How SEIS and EIS actually work for UK founders raising early-stage capital
Two HM Revenue and Customs schemes give individual investors generous income tax relief for backing very early-stage UK companies, and knowing the mechanics can shape how you structure a seed round.
The Seed Enterprise Investment Scheme (SEIS) and Enterprise Investment Scheme (EIS) are HM Revenue and Customs programmes that give individuals significant income tax relief for investing in small, unquoted UK trading companies. For a founder, the appeal is indirect but real: the reliefs lower the effective risk for your investor, which can make it easier to close a round or justify a slightly higher valuation. Neither scheme puts money directly into your company from the government; they work entirely by changing the tax position of the people who invest in you.
This guide explains what each scheme actually does, how the two differ, and what the mechanics mean practically when you are pitching. It is not financial or tax advice, and eligibility rules are detailed, so most founders and investors take advice from an accountant or specialist adviser, and many companies apply to HMRC for “advance assurance” before fundraising to confirm a prospective round is likely to qualify.
What is SEIS for?
SEIS exists to help the very earliest, highest-risk companies raise their first outside capital by making that investment more attractive to individuals. Under SEIS, an investor can claim income tax relief of 50% of the amount invested, against their income tax bill for the year, up to a maximum annual investment of £200,000 per investor, according to GOV.UK’s guidance on tax relief for investors. If the shares are held for at least three years and the relief has not been withdrawn, any gain on disposal is also free of capital gains tax, and investors can additionally exempt capital gains tax on 50% of a new SEIS investment (up to £100,000) where they reinvest a gain from elsewhere.
On the company side, SEIS is deliberately restrictive because it is aimed at the earliest stage. A company can raise a maximum of £250,000 in total through SEIS over its lifetime, it must not have gross assets of more than £350,000 when the shares are issued, and it must not have been carrying out its qualifying trade for more than three years, per GOV.UK’s SEIS guidance. In practice this makes SEIS the scheme for a pre-seed or very early seed round, often the first cheque a company ever raises.
How does EIS differ?
EIS is the larger, more flexible sibling scheme, aimed at companies that have outgrown SEIS eligibility or are raising bigger rounds. The headline income tax relief is lower, at 30% of the amount invested, but the amount an individual can invest each year is far higher: up to £1 million, rising to £2 million if at least £1 million of that goes into “knowledge-intensive” companies, GOV.UK states. Like SEIS, EIS shares are free of capital gains tax on disposal after a three-year hold, and EIS additionally allows investors to defer a capital gain from another asset by reinvesting it into EIS shares, rather than exempting it outright.
Company-side limits are also considerably larger, and they changed for the current tax year. For shares issued fromundefinedApril 2026, a standard company can raise up to £10 million under EIS (and related venture capital schemes) in any 12-month period, and up to £24 million over its lifetime, per GOV.UK’s EIS guidance, current as of that update. A knowledge-intensive company, broadly one carrying out significant research, development or innovation, can raise up to £20 million a year and £40 million over its lifetime. Age limits differ too: a standard company must raise its first scheme investment within seven years of its first commercial sale, extending to ten years for knowledge-intensive companies, and gross assets must not exceed £30 million before the shares are issued (£35 million afterwards) for most companies.
SEIS vs EIS: the key figures side by side
| SEIS | EIS | |
|---|---|---|
| Income tax relief for investor | 50% of amount invested | 30% of amount invested |
| Maximum annual investment per investor | £200,000 | £1 million (£2 million if £1m+ goes into knowledge-intensive companies) |
| Minimum holding period for relief | 3 years | 3 years |
| Company funding limit | £250,000 over the company’s lifetime | £10 million per 12 months / £24 million lifetime (£20 million / £40 million for knowledge-intensive companies) |
| Company gross assets limit | £350,000 before shares issued | £30 million before issue / £35 million after |
| Company age/trading limit | Under 3 years of qualifying trade | Within 7 years of first commercial sale (10 years for knowledge-intensive companies) |
| Capital gains tax on disposal | Exempt after 3-year hold | Exempt after 3-year hold |
Figures reflect GOV.UK guidance on SEIS, EIS and investor tax relief, including the funding-limit increases effective fromundefinedApril 2026.
What does this mean practically for a founder pitching investors?
In practice, most very early UK rounds are structured to use SEIS allocation first, because it offers investors the highest relief, and only move to EIS once the SEIS limit for that funding round or company is used up. If your company is under three years old, has gross assets under £350,000, and has not yet raised the full £250,000 SEIS lifetime limit, it is worth checking whether a SEIS allocation could sit alongside or ahead of an EIS tranche in the same round. Many angel investors and early-stage syndicates specifically look for SEIS or EIS eligibility before they commit, because the relief materially changes their downside if the company fails.
It is worth being upfront with prospective investors about where your company sits against the SEIS and EIS eligibility tests, since this is something they, or their adviser, will check regardless. Applying for HMRC advance assurance before you start fundraising, while not compulsory, can reassure investors that HMRC is likely to agree the shares qualify, and many experienced angels will ask whether you have it. It is also worth noting that qualifying is not guaranteed and depends on the precise structure of the round and the company’s trade, so a company that expects to raise SEIS or EIS money should generally take advice on structuring the share issue correctly from the outset.
What could go wrong, and why relief isn’t automatic
Relief can be withdrawn if the company or the investment later fails to meet the qualifying conditions, for example if the company changes its trade in a disqualifying way, if the investor becomes “connected” to the company (broadly, an employee or a large shareholder in some circumstances), or if the shares are sold within the three-year holding period. HMRC’s advance assurance process reduces this risk but does not eliminate it, because the final qualifying test is applied when the return is filed, based on the facts at that time. This is one reason SEIS and EIS paperwork, including issuing the compliance statement and the certificates investors need to actually claim relief, is usually handled by the company alongside its accountant rather than left informal.
Where to check the current figures
Because these limits and rates are set out in tax legislation and have changed materially even within the current tax year, such as theundefinedAprilundefinedincreases to EIS company funding limits, it is worth checking the live GOV.UK guidance for SEIS and EIS directly before relying on any figure in a pitch deck or term sheet, rather than a secondary summary, including this one. A regulated financial adviser or accountant experienced in venture capital schemes can also confirm whether a specific company and round are likely to qualify before you commit to a structure.