Raising money is one of the hardest parts of building a startup. You have a great idea, a working product, maybe even your first customers — but convincing someone to hand over £50,000 of their own money is a different challenge entirely.
The UK government knows this. That is why it created two of the most generous investor tax reliefs in the world: the Seed Enterprise Investment Scheme (SEIS) and the Enterprise Investment Scheme (EIS). If your startup qualifies, these schemes make investing in your company dramatically more attractive — because the taxman effectively shares the risk with your investors.
This guide explains what SEIS and EIS are, who qualifies, how to apply, and how to use them when pitching investors in 2026.
What Are SEIS and EIS? (And Why Investors Care)
SEIS and EIS are UK tax relief schemes designed to encourage people to invest in small, early-stage companies. Here is the simple version:
- SEIS is for brand-new startups. It gives investors 50% income tax relief on what they invest — so a £100,000 investment cuts their tax bill by £50,000.
- EIS is for slightly more developed young companies. It gives investors 30% income tax relief on larger investments.
Both schemes also offer capital gains tax benefits, and both include “loss relief” — if the company fails, investors can offset some of their loss against their income tax. In other words, the downside of backing your startup is cushioned, while the upside stays fully theirs.
For a founder, the message to investors is simple: “If you invest £100,000 in my SEIS-qualifying company, it will only really cost you £50,000 after tax relief — and if we succeed, your gains are tax-free.”
SEIS vs EIS: The Key Differences at a Glance
| Feature | SEIS | EIS |
|---|---|---|
| Income tax relief | 50% of investment | 30% of investment |
| Max investor relief per tax year | £200,000 | £1,000,000 (£2m for knowledge-intensive companies) |
| Company age limit | Trading for less than 3 years | Trading for less than 7 years |
| Max company raise | £250,000 total under SEIS | £5m per year, £12m lifetime |
| Gross assets limit | £350,000 or less | £15m or less before investment |
| Employee limit | Fewer than 25 full-time staff | Fewer than 250 full-time staff |
| Capital gains on exit | Tax-free if shares held 3+ years | Tax-free if shares held 3+ years |
The two schemes are designed to work in sequence. Most startups raise their first round under SEIS, then move to EIS once they outgrow the SEIS limits. One important rule: once you have issued EIS shares, you cannot go back and issue SEIS shares afterwards — so plan the order of your rounds carefully.
Scheme limits are reviewed periodically, so always double-check the current figures against official HMRC guidance before relying on them.
Does Your Startup Qualify for SEIS?
SEIS is deliberately aimed at genuine early-stage companies. To qualify, your company must:
- Be established and permanently based in the UK
- Have been trading for fewer than 3 years when the shares are issued
- Have gross assets of £350,000 or less
- Employ fewer than 25 full-time equivalent staff
- Not have raised more than £250,000 under SEIS before
- Carry on a qualifying trade — most trades qualify, but HMRC excludes a defined list of activities (such as property development, financial services, and legal or accountancy services)
- Not be controlled by another company, and not trade on a recognised stock exchange
The shares you issue must be full-risk ordinary shares, paid for in cash, with no preferential rights. Investors cannot be connected to the company beyond holding 30% or less of the shares — so a founder who owns 80% of the company cannot claim SEIS relief on their own investment, though outside angels taking smaller stakes can.
There is also a “risk to capital” condition: HMRC will refuse schemes that look like tax-efficient wrappers rather than genuine growth businesses. Your business plan must show real growth ambition and real risk to investors’ capital.
When to Move From SEIS to EIS
SEIS is a brilliant starting point, but its £250,000 lifetime cap means most ambitious startups outgrow it after one round. That is where EIS takes over.
EIS suits companies that are still young (under 7 years trading) but need bigger cheques — up to £5 million per year. The investor relief drops to 30%, but the annual investor limit jumps to £1 million (£2 million for knowledge-intensive companies such as deep-tech or life-sciences startups), which opens the door to larger angels, angel syndicates, and EIS funds.
A typical UK startup funding journey looks like this: a £150,000–£250,000 SEIS round from angels, followed 12–18 months later by a £500,000–£2 million EIS round to scale. If you are exploring every funding route available, it is worth reading our guide to startup grants and funding options alongside this one — grants and tax-relief-backed investment can work well together.
