end of the tax year in which the shares were issued. HMRC will check that the company met all requirements at the time of issue.

Step 4: Receive and Distribute Certificates

If HMRC is satisfied, they will issue SEIS3 or EIS3 certificates for each investor. You distribute these certificates to your investors, who then use them to claim their income tax relief on their Self Assessment return.

To make the SEIS/EIS process smooth and to give investors confidence, you should prepare the following before approaching investors or applying for Advance Assurance.

Accounts and Financial Records

Your company accounts should be up to date. HMRC will want to see your most recent accounts to verify gross assets and employee numbers. If your company is very early stage, management accounts showing the current balance sheet position are usually sufficient.

Articles of Association

Review your articles to ensure they allow the company to issue new shares and that the share classes are structured correctly. SEIS/EIS shares must be ordinary shares carrying no preferential rights on winding up. Some standard articles may need amending.

Business Plan

HMRC will want to see a business plan that demonstrates the company is carrying on (or preparing to carry on) a qualifying trade and that the money raised will be used for that trade. The plan does not need to be elaborate, but it should be clear about what the company does, its market, and how the investment will be used.

Share Valuation

You need a defensible share valuation. For very early-stage companies, a modest valuation is usually accepted by HMRC. The valuation should be proportionate to the company's stage, revenue, and assets.

Shareholders' Agreement

While not required by HMRC, most investors will expect a shareholders' agreement. This covers voting rights, share transfer restrictions, drag-along and tag-along rights, and investor protections. Having this ready shows you are serious and organised.

When issuing SEIS/EIS shares, the share price typically includes two components: the nominal value (often 0.01 or 1.00 per share) and the share premium (the difference between the nominal value and the price paid).

For example, if an investor pays 10 per share and the nominal value is 0.01, the share premium is 9.99 per share. The total investment is allocated as share capital (nominal) plus share premium reserve on the balance sheet.

The 30% Connected Persons Test

A crucial rule for both SEIS and EIS is that investors who hold more than 30% of the company's share capital, voting rights, or rights to assets on winding up are considered connected persons and cannot claim income tax relief.

This means founder-directors with significant shareholdings cannot invest in their own company and claim SEIS/EIS relief. The 30% test also extends to associates (spouses, civil partners, parents, grandparents, children, and business partners).

Be careful when structuring your round. If an investor who currently holds 20% invests further and their total holding exceeds 30%, they will lose the tax relief on the new shares.

The 70% Spend Rule (SEIS)

For SEIS, there is a specific requirement that at least 70% of the SEIS money raised must be spent before the company can raise further investment under EIS, from a VCT, or through other state-aided risk capital. This prevents companies from using SEIS as a stepping stone without actually deploying the capital.

In practice, this means if you raise 150,000 under SEIS, you must spend at least 105,000 on your qualifying trade before issuing EIS shares. The spend must be on genuinely qualifying business activities, not parked in a bank account.

The 4-Month Trading Rule (SEIS)

The company must begin trading within 4 months of receiving the SEIS investment. If the company was already trading when the investment was received, this rule is automatically satisfied. If the company is pre-revenue, it must at least have started carrying on the qualifying trade (which can include development activities preparatory to trading).

EIS Spending Rules

Under EIS, the investment must be used for the purpose of the qualifying trade within 2 years of the share issue (or 2 years of when the company begins trading, if later). The money must be spent on the qualifying business activity, not on excluded activities or passive investments.

Knowledge-Intensive Companies (KICs) receive enhanced EIS limits as recognition that deep-tech and R&D-heavy businesses often need more time and capital before they generate revenue.

Qualifying as a KIC

A company qualifies as knowledge-intensive if it meets one of the following conditions:

• Innovation Condition: The company is creating intellectual property and at the point of issuing shares, the creation or development of that IP is expected to form the greater part of the company's business
• Cost Condition: R&D or innovation costs have been at least 15% of operating costs in each of the preceding 3 years (or 10% of operating costs in any one of the preceding 3 years for companies with higher spend concentration)

Additionally, the company must meet the Skilled Employee Condition: at least 20% of full-time employees hold a relevant master's degree or higher qualification, or at least 20% are in roles that require such a qualification.

Enhanced KIC Limits

• Company age limit extended to 10 years (from 7)
• Annual investor limit increased to 2,000,000 (from 1,000,000)
• Lifetime fundraising limit increased to 20,000,000 (from 12,000,000)

Companies that issue SEIS or EIS shares have ongoing record-keeping obligations. HMRC can enquire into SEIS/EIS claims for up to 6 years after the end of the relevant tax year.

What You Must Keep

• Share register: A complete and up-to-date register of all shareholders, including dates of issue, share class, nominal value, and price paid
• Board minutes: Minutes of the board meeting that approved the share allotment
• Shareholders' agreements: Copies of all agreements with investors
• Advance Assurance correspondence: All correspondence with HMRC regarding your application
• Compliance statement copies: Copies of all SEIS1/EIS1 forms submitted to HMRC and SEIS3/EIS3 certificates issued
• Business plan: The business plan submitted with your Advance Assurance application
• Financial records: Accounts showing gross assets, employee numbers, and trade activity at the time shares were issued
• Spending records: Evidence of how SEIS/EIS funds were spent, particularly for the 70% spend rule

Notification Requirements

You must notify HMRC if there is a disqualifying event within 3 years of the share issue. This includes the company ceasing to carry on a qualifying trade, the company being wound up, or the investor disposing of their shares. Failure to notify can result in penalties.

Several important changes affect SEIS and EIS for the 2025/26 tax year and beyond.

EIS Extended to 2035

The UK government confirmed in the 2023 Autumn Statement that EIS (and VCT) relief will be extended to April 2035. This gives long-term certainty to both investors and companies planning to use EIS. Previously, EIS was due to expire in 2025 (except for knowledge-intensive companies, whose extension to 2035 had already been confirmed).

SEIS Enhanced Limits (from April 2023)

From 6 April 2023, the SEIS limits were permanently enhanced:

• Company lifetime fundraising limit increased from 150,000 to 250,000
• Investor annual limit increased from 100,000 to 200,000
• Company age limit increased from 2 years to 3 years
• Gross asset limit increased from 200,000 to 350,000

Inheritance Tax (IHT) Changes

From April 2026, agricultural and business property relief for IHT will be reformed. While EIS/SEIS shares themselves are not directly affected (they do not qualify for BPR until held for 2 years), the broader change in IHT rules may influence some investors' overall estate planning strategies, potentially making SEIS/EIS investments relatively more attractive compared to other asset classes that lose their IHT exemptions.

CGT Rate Increases

The October 2024 Budget increased CGT rates to 18% (basic rate) and 24% (higher rate) for most assets. This makes the CGT exemption on SEIS/EIS shares even more valuable, as the tax saved on a successful exit is now higher than it was under the previous 10%/20% rates.