What SEIS and EIS are
The Seed Enterprise Investment Scheme (SEIS) and the Enterprise Investment Scheme (EIS) give income tax and capital gains tax relief to individuals who buy new shares in small UK trading companies that are not listed on a stock exchange. The relief belongs to the investor, but most of the conditions are about the company: what it does, how large it is, how the shares are issued and what happens during the three years after the issue.
An investor who puts £20,000 into SEIS shares can take £10,000 off their income tax bill for that year, provided the bill is large enough. The same £20,000 in EIS shares takes £6,000 off. If the company later stops meeting one of the company conditions, HMRC can withdraw the relief from every investor in the share issue.
SEIS is for very young companies and gives the higher rate of relief. EIS is for companies that are older, larger or raising more. A company can use both schemes, provided the SEIS shares are issued first. This guide sets out the rules for the 2026 to 2027 tax year, including the higher EIS limits that took effect on 6 April 2026, with links to the HMRC guidance so you can check each rule for yourself.
What this guide covers
- The tax reliefs investors can claim, with a worked example
- Which companies qualify and how much each scheme can raise
- Advance assurance, compliance statements and investor certificates
- The three-year rules and the mistakes that cost investors their relief
What investors get
Income tax relief
SEIS relief is 50% of the amount invested, on up to £200,000 of shares in a tax year. EIS relief is 30%, on up to £1 million a year, or £2 million if everything above £1 million goes into knowledge-intensive companies, which are companies doing a significant amount of research, development or innovation. The relief can reduce the investor's income tax bill to nil, and an investor can treat some or all of the shares as bought in the previous tax year to use that year's bill instead.
Investors claim using the SEIS3 or EIS3 certificate the company sends them, within five years of 31 January after the tax year of the investment (HMRC guidance for investors).
Capital gains tax and losses
A gain on SEIS or EIS shares sold after at least three years is free of capital gains tax if income tax relief was given and not withdrawn. EIS investors can also defer a gain on any asset by investing in EIS shares between one year before and three years after the gain, and the gain becomes taxable again when those shares are sold. An investor who makes a gain and invests in SEIS shares in the same tax year can have half of the matched gain exempted, up to £100,000.
If the shares are sold at a loss or become worthless, share loss relief lets the investor set the loss, less the income tax relief kept, against income for that tax year or the year before. EIS shares qualify automatically, and SEIS shares qualify if they meet the general conditions for the relief.
Worked example of an investor's relief
The figures in this example are illustrative. An investor who pays income tax at 45%, with an income tax bill above £20,000 for 2026 to 2027, subscribes £40,000 for SEIS shares issued in June 2026.
- Her income tax relief is £40,000 × 50% = £20,000, so the shares cost her £20,000.
- If she sells them four years later for £160,000, the £120,000 gain is free of capital gains tax. At 2026 to 2027 rates, with no other gains, the tax would have been (£120,000 − £3,000 annual exempt amount) × 24% = £28,080.
- If the company fails after four years, her loss is £40,000 − £20,000 = £20,000. If the shares qualify for share loss relief, relief at 45% is £20,000 × 45% = £9,000, leaving her £40,000 − £20,000 − £9,000 = £11,000 worse off.
- If she also made a £40,000 capital gain in 2026 to 2027, SEIS reinvestment relief would exempt £20,000 of it, saving £20,000 × 24% = £4,800.
SEIS and EIS limits
This table compares the main limits for shares issued on or after 6 April 2026. Gross assets means everything on the balance sheet before deducting liabilities.
| Rule | SEIS | EIS |
|---|
| Most the company can raise | £250,000, including SEIS money and de minimis state aid from the previous three years | £10 million in any 12 months and £24 million in total |
| Gross assets | £350,000 or less immediately before the issue | £30 million or less before the issue and £35 million or less after |
| Employees | Fewer than 25 full-time equivalents | Fewer than 250 full-time equivalents |
| Age | Trade no more than three years old at the issue | Usually within seven years of the first commercial sale |
| Money spent within | Three years of the issue | Two years of the issue, or of starting to trade if later |
| Income tax relief | 50% | 30% |
| Investor limit each tax year | £200,000 | £1 million, or £2 million if the excess is in knowledge-intensive companies |
On 6 April 2026 the EIS amounts doubled from £5 million a year and £12 million in total, and the gross assets limits rose from £15 million before and £16 million after an issue. Knowledge-intensive companies can now raise £20 million a year and £40 million in total. Companies with a registered office in Northern Ireland that trade in goods or wholesale electricity keep the old limits, and the SEIS limits did not change.