How to Get HMRC Advance Assurance (Step by Step)
Advance assurance is a letter from HMRC confirming that your planned share issue is likely to qualify for SEIS or EIS. It is not legally required, but in practice most professional UK angel investors will not invest without seeing it. Think of it as a trust badge for your funding round.
Step 1: Prepare your documents. You will need your business plan with financial forecasts, your articles of association, details of your share structure, your latest accounts, and information about any previous investment or grants. HMRC publishes an advance assurance checklist — use it.
Step 2: Show a genuine growth story. Your application must satisfy the “risk to capital” condition. Explain clearly how the money will be spent on growing the trade, what the genuine commercial risks are, and why the business has real growth potential. A plan that reads like a safe, capital-preservation vehicle will be rejected.
Step 3: Apply before you pitch. Submit your application through your Government Gateway account before you start approaching investors — not after terms are agreed. HMRC typically responds within 4 to 6 weeks.
Step 4: Issue shares correctly. Once you have assurance, issue the shares and make sure they are fully paid for in cash before issue. Then file your compliance statement (form SEIS1 for SEIS) with HMRC. HMRC will authorise you to send investors their SEIS3/EIS3 certificates, which they use to claim relief through Self Assessment.
Investors must hold their shares for at least three years to keep the relief, so be upfront about this in your pitch.
How to Use SEIS/EIS When Pitching Investors
Having SEIS or EIS status does not sell itself — you still need a compelling pitch. But it changes the conversation in three powerful ways:
- Lead with the effective cost. Instead of asking for £100,000, frame it as “£50,000 of real cost after SEIS relief, with tax-free gains if we win.” That reframes the risk dramatically.
- Put advance assurance on your first slide. Angels see hundreds of decks. An HMRC advance assurance letter signals you are serious, prepared, and fundable — it gets you past the first filter.
- Target the right investors. Many UK angels invest specifically through SEIS/EIS and have annual allowances to use before the tax year ends (5 April). Timing your raise for January–March, when investors are looking to deploy their allowances, can genuinely help.
For the technical detail behind the schemes, HMRC’s official guidance is the definitive source — see HMRC’s Venture Capital Schemes Manual for the full statutory process.
4 Mistakes That Can Cost You SEIS Eligibility
- Pitching before applying for advance assurance. If investors commit and you issue shares before HMRC has reviewed your application, you cannot undo the timing. Apply first.
- Getting the share structure wrong. SEIS shares must be ordinary, non-redeemable shares with no preferential rights. A bespoke share class designed to protect investors can accidentally disqualify the whole round — take advice before you draft the paperwork.
- Issuing EIS shares too early. Remember: once EIS shares are issued, SEIS is off the table forever. If you still have SEIS allowance left, use it first.
- Assuming you qualify without checking the excluded trades. Property development, banking, insurance, legal services, and a handful of other activities are excluded. Check the qualifying-trade rules against your actual business before promising SEIS to investors.
Frequently Asked Questions
Do I need advance assurance before talking to investors? It is not a legal requirement, but it is strongly recommended. Most experienced UK angel investors expect to see it, and applying after you have already issued shares is too late. Apply through your Government Gateway account before your round opens.
Can I claim SEIS relief on money I invest in my own company? Only if you hold 30% or less of the company’s shares, voting rights, and rights on winding up. Most founders own far more than that, so in practice SEIS is for your outside investors, not for you.
What happens to investors’ money if my startup fails? They can claim loss relief, offsetting their net loss (after the initial income tax relief) against their income tax bill. Combined with the upfront relief, this significantly cushions the downside — which is exactly why the schemes exist.
Can I raise under SEIS and EIS in the same round? Yes, you can issue some shares under SEIS and others under EIS, provided you respect the limits and the sequencing rule: complete the SEIS portion first, because issuing EIS shares closes the door on any future SEIS issues.
Conclusion
SEIS and EIS are among the most powerful tools a UK founder has for raising early-stage money. They do not replace a great product, a strong team, or a convincing pitch — but they turn a scary £100,000 gamble into a calculated £50,000 risk with tax-free upside, and that changes how investors respond to you.
Start by checking your eligibility, apply for advance assurance before you pitch, use SEIS first and EIS second, and lead every investor conversation with the effective after-relief cost. Do that, and you will be raising on much friendlier terms than founders in almost any other country.
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