Raising your first outside money is hard. SEIS and EIS make it easier by handing your investors a generous slice of their cash back through the tax system, which makes saying "yes" to a young, risky company far more attractive.
If you're a founder trying to close an early round, or an angel weighing up a startup, these two schemes are probably the most powerful tax incentives you'll meet in the UK. They're also where founders most often trip up, because the eligibility rules are strict and a single misstep can cost your investors their relief.
This guide explains what SEIS and EIS are, what each gives the investor, the limits that apply to your company, and how the two fit together. We'll keep the figures dated to 2025/26 and link straight to the gov.uk guidance so you can check everything yourself.
What are SEIS and EIS?
SEIS (the Seed Enterprise Investment Scheme) and EIS (the Enterprise Investment Scheme) are government schemes designed to channel private money into small, higher-risk UK companies. They do it by giving the investor, not the company, a set of tax reliefs in exchange for backing your shares.
Think of them as a sliding scale by company stage. SEIS is the seed-stage scheme for brand-new trades, with the most generous reliefs because the risk is highest. EIS is for slightly more established (but still young and growing) companies raising larger amounts.
The company itself doesn't get a tax break. Instead, the reliefs make your equity cheaper and more appealing to angels, which is what gets the round closed. A typical journey is SEIS first, then EIS for later rounds once you've outgrown the seed limits.
If you're setting up the company that will raise this money, our guidance for startups and limited companies covers the structure you'll need in place first.
What does SEIS give an investor?
SEIS is the more generous of the two because seed-stage companies are the riskiest bet. Here's what an individual investor gets, all per the HMRC helpsheet HS393 for 2025/26.
- 50% income tax relief on the amount invested. So an investor putting in £20,000 can knock £10,000 off their income tax bill.
- A maximum of £200,000 of SEIS investment per tax year on which relief can be claimed.
- The relief can only reduce the investor's income tax to nil. If their tax bill for the year isn't big enough to absorb it all, the excess is lost, though they can carry back some or all of the claim to the previous tax year.
- CGT disposal relief: if the investor holds the shares for at least three years and keeps their income tax relief, any gain on selling those SEIS shares is free of Capital Gains Tax.
- CGT reinvestment relief: if the investor reinvests a capital gain from another asset into SEIS shares, 50% of that gain can be treated as exempt from CGT, up to a maximum gain of £100,000.
That combination, half your money back up front plus a tax-free exit, is why SEIS is so effective at unlocking angel cheques for very early companies.
What does EIS give an investor?
EIS works the same way but for larger, slightly later-stage rounds. The reliefs are still strong, just pitched a notch below SEIS. These figures come from HMRC helpsheet HS341 for 2025/26.
- 30% income tax relief on the amount invested.
- A maximum of £1 million of EIS investment per tax year, rising to £2 million where anything above £1 million goes into knowledge-intensive companies.
- Relief is capped at the investor's income tax liability for the year, with the same option to carry back to the previous year.
- CGT disposal relief: gains on EIS shares held for at least three years (with income tax relief intact) are free of Capital Gains Tax.
- CGT deferral relief: an investor can defer a capital gain made on another asset by reinvesting it into EIS shares. The deferred gain comes back into charge when they later sell the EIS shares.
In practice, EIS is what most founders use for their Series A-style rounds once they've used up their SEIS allowance.
SEIS vs EIS: what's the difference?
The cleanest way to see it is side by side. All investor figures are for 2025/26.
| Feature | SEIS | EIS |
|---|---|---|
| Income tax relief | 50% | 30% |
| Max investment per investor per year | £200,000 | £1m (£2m for knowledge-intensive) |
| Max the company can raise under the scheme | £250,000 (lifetime) | £5m a year, £12m lifetime |
| CGT on shares after 3 years | Exempt | Exempt |
| Other CGT relief | 50% reinvestment relief (max £100,000 gain) | Unlimited gain deferral |
| Company age limit | New trade, under 3 years | Trade under 7 years (10 for knowledge-intensive) |
| Gross assets before investment | Under £350,000 | Under £15m |
| Full-time equivalent employees | Under 25 | Under 250 |
The EIS company raising limits (£5m a year, £12m lifetime) and the 7-year age and £15m gross-asset tests sit in HMRC's EIS guidance for companies, linked in Sources. The headline point: SEIS is for the very first money in, EIS for everything after, up to the lifetime caps.
Does my company qualify?
Both schemes ask broadly similar things of the company, with SEIS being tighter because it's aimed at brand-new trades. To use SEIS, when the shares are issued your company must:
- have a new trade, generally carried on for less than three years
- hold gross assets of under £350,000
- have fewer than 25 full-time equivalent employees
- be a UK-based company carrying on (or preparing to carry on) a qualifying trade
For EIS, the company is allowed to be larger and a bit older: under £15 million in gross assets before the investment, fewer than 250 employees, and generally trading for under seven years (longer for knowledge-intensive companies).