The EIS limits count SEIS money and every share listed on a compliance statement, so list only the investors who want certificates. Ask the provider of any grant or public support whether it was de minimis aid, which counts towards the SEIS limit.
Other company conditions
The conditions are tested when the shares are issued, and most must keep being met for three years. HMRC lists them in its guidance on using SEIS and using EIS.
Age of the trade
For SEIS, the trade must be no more than three years old when the shares are issued, counting any time it was run by someone else, and the company must not have had an earlier trade. For EIS, the first investment under the schemes usually has to come within seven years of the group's first commercial sale. There are exceptions for later rounds the original business plan anticipated, and for money to enter a new product or geographic market that is at least 50% of average annual turnover over the last five years.
Qualifying trade and excluded activities
The trade must be run commercially with a view to profit, and excluded activities must not be a substantial part of it. HMRC normally accepts 20% or less, measured on a reasonable basis such as turnover, as not substantial. Excluded activities include:
- dealing in land, shares, commodities or futures
- banking, insurance, lending, debt-factoring and other financial activities
- leasing, and receiving royalties or licence fees
- legal and accountancy services
- property development, farming and forestry
- running hotels, nursing homes or residential care homes
- shipbuilding, coal and steel production, and energy generation
Royalties and licence fees from intellectual property the company created, or created most of by value, are not excluded (VCM3010).
Independence
An SEIS company must not be controlled by another company at any time from incorporation to the end of the three-year period, ignoring any early period when it had only subscriber shares and was not preparing to trade. An EIS company must not be controlled by another company or more than 50% owned by one. Subsidiaries must be more than 50% owned, or at least 90% owned if they use the money. Both schemes also require a UK permanent establishment, unlisted shares and a company that is not in financial difficulty.
The risk-to-capital condition
The company must intend to grow and develop its trade over the long term, for example in revenue, customers and employees. The investment must also carry a significant risk that the investor loses more than they gain as a net return, including dividends, interest, fees, capital growth and the upfront tax relief. Arrangements that give investors priority, early withdrawal or protection fail the condition, and HMRC may decline advance assurance where offer documents describe the investment as low risk (VCM8540).
Using SEIS and EIS in the same round
Issue the SEIS shares on an earlier day than any EIS shares. SEIS requires that no EIS or venture capital trust investment has been made on or before the day the SEIS shares are issued, so SEIS shares issued on the same day as EIS shares do not qualify, and SEIS cannot be used after an EIS issue covered by a compliance statement. The old rule that 70% of the SEIS money had to be spent before EIS shares were issued was withdrawn for shares issued from 6 April 2015.
How advance assurance works
Advance assurance is HMRC's opinion, given before any shares are issued, that a proposed issue is likely to meet the scheme conditions. It is optional, and it shows investors that HMRC has reviewed the company. HMRC cannot give it once the shares are issued, and it does not cover the conditions each investor must meet.
The company needs a Unique Taxpayer Reference. A director, the company secretary or an authorised agent applies through HMRC's online advance assurance form, which asks for:
- amount to be raised and how it will be spent
- business plan, forecasts and latest accounts, if any
- articles of association, planned changes and the register of members
- latest drafts of the pitch deck and other investor documents
- other agreements between the company and its shareholders
- how the company meets the risk-to-capital condition
- names, addresses and intended amounts of prospective investors
A company new to the schemes must name the individuals it seriously expects to invest the amount applied for, because HMRC does not consider speculative applications. Include evidence that any crowdfunding platform or fund manager involved has accepted you, and disclose every intermediary, or the assurance is invalid.
