SEIS (Seed Enterprise Investment Scheme)
The UK tax relief for individuals investing in very early companies: 50% of the amount invested off income tax, no capital gains tax on the shares after three years, and loss relief if the company fails. Since April 2023 a company may raise £250,000 under it and an investor may put in £200,000 a year. It is the reason the first cheque into a British startup is usually an angel’s, and the reason that cheque is structured the way it is.
How a startup is financed · 24 of 26Next: EIS (Enterprise Investment Scheme)
Why SEIS (Seed Enterprise Investment Scheme) matters in interviews
SEIS decides who writes the first cheque into a British startup and on what terms, which makes it the first thing to understand about UK seed investing and a reliable interview question at any fund that invests in the UK. A candidate who can say what the relief is worth, what a company has to be to qualify, and why an ASA rather than a SAFE is the instrument, has demonstrated something about the market that reading American blogs does not teach.
How it works in practice
What the investor gets. Income tax relief of 50% of the amount invested, up to £200,000 a year (the limit since 6 April 2023; it was £100,000 before), which can be carried back to the previous tax year. No capital gains tax on the shares if they are held for at least three years. Reinvestment relief: half of a capital gain reinvested in SEIS shares in the same year is exempt from CGT. Loss relief if the company fails: the loss, net of the income tax relief already received, can be set against income rather than only against gains. Put together, a 45% taxpayer who invests £10,000 and loses everything is out of pocket by about £2,750.
What the company has to be. Trading for less than three years (two before April 2023), with gross assets of no more than £350,000 immediately before the share issue (£200,000 before), fewer than 25 full-time employees, a UK permanent establishment, and a qualifying trade, which excludes property, financial services, farming and a list of others. It may raise no more than £250,000 under SEIS in total (£150,000 before), and the money must be spent on the trade within three years. Most companies apply to HMRC for advance assurance before the round so that investors know the relief will be available.
What the shares have to be. Full-risk ordinary shares, paid for in cash, with no preferential right to assets on a winding up and no guaranteed return. That single condition explains most of the drafting of a UK angel round: no liquidation preference, no redemption rights, and an advance subscription agreement rather than a SAFE or a convertible loan, because a loan is not a share and a SAFE with a refund right is not full-risk. The investor must not be an employee (a director is allowed) and must not hold more than 30% of the company.
The path after SEIS. Once the £250,000 is used the company moves to EIS for its next money, often in the same round, with the SEIS shares issued first. The two schemes are designed to hand over to each other, and a seed round on a UK cap table will usually show an SEIS tranche and an EIS tranche side by side.
What candidates get wrong
- Quoting the old limits. The scheme was widened in April 2023: £250,000 per company, £200,000 per investor, three years of trading, £350,000 of gross assets. The old figures are still all over the internet.
- Assuming a SAFE works. A US-form SAFE does not meet HMRC’s conditions, so an angel who invests through one loses the relief. The advance subscription agreement is the compliant instrument.
- Forgetting the three-year hold. Sell inside three years and the income tax relief is clawed back. Founders selling a company early have angels on the cap table who are worse off than they look.
- Treating it as free money. The relief lowers the cost of a loss; it does not raise the value of a win. An angel still needs the company to succeed, and a company that raises on the strength of the tax break alone tends to attract investors who care about the break rather than the business.
Go deeperThe equivalents elsewhere: EIS, VCTs, and what other countries do
EIS (the Enterprise Investment Scheme) is the same idea for the next stage: 30% income tax relief on up to £1m a year, or £2m where the excess goes into knowledge-intensive companies, CGT exemption after three years, deferral of gains reinvested, and loss relief. A company may raise £5m a year and £12m in total (£10m and £20m for knowledge-intensive companies), must generally take its first EIS money within seven years of its first commercial sale, and must have gross assets under £15m and fewer than 250 employees. Venture Capital Trusts are the retail route into the same asset class: a listed fund whose shareholders get 30% relief on up to £200,000 a year, tax-free dividends and no CGT, provided they hold for five years. Both schemes were due to expire in 2025 and were extended to April 2035.
The United States has no entry relief of this kind. Its equivalent works at exit: Section 1202 exempts gain on qualified small business stock in a C corporation held for more than five years, up to the greater of $10m or ten times the cost basis, with the cap raised to $15m and shorter tiered holding periods for stock issued after 4 July 2025. Founders and early investors plan around it; it is why so many American startups are Delaware C corporations rather than LLCs.
Ireland’s Employment Investment Incentive gives income tax relief tiered by the company’s stage, with the highest rate for companies that have not yet traded in any market. France’s IR-PME (the Madelin reduction) gives a percentage of the investment off income tax, capped per taxpayer, with the rate raised for certain young companies. Australia’s early stage innovation company rules give a 20% non-refundable tax offset capped at A$200,000 a year and a capital gains exemption for shares held between one and ten years. Germany’s INVEST programme pays angels a grant of a fifth of the amount invested rather than a tax deduction. Rates and thresholds in every one of these move with each budget; the pattern is what matters. Almost every developed venture market subsidises the first cheque, and the shape of the subsidy shapes the shape of the round.
SEIS (Seed Enterprise Investment Scheme): frequently asked questions
What is SEIS?
The Seed Enterprise Investment Scheme is a UK tax relief for individuals who buy new ordinary shares in very early-stage companies. The investor receives 50% of the amount invested as income tax relief, pays no capital gains tax on the shares after three years, can shelter half of other gains by reinvesting them, and can set a loss against income if the company fails. A company may raise up to £250,000 under the scheme and an investor may invest up to £200,000 a year.
What are the SEIS limits in 2026?
The limits set in April 2023 still apply: a company may raise £250,000 in total under SEIS, must have been trading for under three years with gross assets under £350,000 and fewer than 25 employees, and an individual may invest £200,000 a year. Income tax relief is 50%, shares must be held three years, and the investor may not be an employee or hold more than 30% of the company.
What is the difference between SEIS and EIS?
SEIS is for the earliest stage and gives 50% income tax relief on up to £200,000 a year, with a company limit of £250,000. EIS follows it and gives 30% relief on up to £1m a year (£2m with knowledge-intensive companies), with a company able to raise £5m a year and £12m over its life. Both require three-year holds, full-risk ordinary shares and a qualifying trade; EIS adds a deferral relief for reinvested gains that SEIS does not have. A company typically uses its SEIS allowance first and moves to EIS in the same or the next round.
Can a SAFE qualify for SEIS?
Not in its US form. SEIS requires that the investor receive full-risk ordinary shares for cash with no right to a refund, and HMRC’s guidance requires that an advance payment for shares carry no interest, cannot be varied or refunded, and converts within six months. The advance subscription agreement is drafted to satisfy those conditions and is the instrument UK angels use in place of a SAFE.
Where SEIS (Seed Enterprise Investment Scheme) comes up
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