Some trades are excluded from both schemes, including dealing in land, financial services, leasing, and legal or accountancy services. The money raised has to be used for a qualifying business activity, and your investors have to hold their shares for at least three years or their relief is withdrawn.
A practical tip from experience: most founders apply to HMRC for advance assurance before the round. It's not compulsory, but a provisional view that your company looks eligible gives angels confidence their relief will stand up. Getting the share structure and trade description right is exactly the kind of thing our tax advisory team sorts out before you raise.
Illustrative example: a £150,000 SEIS round
Illustrative example. Maya is a higher-rate taxpayer angel investor. She invests £30,000 into a qualifying seed-stage software startup under SEIS in 2025/26. She holds the shares for more than three years and keeps her income tax relief.
Here's how the reliefs stack up for her, using the SEIS rates above.
| Item | Amount |
|---|---|
| Cash invested | £30,000 |
| SEIS income tax relief at 50% | £15,000 |
| Net cash at risk after income tax relief | £15,000 |
So Maya's real exposure is £15,000, not £30,000, because the 50% relief gives her £15,000 back (£30,000 x 50% = £15,000).
Now suppose the startup does well and Maya sells her shares after four years for £90,000, a £60,000 gain. Because she held qualifying SEIS shares for over three years with her relief intact, that £60,000 gain is free of Capital Gains Tax. For comparison, a £60,000 gain on an ordinary holding would normally be taxed at up to 24% for a higher-rate taxpayer on most assets (after the £3,000 annual exempt amount for 2025/26).
This is illustrative only. Real investments can fail, and if they do, the SEIS structure also offers loss relief, which softens the downside. The figures show why founders find SEIS such a strong pitch: the investor's downside is cut, and the upside is tax-free.
How do you actually get the relief to investors?
The relief flows to investors, but the paperwork is the company's job. The broad sequence is:
- Check eligibility, ideally by applying to HMRC for advance assurance before you raise.
- Issue the shares and spend the money on the qualifying trade. They must be full-risk ordinary shares, paid up in cash.
- Wait for the trading or spending condition, then apply to HMRC using the compliance statement (form SEIS1 or EIS1).
- HMRC issues authority for you to give investors their certificates (SEIS3 or EIS3).
- Investors claim the relief on their Self Assessment tax return using that certificate.
If you've raised under SEIS first and then EIS, the ordering matters: the SEIS shares generally need to be issued (and the money largely spent) before EIS shares, or you can jeopardise the SEIS relief. This is a classic area to get a second pair of eyes on.
Common mistakes that void the relief
In practice, the failures we see most often are avoidable:
- Issuing shares before advance assurance or before the trade qualifies. Timing the share issue wrongly can disqualify the round.
- Using the wrong share class. The shares must be ordinary, non-redeemable, full-risk shares with no preferential rights to assets on a winding up.
- Spending the money on a non-qualifying activity, or not spending it within the required window.
- Investors who are connected to the company (for example, employees or those with a substantial stake) claiming relief they aren't entitled to.
- Breaking the three-year holding period, which claws the relief back from the investor.
Because the company carries the compliance burden but the investor bears the consequences, getting this right protects your relationship with the people who backed you. If you're scaling internationally as well, our US CFO services help founders keep UK reliefs intact while raising across borders.
Frequently asked questions
Can a company use both SEIS and EIS?
Yes. Many startups raise under SEIS first, up to the £250,000 SEIS lifetime limit, then move to EIS for larger rounds. The SEIS shares generally need to be issued and the money largely spent before you issue EIS shares, so the order matters.
How much income tax relief do investors actually get?
SEIS gives 50% income tax relief and EIS gives 30%, both for 2025/26. So a £20,000 SEIS investment can reduce an investor's income tax bill by £10,000, and the same amount under EIS would reduce it by £6,000. Relief can only reduce tax to nil, but it can be carried back to the previous year.
Do SEIS and EIS reduce my company's Corporation Tax?
No. The reliefs go to the individual investor, not the company. Your company still pays Corporation Tax on its profits in the normal way, at 19% on profits up to £50,000 and 25% above £250,000 for the financial year from 1 April 2025, with marginal relief in between. Our Corporation Tax service handles that side.
How long do investors have to hold the shares?
At least three years from the date the shares are issued (or from when the company starts trading, if later). Sell or breach the conditions before then and HMRC withdraws the relief from the investor.
What is a knowledge-intensive company?
It's a company doing significant research, development or innovation that meets HMRC's specific tests. These companies get higher EIS limits: investors can put in up to £2 million a year (where the amount over £1 million goes into knowledge-intensive companies), and the company can be up to 10 years old rather than 7.
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Ready to raise a tax-efficient round?
Getting SEIS or EIS right is the difference between a clean raise and investors losing their relief a year later. Zmartly helps UK founders structure the company, secure advance assurance, and get the compliance paperwork right so your angels get their relief without drama. Book a free 20-minute call with a Zmartly accountant to talk through your round at zmartly.co.uk/contact.
