The Seed Enterprise Investment Scheme (SEIS) and the Enterprise Investment Scheme (EIS) give tax relief to people who buy new shares in qualifying companies. The relief reduces the investor's risk, so it affects whether UK angel investors will back a company with no revenue, and the price they will pay for its shares. This post covers the schemes from the founder's side.

What the reliefs are worth to an investor

SEIS gives an individual investor 50% income tax relief on what they put in, up to £200,000 a tax year. EIS gives 30%, up to £1m a tax year (£2m if at least £1m of it goes into knowledge-intensive companies). If the investor holds the shares for three years, any gain is free of Capital Gains Tax. If the shares become worthless, the loss, less the income tax relief already given, can be set against income.

Worked example — illustrative. A £25,000 SEIS cheque from an additional-rate taxpayer.
  • Invested: £25,000
  • Income tax relief at 50%: £12,500, leaving a net cost of £12,500
  • Company fails, shares worth nothing. Loss relief on the £12,500 net cost at 45%: £5,625
  • Maximum loss: £6,875, which is 27.5p for each £1 invested
  • Company succeeds and the shares sell for £250,000 after three years: the entire gain is exempt from Capital Gains Tax

In this example the investor can lose at most 27.5p in the pound and keeps all of any gain. If you meet angel investors before you have advance assurance from HMRC, they cannot be confident of getting that relief, and some will wait until you have it.

SEIS and EIS conditions for the company

SEIS is for early-stage companies:

  • The company can raise £250,000 in total under SEIS.
  • Gross assets of £350,000 or less when the shares are issued.
  • Fewer than 25 full-time equivalent employees.
  • The trade must have been carried on for no more than 3 years before the investment.
  • The money must be spent within 3 years of the share issue.

EIS is for later rounds:

  • Fewer than 250 full-time equivalent employees when the shares are issued.
  • Within 7 years of your first commercial sale (10 years for a knowledge-intensive company).
  • The money must be spent within 2 years of the investment, or of the date you started trading if that is later.

The EIS limits from 6 April 2026

The EIS limits doubled from 6 April 2026, so larger companies can now raise money under the scheme:

  • Annual limit: £10m in any 12 months, up from £5m, or £20m for knowledge-intensive companies.
  • Lifetime limit: £24m, up from £12m, or £40m for knowledge-intensive companies.
  • Gross assets: £30m before the share issue and £35m immediately after, up from £15m and £16m.
Example. Before 6 April 2026, an £8m funding round could not be raised entirely under EIS, because the company's annual limit was £5m, so part of the round had no relief. Under the £10m annual limit the same round can qualify in full. If your funding plan uses the old limits, update it.

Specified companies keep the old limits of £5m a year, £12m over the company's lifetime, and gross assets of £15m before and £16m after the share issue. A specified company is one with a registered office in Northern Ireland whose trade involves goods, or the generation, transmission, distribution, supply, wholesale trade or cross-border exchange of electricity.

EIS relief is available for shares issued before 6 April 2035.

Advance assurance

Advance assurance is optional. It is HMRC confirming, before the shares are issued, that a proposed share issue is likely to qualify. Experienced angel investors expect it, and many treat a company without it as one that has not checked the rules.

You apply with your business plan, your latest accounts or forecasts, details of the proposed share issue, your articles of association, and the names of investors who have expressed an interest. HMRC will not consider an application with no identified investors. HMRC takes several weeks to respond, so apply when you start building the round.

The order of steps for a qualifying round

Relief can be lost if these steps happen in the wrong order:

  1. Advance assurance before you pitch.
  2. SEIS shares first, EIS shares afterwards. If EIS shares are issued before the SEIS shares, SEIS relief can be lost for everyone in that round. Where a round mixes both, the SEIS allocation is issued on an earlier day.
  3. Money in, then shares issued. The subscription money must be fully paid in cash before or at the time the shares are issued, and the shares must then be formally issued, with a board resolution, an updated register of members and form SH01 filed at Companies House.
  4. Trade for four months (or, for SEIS, spend 70% of the money) before you can file the compliance statement.
  5. File SEIS1 or EIS1. HMRC issues you an SEIS2 or EIS2 with a unique reference number.
  6. Issue SEIS3 or EIS3 certificates to your investors. Investors cannot claim relief until they have them.

The EIS1 must be filed within 2 years of the end of the tax year in which the shares were issued, or within 2 years of the date the company completes four months of trading if that is later. Put the deadline in the diary on the day the round closes.

Six mistakes that can remove the relief

  • The wrong share class. SEIS and EIS shares must be full-risk ordinary shares, paid up in cash, with no preferential right to dividends or to assets on a winding up, and not redeemable. Preference terms commonly used in US-style investment documents do not meet this condition.
  • Converting a loan. Money that went in as a loan or a convertible loan generally cannot become qualifying SEIS shares later. If you may need short-term funding before the round, take advice before the money is paid.
  • Any arrangement that protects the investor's capital. Side letters, buy-back promises and guarantees breach the risk-to-capital condition, and the relief is lost.
  • An investor who is too connected. An investor holding more than 30% of the share capital or voting rights, counting associates, does not qualify. Employees are also excluded, although a director can qualify for SEIS, and for EIS in the circumstances that apply to business angels.
  • Spending too slowly or on the wrong thing. The money must be spent on the qualifying trade within 3 years for SEIS or 2 years for EIS. Money left on deposit has not been spent.
  • Falling out of qualification within three years. The company has to keep meeting the conditions for at least three years after the investment. A change of trade, a share buy-back or the wrong kind of group restructure can withdraw the investors' relief retrospectively.

How this fits your wider funding plan

SEIS and EIS investment is equity. If the company does well, equity costs more than any other funding, because investors share in the company's value. Plan it alongside grants, R&D tax credits and loans. Our startup funding guide compares the routes, and alternative funding beyond bank loans covers the options that do not involve selling shares.

Decisions about paying and keeping your team often come at the same time as a raise. If you are granting share options in the same quarter, read EMI share options explained as well. Both need a share valuation, so doing them together avoids paying for the valuation work twice.

What to do now

  1. If a raise is anywhere in the next twelve months, apply for advance assurance now.
  2. Check your articles and any existing investment documents for preference terms that would disqualify the shares.
  3. Confirm whether the new £10m and £24m limits or the specified-company limits apply to you.
  4. On the day the round closes, put the end of the four months of trading and the compliance statement deadline in your calendar.

Getting the structure right before money moves costs much less than fixing it afterwards, and some mistakes cannot be fixed. We handle advance assurance, share issues and compliance statements for clients on any service. Get started.

Our SEIS and EIS service covers advance assurance before you pitch, the share issues in the right order, the compliance statement and your investors’ certificates. See how we handle SEIS and EIS.