ASA vs SAFE — which should UK startups use?
By SuLe · Updated 2 June 2026
For most UK startups the answer is an ASA: it does the same job as a SAFE — money now, shares at your next round — but it is designed around HMRC's conditions for SEIS and EIS, which most UK angels rely on. A standard US SAFE does not meet those conditions and needs restructuring before it protects your investors' relief.
Key facts
- An ASA and a SAFE both mean money now, shares at the next round — neither is a loan, and neither fixes a valuation today.
- A standard SAFE has no longstop date; HMRC expects an ASA to convert within six months of signing to protect SEIS/EIS.
- SEIS is worth 50% of the amount invested in income tax relief, EIS 30% — reliefs most UK angels price in.
- A SAFE is legally usable by a UK company but needs restructuring (longstop, non-refundable payment, no variation rights) before it protects SEIS/EIS.
- ASA discounts typically run at 10–20% on the next round's share price.
What do an ASA and a SAFE have in common?
Almost everything that matters: the investor pays now, gets shares at your next funding round, and the valuation argument is postponed. Neither is a loan — no interest, no repayment date.
Both exist to make early money fast and cheap: no valuation to negotiate, no long-form investment agreement, a document a few pages long. Both reward the early investor for the extra risk — UK ASAs typically with a 10–20% discount on the next round's share price, SAFEs usually through a valuation cap, a discount or both.
The resemblance is no accident: the SAFE came first, out of Y Combinator in the US, and the ASA is the UK's rebuild of the same idea for HMRC's tax relief schemes.
Where do the two instruments actually differ?
In the plumbing — which is what HMRC reads. The differences cluster around the longstop date, variability and what the money converts into.
An ASA always has a longstop date: if no qualifying round arrives in time, it converts anyway at a fallback valuation, and HMRC expects that date within six months of signing where SEIS or EIS matters. A standard SAFE has no longstop at all — it waits indefinitely for a priced round or an exit.
An ASA drafted for SEIS/EIS must also be irrevocable: the payment is non-refundable, carries no interest, and the agreement cannot be varied, cancelled or assigned. It must convert only into full-risk ordinary shares, where US SAFE templates are typically built to convert into preferred stock.
| ASA | SAFE | |
|---|---|---|
| Built for | UK companies with SEIS/EIS investors | US (Delaware) companies — Y Combinator template |
| Longstop date | Yes — HMRC expects ≤6 months for SEIS/EIS | None — waits for a round or exit |
| Repayable / interest | No — irrevocable, non-refundable, interest-free | No repayment date; not a loan |
| Pricing mechanism | Discount (typically 10–20%) plus a fallback valuation for the longstop | Valuation cap and/or discount; post-money variants common |
| Converts into | Full-risk ordinary shares only | Typically preferred stock |
| SEIS/EIS | Yes, if HMRC's conditions are met | Not as standard — needs restructuring |
Why does SEIS or EIS make the ASA the default choice?
Because most UK angels price their cheque assuming the relief: SEIS returns 50% of the amount invested as an income tax reduction, and EIS 30%. Break the schemes and your round becomes materially more expensive for the people funding it.
HMRC's advance assurance guidance is written around the ASA's shape — the six-month longstop, the non-refundable payment, the ban on variation. A standard SAFE misses them, so investors relying on SEIS or EIS would be gambling their relief.
Relief also arises only when shares are issued at conversion, not when the money is paid — a short longstop keeps that wait tolerable.
When might a SAFE still be the right call?
When the investor is American and has no UK tax to relieve. A US fund or accelerator cannot benefit from the UK schemes, often insists on its own SAFE template, and there is usually little point fighting it.
A SAFE is legally usable by a UK company, so signing one is a commercial choice rather than a legal problem. If you do, watch the drafting: post-money SAFE variants are common and are more founder-dilutive than the older pre-money form.
If UK angels join the same round wanting SEIS or EIS, don't stretch one instrument across both groups. Making a SAFE relief-safe means adding a longstop, a non-refundable payment and a ban on variation — at which point you have written an ASA in substance.
Worked example
Leila and Tom run a climate-analytics SaaS startup. A London angel offers £100,000 and emails over a US SAFE template from a previous deal. Their solicitor flags it: with no longstop date and variable terms, the SAFE fails HMRC's conditions — and the angel is counting on SEIS.
They sign an ASA instead: 15% discount, £1.5m fallback valuation, six-month longstop. Four months later they close a £400,000 seed round at £1.00 per share. The ASA converts at £0.85, so the angel receives 117,647 shares against the 100,000 a new investor gets for the same money — and her SEIS claim, worth £50,000 at 50%, runs from the share issue date.
Where founders go wrong
Signing the SAFE because the investor sent one
— templates travel; check the instrument against HMRC's conditions before anyone relies on SEIS or EIS.Assuming a SAFE is just an ASA with an American accent
— the missing longstop and the ability to vary terms are exactly what HMRC objects to.Promising relief you haven't checked
— if the instrument fails, your angel discovers it at claim time; the relationship rarely survives.Running SAFEs and ASAs side by side on mismatched terms
— different caps, discounts and conversion triggers make the next round's cap table needlessly painful.
Related questions
Is a SAFE legal in the UK?
Yes. A SAFE is legally usable by a UK company — English contract law has no objection to it. The problems are practical: a standard SAFE does not meet HMRC's conditions for SEIS or EIS, and its US drafting assumptions do not always map neatly onto UK company law. [More: Can a UK company use a SAFE?]
Do SAFEs qualify for SEIS or EIS?
Not as standard. HMRC's conditions require an irrevocable, non-refundable, interest-free advance that cannot be varied and that converts into full-risk ordinary shares within a six-month longstop. A standard SAFE has no longstop, so investors relying on SEIS or EIS need it restructured before signing. [More: Do ASAs and convertible notes qualify for SEIS/EIS?]
What discount do ASAs and SAFEs give early investors?
UK ASAs typically carry a discount of 10–20% on the price paid by new investors at the next round. SAFEs usually work from a valuation cap, a discount or both — and where both appear, the investor typically converts at whichever price per share is lower. [More: What is a valuation cap and how does it work?]
What happens if the next round never comes?
An ASA converts anyway on its longstop date, at a fallback valuation written into the agreement — HMRC expects that date within six months where SEIS or EIS matters. A standard SAFE has no longstop: it simply waits for a priced round or an exit. [More: Why do ASAs have a six-month longstop date?]
Choosing between an ASA and a SAFE is really a choice about your investors' tax relief — and the cost of getting it wrong lands on the people backing you earliest. A SuLe solicitor can check the instrument, and the SEIS/EIS position, before anyone signs. Book a free term sheet review and get the structure confirmed in one call.
Keep reading: What is an advance subscription agreement (ASA)? · Can a UK company use a SAFE? · ASA vs convertible loan note — what's the difference? · What is a valuation cap and how does it work? · Why do ASAs have a six-month longstop date? · Can US investors invest in a UK limited company?
Primary sources: HMRC — Seed Enterprise Investment Scheme · HMRC — advance assurance for venture capital schemes
