SEIS tax relief UK explained for founders and investors

21 August 2026

SEIS tax relief UK is one of the most generous government incentives for early-stage investing in the UK. Whether you are a founder looking to attract seed capital or an investor assessing startup investment relief, understanding SEIS rules will help you make better decisions and unlock tax benefits.

What is SEIS and why it matters

The Seed Enterprise Investment Scheme, commonly called SEIS or seed EIS, is designed to encourage investment in very early stage companies by offering attractive tax reliefs to investors. For many startups, SEIS makes raising a first round of equity easier because investors receive significant income tax and capital gains advantages that reduce the financial risk of backing a fledgling business.

SEIS sits alongside the Enterprise Investment Scheme, or EIS, but targets businesses at an earlier stage with smaller company and investment limits. This post explains the key features of SEIS tax relief UK, compares SEIS vs EIS, and gives practical steps founders and investors should take to use SEIS effectively.

Key SEIS tax reliefs at a glance

Income tax relief – Investors can claim tax relief worth 50% of the amount invested, up to a maximum of £100,000 per investor per tax year. That means a £10,000 investment could reduce your income tax bill by £5,000.
Capital gains tax (CGT) exemption – If you claim the income tax relief and hold the SEIS shares for at least three years, any gain on disposal of those shares is normally free of CGT.
CGT reinvestment relief – You can also claim 50% exemption on a capital gain that you reinvest into SEIS shares in the same tax year or the previous tax year, subject to limits.
Loss relief – If the company fails and the shares become worthless, investors can offset the loss against income or capital gains, reducing the downside.

These benefits are the reason SEIS is commonly called one of the best startup investment relief schemes for UK angel investors.

Who can claim SEIS tax relief UK – investor eligibility

Investors must meet certain conditions to qualify for SEIS relief. The basic points are:

You must be a UK taxpayer and make a qualifying investment into a qualifying company.
The maximum income tax relief you can claim is 50% of the sum invested, up to £100,000 in a single tax year.
You must hold the shares for at least three years beginning from the date the shares are issued and the company must continue to meet SEIS conditions throughout that period.
There are rules about being a “connected person” – if you are employed by the company, or hold a significant stake or control, different restrictions apply. Being a director may be possible in certain circumstances but you should check the specifics for connected persons.

Because the detailed connection and employment tests are technical, investors should seek tailored advice before assuming they qualify.

Company qualification – when a startup can offer SEIS shares

To issue SEIS-qualifying shares the company must meet several conditions at the time the shares are issued and throughout the three-year qualifying period. Key company rules include:

The company must be based in the UK and carry out a qualifying trade.
The company must generally be less than two years old from the date of its first commercial sale.
Gross assets must be no more than £200,000 immediately before the share issue.
Fewer than 25 full-time equivalent employees immediately before the investment.
The company can raise no more than £150,000 altogether through SEIS funding.
Shares issued must be ordinary shares that are not redeemable and must not give the investor a preferential exit.

Some trades are excluded from SEIS eligibility – for example, certain financial activities, property development and legal or accountancy services where eligibility can be limited. Always check the detailed list on GOV.UK before relying on SEIS status.

For the official government guidance see: https://www.gov.uk/guidance/seed-enterprise-investment-scheme-seis

How to apply and claim SEIS relief – process step by step

For founders

Consider advance assurance – Before you begin fundraising many companies apply to HMRC for advance assurance. This is not mandatory but gives potential investors confidence that the company appears likely to qualify for SEIS. Advance assurance requests include company details, business plan and proposed investment structure.
Issue qualifying shares – Make sure the share class and documentation meet SEIS rules. Shares must be fully paid up in cash and satisfy the ordinary share requirement.
Submit the compliance statement (SEIS1) – After shares are issued the company must submit a compliance statement to HMRC. Once HMRC agree, they will issue SEIS3 certificates that the company must give to investors.
Maintain qualifying conditions – The company must continue to meet SEIS conditions for at least three years from share issue, otherwise investors risk losing relief.

For investors

Obtain the SEIS3 certificate – Do not claim relief until you have the SEIS3 form from the company. This is your proof that HMRC accepted the company’s SEIS compliance statement.
Claim income tax relief – Use your Self Assessment tax return or contact HMRC to claim the income tax relief for the tax year in which the shares were issued.
Claim CGT reinvestment relief if relevant – If you reinvest a capital gain into SEIS shares in the same tax year or the previous one you can claim up to 50% exemption on that gain.
Keep records – Maintain the SEIS3 certificate and evidence of share transactions and any correspondence with HMRC.

SEIS vs EIS – which scheme fits your situation?

Both SEIS and EIS encourage investment into growing businesses but they have different target companies and relief levels.

Stage of company: SEIS is for very early stage startups – younger, smaller and with lower asset and employee limits. EIS is aimed at somewhat later-stage, higher-growth companies.
Income tax relief: SEIS gives 50% income tax relief on investments up to £100,000 per tax year. EIS provides 30% relief, but the annual investor limit under EIS is higher – typically up to £1,000,000 or £2,000,000 for knowledge-intensive companies.
Company limits: SEIS company gross assets limit is £200,000 and headcount under 25. EIS companies can have larger assets and up to 250 employees depending on circumstances.
Total amount raised: Under SEIS the maximum a company can raise via SEIS is £150,000. EIS allowed fundraising amounts are larger.