HMRC aims to respond to most applications within 15 working days and to complex ones within 40. After giving an opinion it enters into no more than two rounds of correspondence, and there is no right of appeal. Of the applications received in 2024 to 2025, 85% for SEIS and 76% for EIS were approved (HMRC statistics).
Compliance statements and investor certificates
The compliance statement is the company's declaration that the scheme conditions have been met since the shares were issued. An SEIS1 can be submitted once the company has carried on its new trade for four months or spent 70% of the money raised. An EIS1 can be submitted once the qualifying activity has run for four months, and no later than two years after the end of the tax year of the issue or, if later, two years after the four-month point.
Both are online forms. Submit a separate statement for each share issue and disclose any changes since advance assurance. If HMRC is satisfied, it sends form SEIS2 or EIS2 with a unique investment reference and the certificates, and the company completes an SEIS3 or EIS3 for each investor listed. The company must tell HMRC within 60 days if it stops meeting the conditions.
The three-year period and what breaks relief
For SEIS the period runs for three years from the share issue, with some investor tests starting at incorporation. For EIS it runs for three years from the issue, or from the start of trading if later, and connection with the company is tested from two years before the issue.
Preferential rights
SEIS and EIS shares must be ordinary shares that, throughout the period, carry no preferential right to assets on a winding up and no right to be redeemed. A preferential dividend is allowed only if nobody can vary its amount or timing and unpaid dividends do not roll up. These rights sit in the articles and any shareholders' agreement, so check any change to either during the period. Our share structure page covers share classes.
Returns of value
Relief is reduced or withdrawn if the investor or an associate receives value from the company or a connected person, such as repayment of an earlier loan, a buy-back of their shares, a loan, a benefit or an overpayment for an asset. Receipts of no more than £1,000, or insignificant compared with the investment, are ignored unless they come under arrangements that existed in the 12 months before the issue. A buy-back from a shareholder who had no relief, such as a departing co-founder, can also reduce investors' relief.
Connected investors
An SEIS investor can be a director. They must not be an employee, and with their associates they must not hold more than 30% of the shares, votes or rights on a winding up from incorporation to the end of the period. Associates include a spouse or civil partner, parents, grandparents, children, grandchildren and business partners, and exclude brothers and sisters.
An EIS investor must not be an employee, a paid director or a holder of more than 30% from two years before the issue to the end of the period. A paid director can still qualify as a business angel if they had no earlier connection with the company or its trade and their pay is reasonable. An existing shareholder qualifies only if their earlier shares were subscriber shares or covered by a compliance statement.
Advance subscription agreements and loan notes
An advance subscription agreement lets an investor pay now for shares issued later. HMRC accepts one only if the money cannot be refunded in any circumstances, the agreement cannot be varied, cancelled or assigned, it carries no interest and it has a longstop date, which HMRC generally expects to be within six months of signing (VCM33025). A convertible loan note does not qualify, because the shares must be paid for in cash when issued and HMRC treats shares issued on conversion as the company repaying a debt (VCM15060).
Other events that break relief
Relief is also lost or reduced if the investor sells or gives away the shares within three years, other than to a spouse or civil partner, or grants or receives an option over them. The same happens if the company stops meeting a condition, for example by coming under another company's control or not spending the money in time.
Common mistakes
- Issuing SEIS and EIS shares on the same day
- Issuing shares before the money has arrived in full
- Taking early money on a convertible loan note
- Signing an advance subscription agreement with refunds, interest or a longstop date beyond six months
- Giving scheme investors shares that rank first on a winding up or can be redeemed
- Applying for advance assurance without named investors, or without disclosing a platform or promoter
- Calling the investment low risk or protected in the pitch deck
- Buying back a departing founder's shares without checking the effect on investors' relief
- Filing the EIS1 late, or issuing certificates with the wrong issue date
How we help
We check the company and the planned issue against the conditions, apply for advance assurance as your agent and plan the order of the share issues. After the round we prepare the SEIS1 or EIS1 and issue each investor's certificate. Advance assurance costs £499 + VAT, and the compliance statement with investor certificates costs £599 + VAT. See our SEIS and EIS service and investor readiness pages for details. We act for the company, and investors should take their own advice.
