SEIS and EIS Explained: How UK Startups Raise Tax-Advantaged Funding

Raising a first round in London is hard enough without asking investors to back a company that might not exist in two years. The two schemes most British founders lean on, the Seed Enterprise Investment Scheme (SEIS) and the Enterprise Investment Scheme (EIS), exist to tip that decision in your favour. They give individual investors generous income tax relief and capital gains breaks for putting money into early-stage companies, which makes a startup cheque far easier to write.

If you are weighing up SEIS vs EIS for startups, the short version is that SEIS is for the very earliest stage and EIS picks up where SEIS runs out. This guide walks through how each scheme works, what your company has to qualify, what changed in April 2026, and the paperwork that lets your investors actually claim their relief.

What SEIS and EIS actually do

Both schemes are run by HMRC and both reward investors rather than the company directly. Your startup does not receive a grant or a tax cut. Instead, the schemes make your shares more attractive by handing the investor a slice of their money back through their own tax return, plus protection if the company fails.

That distinction matters when you pitch. You are not offering investors free money from the government. You are offering a structure that lowers their effective cost of investing and caps their downside, which is exactly the reassurance a seed-stage angel wants before backing an unproven team.

The reliefs only apply to individual investors who pay UK tax, who subscribe for new ordinary shares paid in cash, and who hold those shares for at least three years. Both schemes also require the investor to be genuinely at arm’s length, so founders and employees with a substantial stake usually cannot claim relief on their own shares.

The investor benefits at a glance

SEIS gives the investor 50% income tax relief on what they put in, up to £200,000 invested per tax year. So a £20,000 SEIS investment can reduce that person’s income tax bill by £10,000. EIS gives 30% income tax relief, on a much larger annual limit of £1 million (or £2 million if at least £1 million of it goes into knowledge-intensive companies).

On top of that, both schemes exempt any gain on the shares from Capital Gains Tax when the investor sells, provided they claimed income tax relief and held for three years. SEIS also offers a reinvestment relief that exempts 50% of a gain reinvested into SEIS shares from CGT, while EIS lets an investor defer a gain made elsewhere by rolling it into EIS shares. If the company goes under, loss relief lets the investor set the loss, after relief already given, against their income or capital gains. You can read the full investor rules on the gov.uk tax relief for investors guidance.

SEIS vs EIS for startups: the core differences

The simplest way to think about it is by company maturity. SEIS is built for companies that have barely started trading and have very little on the balance sheet. EIS is for companies that are past that first stage but still count as small and high-risk by HMRC’s definition.

A founder making notes while comparing startup funding options at a desk overlooking London — SEIS suits the earliest stage; EIS picks up for larger rounds.

Here are the company-side limits that decide which scheme you qualify for.

SEIS company requirements:

Your company can raise a maximum of £250,000 in total through SEIS, ever.
The trade must be less than three years old when the shares are issued.
Gross assets must be no more than £350,000 immediately before the shares are issued.
You must have fewer than 25 full-time equivalent employees.
The company must have a permanent UK establishment and not be listed on a main stock exchange.

EIS company requirements (for shares issued from 6 April 2026):

You can raise up to £10 million in any 12-month period, with a lifetime cap of £24 million across all venture capital schemes.
Investment must happen within seven years of your first commercial sale (longer for knowledge-intensive companies).
Gross assets must be no more than £30 million immediately before the share issue.
You must have fewer than 500 full-time equivalent employees (the same threshold now applies to knowledge-intensive companies).

Most startups use both in sequence. You raise your first £150,000 to £250,000 under SEIS to get off the ground, then move to EIS for the larger rounds that follow. Money already raised under SEIS counts towards your overall venture capital scheme limits, so plan the order carefully with your accountant.

What changed for EIS in April 2026

The Finance Act 2026 expanded EIS significantly for shares issued on or after 6 April 2026, widening the pool of companies that can use it. The annual amount a company can raise rose from £5 million to £10 million, and the lifetime limit doubled from £12 million to £24 million. The gross assets ceiling jumped from £15 million to £30 million before the issue, and £16 million to £35 million afterwards. The full-time employee limit also doubled, from fewer than 250 to fewer than 500. Knowledge-intensive companies, broadly those doing significant research and development, get higher limits again on the amounts raised.

For context, the broader scheme already has a long runway. The government extended the EIS and Venture Capital Trust sunset clause to 6 April 2035, so relief is confirmed for shares issued before that date. SEIS has no sunset clause at all. That stability is worth mentioning to nervous investors who worry the rules might vanish mid-round. The official company-side conditions sit on the British Business Bank EIS guide.

How a startup gets set up for SEIS or EIS

Qualifying is a process, not a box you tick once. The schemes have strict rules about the kind of trade you run. Companies whose activity is mostly in excluded trades, such as property development, dealing in land, financial services, legal or accountancy services, or running hotels and nursing homes, cannot use either scheme. London’s software, fintech, biotech and consumer brands generally qualify without trouble, but it is worth checking your specific activity early.

