SEIS, the Seed Enterprise Investment Scheme, is a UK tax scheme that gives individual investors 50% income tax relief when they buy new shares in a young company. The company can raise up to £250,000 under it, and in return it has to meet HMRC’s rules on its size, its age, its trade and how it spends the money.
The relief goes to the investor, not the company. For the founder, SEIS matters because it changes the maths for the UK angels looking at the round, and some of them won’t talk about investing without it.
I’ve raised £250m+ for my own companies and funded more than 750 businesses with over £1bn, so I’ve seen early rounds as a founder, as an investor and as a lender.
What SEIS Is
The government created the scheme in 2012 to get private money into companies at the stage where the risk is highest and the business has the least to show. It works by taking part of that risk off the investor through the tax system.
An investor who puts £10,000 into qualifying SEIS shares can take £5,000 off their income tax bill for that year. If they hold the shares for at least 3 years, any gain when they sell is free of capital gains tax. If the company fails, they can claim relief on the loss as well.
The SEIS scheme sits alongside the Enterprise Investment Scheme (EIS), which is for companies that have outgrown SEIS, and venture capital trusts. SEIS is the one for the earliest stage.
SEIS Eligibility: Which Companies Qualify
HMRC’s SEIS guidance sets the tests. Most of them apply on the day the shares are issued, so a company can qualify for one raise and not the following one.
| Test | The rule |
|---|---|
| Where the company is | Established in the UK, with a permanent establishment here |
| Listing | Not trading on a recognised stock exchange, and no plans to |
| Independence | Not controlled by another company, and never has been since it was incorporated |
| Gross assets | No more than £350,000 when the shares are issued, including any subsidiaries |
| Employees | Fewer than 25 full-time equivalent employees when the shares are issued |
| Age of the trade | A new qualifying trade that hasn’t been carried on for more than 3 years |
| Earlier investment | No money already received through EIS or a venture capital trust |
| Type of trade | A commercial trade run to make a profit, not mostly an excluded activity |
The excluded activities are trades the scheme leaves out, such as property development, banking and finance, legal and accountancy services, and running hotels or nursing homes. A company that does a little of one of these alongside its main trade can still qualify. A company whose trade is mainly one of them can’t.
There’s also a risk to capital condition. The company has to intend to grow its trade over the long term, in revenue, customers and staff, and the investor’s money has to be at real risk. A business set up to hand investors a tax break with little chance of losing anything won’t pass.
The shares themselves have to be full-risk ordinary shares. They can’t be redeemable, they can’t carry special rights to the company’s assets, and they have to be paid up in full, in cash, when they’re issued. That rules out the preference shares a later-stage investor might want.
How Much You Can Raise Under SEIS
A company can raise a maximum of £250,000 through SEIS in total. That’s a lifetime figure for the company, not an annual one. It can be raised in one go or across several share issues, and it includes any other de minimis state aid the company has received in the 3 years up to the investment.
On the investor’s side, each person can claim SEIS relief on up to £200,000 a tax year. They can also carry back some or all of an investment and treat it as made in the previous tax year, as long as that year’s limit isn’t used up.
The money has to go on the trade, on getting ready to start it, or on research and development expected to lead to it, and it has to be spent within 3 years of the share issue. It can’t be used to buy shares in another company, except a qualifying 90% subsidiary that uses it for the same purpose.
How much the company raises should come from what the money is going to be used for and the plan, built up from its parts. It isn’t just a round number plucked out of the air, and it isn’t £250,000 because that’s the scheme’s limit. A company that raises the full £250,000 when its plan needs £150,000 has sold more of the business than it needed to.
Why Angels Ask for SEIS
UK angels are individuals investing their own money, and SEIS changes how much of that money they can lose. Here’s how the reliefs work on a £10,000 investment by an additional-rate taxpayer.
| Company fails | Company sells for 5 times the money | |
|---|---|---|
| Amount invested | £10,000 | £10,000 |
| Income tax relief at 50% | £5,000 | £5,000 |
| Net cost after relief | £5,000 | £5,000 |
| Value of the shares | £0 | £50,000 |
| Loss relief at 45% on the £5,000 net loss | £2,250 | None |
| Capital gains tax on the £40,000 gain | None | None, if held for 3 years |
| Investor’s money actually lost | £2,750 | None |
On a company that fails, the investor’s real loss is £2,750 out of a £10,000 cheque. On one that succeeds, they keep the whole gain tax free. That’s why SEIS is often a condition of an angel investing at this stage, rather than a bonus. Some angels and angel networks only look at early-stage companies that have SEIS in place, and SEIS funds can only invest in companies that qualify.
