What is SEIS and how does it work?
By SuLe · Updated 6 May 2026
The Seed Enterprise Investment Scheme (SEIS) is a UK government tax incentive that rewards individuals for backing brand-new companies: investors get 50% of what they invest back as an income tax reduction, on up to £200,000 invested per tax year. Your company can raise a lifetime maximum of £250,000 under SEIS. In return, HMRC expects genuine risk — new ordinary shares, held for 3 years, in a growing trade.
Key facts
- Investors receive 50% income tax relief on up to £200,000 invested per tax year.
- A company can raise a maximum of £250,000 under SEIS across its lifetime.
- Company tests: gross assets of £350,000 or less immediately before the issue, fewer than 25 full-time equivalent employees, a qualifying trade less than 3 years old.
- Shares must be held for 3 years or the income tax relief is withdrawn.
- Gains on SEIS shares are CGT-free if held for 3 years, provided the income tax relief was given and not withdrawn.
What tax reliefs do SEIS investors get?
Four. The headline is income tax relief: 50% of the amount invested, on up to £200,000 per investor per tax year.
Growth is sheltered too: gains on SEIS shares are free of capital gains tax if held for 3 years and the income tax relief was given and not withdrawn. There is also reinvestment relief — 50% of a capital gain reinvested into SEIS shares is exempt from CGT.
If the company fails, loss relief lets the investor set the loss — net of the relief already received — against income tax or capital gains. HMRC's investor guidance walks through each relief; the income tax relief is currently legislated for shares issued before 6 April 2035.
Which companies can raise money under SEIS?
Very young, very small ones: a qualifying trade less than 3 years old, gross assets of £350,000 or less immediately before the share issue, and fewer than 25 full-time equivalent employees.
The company can raise at most £250,000 under SEIS in its lifetime, and the money must be spent on the qualifying trade within 3 years of issue. These figures date from the April 2023 uplift, so confirm them on gov.uk before you raise.
Some trades are excluded — including dealing in land or shares, banking, property development, hotels and energy generation. Under the risk-to-capital condition (Finance Act 2018), the company must also have objectives to grow and develop long-term, with investors' capital at significant risk.
How does the SEIS process actually work?
Almost every SEIS round follows the same steps, starting and ending with HMRC. First, apply for advance assurance: a non-statutory pre-clearance that HMRC would expect your raise to qualify. It is not mandatory, but most angels require it, and applications now need details of your expected investors.
Then close the round and issue the shares — new ordinary shares, full-risk, paid up in full in cash at issue, with no preferential rights to assets on a winding up.
Once the company has traded for 4 months, or spent 70% of the money, you submit a compliance statement (form SEIS1). When HMRC accepts it, investors get their SEIS3 certificates and claim the relief.
What can go wrong after the money lands?
SEIS status can be lost during the 3 years after the issue, and the withdrawal of relief lands on your investors, not the company. The main triggers: ceasing the qualifying trade, excluded activities becoming substantial, the company being acquired, repaying share capital, or an investor receiving value from the company.
Investor-side rules bite too. Anyone holding more than 30% of the shares, votes or capital — counting their associates — cannot claim, and employees cannot claim at all, though directors can.
And the shares must stay honest: pre-arranged exits or capital protection arrangements disqualify the investment from the start.
| Rule | SEIS figure |
|---|---|
| Company lifetime raise cap | £250,000 |
| Gross assets | £350,000 or less immediately before the issue |
| Team size | Fewer than 25 full-time equivalent employees |
| Trade age | Less than 3 years old |
| Investor relief rate | 50% income tax relief |
| Investor annual cap | £200,000 per tax year |
| Minimum holding period | 3 years |
| Spending deadline | Money spent on the qualifying trade within 3 years of issue |
Worked example
Amara founded a climate-analytics SaaS company 14 months ago: gross assets of £90,000, five staff, nothing yet raised under SEIS — inside every limit. She takes £150,000 from two angels: £100,000 from the first, £50,000 from the second.
The first angel's income tax bill falls by £50,000 and the second's by £25,000 — £75,000 of relief on £150,000 invested. Because the company has already traded for more than 4 months, Amara can submit her SEIS1 shortly after the issue rather than waiting.
Both angels must hold their shares for 3 years; £100,000 of SEIS capacity remains for a future top-up.
Where founders go wrong
Issuing SEIS and EIS shares on the same day
— SEIS shares must be issued before EIS shares; a same-day batch is a known trap.Forgetting the cap is lifetime, not per round
— every SEIS issue counts towards the £250,000, including shares issued when an ASA converts.Taking the money out of the qualifying trade
— it must be spent on that trade within 3 years, and repaying share capital is a trigger for losing relief.Giving investors protected shares
— SEIS shares must be full-risk ordinary shares, with no preferential rights to assets on a winding up and no pre-arranged exit.
Related questions
When can my investors actually claim SEIS relief?
After HMRC accepts your compliance statement (form SEIS1), which you can submit once the company has traded for 4 months or spent 70% of the money raised. HMRC then authorises SEIS3 certificates, which investors use to claim the relief from HMRC. [More: What are SEIS1 and SEIS3 forms?]
Do founders qualify for SEIS relief on their own shares?
Directors can claim SEIS relief, which makes it more founder-friendly than EIS, where paid directors are generally excluded. But anyone holding more than 30% of the shares, votes or capital — counting their associates — cannot claim, which rules most founders out in practice. [More: Can founders or directors claim SEIS relief on their own shares?]
What happens to SEIS relief if the startup fails?
If the company fails, investors can claim loss relief: the loss net of the income tax relief they received can be set against income tax or capital gains. Combined with the original 50% relief, that substantially cushions a total loss — one reason SEIS money is relatively patient. [More: What happens to SEIS relief if my startup fails?]
Do I need advance assurance before raising under SEIS?
Not legally — it is a non-statutory pre-clearance and the scheme works without it. In practice most angels will not transfer money until they have seen HMRC's advance assurance letter, so almost every SEIS round starts with an application to HMRC well before completion. [More: How do I get SEIS/EIS advance assurance?]
SEIS relief is claimed by your investors but protected — or lost — by your company's decisions: round sequencing, share rights, where the money goes. A SuLe solicitor can sanity-check your round before any shares are issued. Book a free SEIS/EIS readiness call and get the structure right first time.
Keep reading: What is EIS and how does it work? · SEIS vs EIS — what's the difference? · Is my startup eligible for SEIS? · How do I get SEIS/EIS advance assurance? · Can I raise under SEIS and EIS at the same time? · What is an advance subscription agreement (ASA)?
Primary sources: HMRC — Apply to use the Seed Enterprise Investment Scheme · HMRC — Apply for advance assurance on a venture capital scheme · HMRC — Tax relief for investors using venture capital schemes