In short – use SEIS when your business is in the very earliest seed phase and you want to attract investors looking for the highest upfront income tax relief. Use EIS when you are a slightly more mature growth company and need larger rounds.

Example calculations

Example 1 – income tax relief

Investor invests £20,000 in SEIS-qualifying shares.
Income tax relief at 50% equals £10,000.
Net out-of-pocket cost after relief = £10,000, subject to the investor having sufficient income tax liability to claim against.

Example 2 – reinvestment relief and exit

Investor realises a capital gain of £50,000 and reinvests £50,000 into SEIS shares in the same tax year.
Up to 50% of that reinvested gain (£25,000) can be exempt from CGT due to reinvestment relief.
If the investor later sells the SEIS shares after holding for three years and they have increased in value, provided the income tax relief was claimed and qualifying conditions met, the sale gain is typically exempt from CGT.

Example 3 – loss relief

If an investor's SEIS-backed company becomes worthless and their net loss after reliefs is £10,000, they can offset that loss against income tax or capital gains, reducing their ultimate tax exposure.

These examples are illustrative. Individual tax circumstances vary and reliefs depend on meeting all SEIS conditions.

Practical tips for founders raising SEIS funding

Apply for advance assurance early to reassure investors.
Structure ordinary shares carefully and document everything – HMRC looks at the substance of the arrangement.
Maintain accurate payroll and bookkeeping records so you can demonstrate employee counts and qualifying trading activities – good systems, such as Xero, make this simpler and can reduce the risk of mistakes. Consider professional bookkeeping to support compliance: Bookkeeping & Xero.
Plan the cap table and future fundraising with SEIS and EIS rules in mind so later rounds do not inadvertently invalidate earlier reliefs.
Keep in touch with investors about the SEIS compliance process and provide the SEIS3 certificates promptly after HMRC approval.

Practical tips for investors

Always ask for advance assurance evidence and the SEIS3 certificate before claiming relief.
Check your eligibility and whether you are a connected person. If you plan to take an active, paid role in the business, get advice first.
Use SEIS to diversify your early-stage portfolio, but remember the high risk profile of seed investments.
Understand the three-year holding period and plan exit strategies accordingly.

Common pitfalls and risks

Company non-compliance – If HMRC determines the company did not meet SEIS conditions during the three-year period you could lose relief.
Improper share class – Non-qualifying share terms can prevent relief.
Insufficient tax liability – Income tax relief only reduces income tax liability. If you have no taxable income to offset, the relief may not be fully usable in that year though you may be able to carry back or carry forward some reliefs in certain circumstances.
Tax rule changes – Though SEIS has been stable for many years, tax rules can change. Check current guidance and seek advice.

How Figures can help

At Figures we guide founders and investors through SEIS applications, compliance and reporting so you can focus on building the business. We support:

Advance assurance applications and preparing the investor pack.
Preparing the SEIS compliance statement and issuing SEIS3 certificates.
Ongoing statutory accounts and tax services to ensure the company continues to meet qualifying conditions: Statutory Accounts & Tax.
Bookkeeping and systems set-up so headcounts, payroll and trading records are accurate for HMRC review: Bookkeeping & Xero.

If you want specialist support with SEIS or broader financial strategy, book a time to talk: book a discovery call.

UK tax and legal accuracy

This article is for informational purposes only and does not constitute professional tax or financial advice. Please speak to a qualified accountant before taking action. Tax rules and thresholds can change – this guidance is current for the tax year 2026/27.

Frequently asked questions

What is the single biggest benefit of SEIS for investors?

The most immediate benefit is the 50% income tax relief on qualifying investments up to £100,000 per tax year, which significantly reduces the investor's upfront risk.

Can a company use both SEIS and EIS?

Yes, a company can use SEIS and later raise funds under EIS, but there are timing and qualification rules to follow. SEIS funding is limited and applies at an earlier stage. Discuss planned rounds with your adviser to avoid invalidating relief.

Do I need advance assurance from HMRC before accepting investments?

Advance assurance is not mandatory but is strongly recommended. It reassures investors that the company appears to meet SEIS conditions. Without it, some investors may be reluctant to commit.

How long do I have to hold SEIS shares to keep the tax benefits?

You normally must hold SEIS shares for at least three years from the date of issue to retain income tax relief and CGT exemption on disposal, provided the company continues to meet qualifying conditions.

If the company fails can I get back the tax I paid?

If the investment is lost, loss relief allows you to offset the loss against income or capital gains, which can reduce your tax bill. Specifics depend on the individual situation and how much relief you initially claimed.

Summary and next steps

SEIS tax relief UK is a powerful tool for encouraging early-stage investment and can materially lower the cost and risk of backing seed-stage companies. For founders it makes raising first equity rounds easier; for investors it offers substantial income tax and CGT incentives. To use SEIS effectively you need correct company structuring, HMRC compliance and clear record-keeping.

If you are considering SEIS investment or planning to raise a SEIS round, Figures can help with advance assurance, compliance statements and the accounting processes that support ongoing eligibility. Book a discovery call to discuss your situation in detail and get specialist support: book a discovery call.