For the founder, that widens the pool of people who’ll take a meeting. It doesn’t change what they’re looking at once they’re in the room. Things an investor is looking for include:
- the founder and the team, and whether they can deliver the plan
- the product and the problem it solves
- evidence of demand, such as paying customers, pilots or pre-orders
- the plan, what the money is going to be used for and how big the business could become
They will then do their due diligence and check what they have been told is true. The advance subscription agreement is one way UK companies take SEIS money before a valuation is agreed, as long as it’s drafted to HMRC’s conditions.
Founders can’t usually claim the relief on their own shares. An investor who, with their associates, holds more than 30% of the company’s shares, voting power or assets on a winding-up has a substantial interest and doesn’t qualify, which rules out many founders at this stage.
Advance Assurance and the Compliance Statement
Advance assurance is an optional opinion from HMRC, given before the round, that a planned share issue is likely to qualify. It isn’t required by law, but some angels won’t invest without it, because it’s the only way to know before the money goes in.
After the shares are issued, the company files a compliance statement, form SEIS1. It can only file once it has either traded for at least 4 months or spent at least 70% of the money raised. If HMRC agrees the conditions are met, it sends the company a compliance certificate, form SEIS3, for each investor, and the investors use it to claim their relief.
SEIS and EIS in the Same Round
A company can raise under both schemes in the same round, with SEIS money taken first. HMRC’s manual says the two can’t be raised on the same day, and EIS investments must always be raised at least a day after any SEIS investment. If EIS shares go out first, the company can’t use SEIS at all.
The usual order is SEIS shares issued first, up to the £250,000 limit, and EIS shares issued on a later day for the rest of the round.
EIS gives investors 30% income tax relief, against SEIS’s 50%, and covers much larger raises. From 6 April 2026, the EIS limits rose to £10 million a year for most companies and £24 million over a company’s lifetime, and SEIS money counts towards them.
Mistakes That Lose SEIS Relief
The relief can be withheld, or taken back from investors, if the company breaks the rules in the 3 years after the investment. Things that can lose it include:
- Issuing the shares before the money is in. The shares have to be paid up in full, in cash, when they’re issued.
- Issuing the wrong class of shares. Preference shares, redeemable shares or shares with rights to the company’s assets don’t qualify.
- Taking EIS money first, or on the same day. SEIS shares have to be issued at least a day before any EIS shares.
- Growing past the limits before the shares are issued. Gross assets over £350,000 or 25 or more employees on the issue date rule out SEIS for that issue, and a previous raise sitting in the bank counts towards gross assets.
- Spending the money on the wrong things. An excluded activity, or buying shares in a company that isn’t a qualifying subsidiary, can lose the relief.
- Protecting the investor. Any arrangement that guarantees the investment, promises to buy the shares back or puts one investor ahead of another breaks the risk to capital condition.
- Selling or changing the business inside the 3 years. A sale of the company or a switch to an excluded activity during the period can withdraw the relief from every SEIS investor.
SEIS Equivalents Outside the UK
SEIS only works for UK taxpayers investing in companies with a permanent establishment in the UK. Other countries back early-stage investors in different ways.
In Australia, investors in an early stage innovation company get a 20% non-refundable tax offset, capped at A$200,000 a year for the investor and their affiliates. Gains on shares held for at least 12 months and less than 10 years can be disregarded for capital gains tax.
In the US there’s no upfront relief like SEIS. Qualified small business stock, under section 1202 of the Internal Revenue Code, lets investors exclude some or all of the gain when they sell instead. For stock issued after 4 July 2025, the exclusion is 50% after 3 years, 75% after 4 years and 100% after 5 years, capped at the greater of $15m or 10 times the investor’s cost, and the company’s gross assets have to be $75m or less.
In Singapore, the government’s Startup SG Equity scheme co-invests with independent third-party investors in eligible technology startups, rather than giving investors a tax break. The UAE has no personal income tax, so there’s no income tax relief to offer investors in the first place.
FAQs
Who is eligible for SEIS?
A company is eligible for SEIS if it’s established in the UK, has gross assets of no more than £350,000 and fewer than 25 full-time equivalent employees when the shares are issued, and runs a qualifying trade that’s no more than 3 years old. It also can’t have already taken EIS or venture capital trust money.
How much can a company raise under SEIS?
A company can raise up to £250,000 under SEIS in total, across one or more share issues. Anything above that can be raised under EIS, as long as the EIS shares are issued at least a day after the SEIS shares.
Can a company outside the UK use SEIS?
Only if it has a permanent establishment in the UK. A US or UAE company with no UK presence can’t use SEIS, and some overseas founders set up a UK company so they can raise from UK angels with the relief available.
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This explains how SEIS generally works for UK companies. It isn’t tax, legal or investment advice, and an accountant or tax adviser should check the company’s position before shares are issued.