An accountant and a founder discussing SEIS and EIS compliance documents in a London office — A specialist adviser helps keep the SEIS and EIS compliance steps in order.

Get advance assurance first

Before you take any money, you can ask HMRC whether your planned share issue is likely to qualify. This is called advance assurance, and while it is not legally required, most serious angels and seed funds will ask for it before they commit. It is a signal that HMRC has looked at your structure and agrees the investment should be eligible. Apply through the gov.uk venture capital schemes service, and include details of your trade, your funding plans and ideally a named potential investor or two.

Issue the shares, then file the compliance paperwork

You issue new ordinary shares for cash, then wait. For SEIS you can submit your compliance statement once the company has been trading for at least four months or has spent at least 70% of the money raised. For EIS the four-month trading condition applies before you can file. The order of filing runs like this:

You submit a compliance statement to HMRC: form SEIS1 for SEIS, EIS1 for EIS.
HMRC reviews it, which commonly takes a few weeks, and if approved sends back an authorisation (SEIS2 or EIS2) with a Unique Investment Reference number.
You then issue each investor a compliance certificate, SEIS3 or EIS3, which is their proof to claim relief on their own tax return.

Without those certificates, your investors cannot claim a penny, so treat the compliance step as part of closing the round rather than an afterthought. Many founders run this through a platform like SeedLegals or their accountant to keep the forms straight.

Common mistakes founders make

The most expensive error is taking the investment before sorting advance assurance, then discovering the trade or the share class does not qualify. Relief is also withdrawn if the company breaks the rules within three years, for example by repaying the investor’s capital or by the investor acquiring too much control. Issuing shares with preferential rights, such as guaranteed dividends or a preferential return on a winding up, can also disqualify them, because the schemes require ordinary shares carrying real risk.

Another trap is timing the SEIS and EIS rounds badly. You cannot issue EIS shares on the same day as, or before, you have used your SEIS allowance, so the SEIS shares generally need to go out first. Get the sequence wrong and you can lose relief on the whole EIS tranche. A short conversation with a specialist accountant before you draft the term sheet usually pays for itself many times over.

Where SEIS and EIS fit in your fundraising plan

For a London startup raising its first money, SEIS is the obvious opening move. It de-risks the cheque for angels and accelerators at the exact point your company looks most fragile. As you grow into larger seed and Series A rounds, EIS keeps that tax-advantaged structure in place for bigger tickets, and the expanded 2026 limits mean more scaling companies can still use it.

None of this replaces having a business worth backing, but it removes a real barrier between a good founder and a willing investor. For more on building and funding a company in the capital, see more guides on the idea-london.co.uk homepage. As always, the schemes carry detailed conditions and the figures here can change at fiscal events, so confirm your position with a qualified adviser and the current HMRC guidance before you raise.

Frequently asked questions

Can a startup use both SEIS and EIS?

Yes, and most do. Companies typically raise their first money under SEIS, up to the £250,000 lifetime cap, then move to EIS for subsequent rounds. The SEIS shares generally need to be issued before any EIS shares, and the money raised counts towards your combined venture capital scheme limits, so the order and timing matter. Plan it with your accountant before you issue shares.

How much income tax relief does each scheme give investors?

SEIS gives investors 50% income tax relief on up to £200,000 invested per tax year. EIS gives 30% relief on up to £1 million per tax year, rising to £2 million where at least £1 million goes into knowledge-intensive companies. Both also offer Capital Gains Tax exemption on the shares after a three-year hold, plus loss relief if the company fails.

Do I need advance assurance from HMRC?

Advance assurance is not legally required, but in practice most angels and seed funds expect it before they invest. It is HMRC confirming that your planned share issue is likely to qualify, which gives investors confidence their relief is safe. You apply through the gov.uk venture capital schemes service, ideally with a named potential investor included in the application.

What is the difference between SEIS3 and EIS3 certificates?

They are the compliance certificates you issue to investors so they can claim their relief. SEIS3 is for Seed Enterprise Investment Scheme investors and EIS3 for Enterprise Investment Scheme investors. You can only issue them after HMRC has approved your compliance statement and sent back an authorisation with a Unique Investment Reference. Each investor needs their certificate to claim relief on their tax return.

How long must investors hold the shares?

At least three years from the date the shares are issued, or from when the company starts trading if that is later. If the shares are sold or the company breaks the scheme rules within that period, HMRC can withdraw the income tax relief already given. The three-year hold also applies before the Capital Gains Tax exemption on any growth in the shares becomes available.

Which types of company cannot use SEIS or EIS?

Companies whose trade is mostly in excluded activities cannot qualify. These include property development and dealing in land, most financial services, legal and accountancy work, leasing, running hotels or nursing homes, and energy generation that benefits from other subsidies. Most technology, software, fintech, biotech and consumer product startups in London qualify, but check your specific activity against the HMRC rules before raising.