SEIS and EIS are UK government tax incentive schemes that encourage individuals to invest in early-stage companies by offering tax reliefs on the money they put in. For UK founders, they can make it easier to attract the right investors without giving up large amounts of equity early on.
This guide explains the basics in plain terms, covering the main tax reliefs, what companies and investors must meet to qualify, the application steps, and what investors typically look for. All figures, limits and rules change, so always check the latest details on GOV.UK and with HMRC before proceeding.
What SEIS and EIS actually are
The Seed Enterprise Investment Scheme (SEIS) and Enterprise Investment Scheme (EIS) are designed to help small, higher-risk UK companies raise money from individual investors. Investors receive income tax relief and capital gains tax relief on their investments, which reduces the real cost and risk of backing a new business.
SEIS is aimed at very early-stage companies, while EIS supports slightly more established early businesses. Both schemes allow qualifying investors to claim tax reliefs against the amount they invest. The schemes are separate but follow similar principles, and some companies use both over time as they grow.
Tax reliefs available to investors
Investors can receive income tax relief on a portion of the money they invest in qualifying shares. This relief is claimed in the tax year the investment is made or carried back to the previous year in some cases.
Additional reliefs can apply if the investment is eventually sold at a loss or if the shares are held for a minimum period before disposal. Capital gains tax deferral or exemption may also be available when investors sell the shares. Because these reliefs change and depend on individual circumstances, investors must check current HMRC guidance and consider professional tax advice before investing.
Founders should understand that these reliefs are what make the investment more attractive, so explaining them clearly in conversations with potential backers can help.
Qualifying criteria for companies and investors
Your company must be UK-based, carry out a qualifying trade, and meet rules on size, age and the type of activities it undertakes. Most trading activities qualify, but certain sectors such as financial services, property development and farming are usually excluded. The company must not be listed on a stock exchange and must remain independent.
Investors must be individuals rather than companies, and there are rules preventing them from being connected to the business in certain ways, such as being an employee or having a controlling interest before the investment. The amount a company can raise under each scheme is limited, and the money must be used for a qualifying business purpose within a set time.
Check the current qualifying criteria on GOV.UK because they are updated regularly. Companies House records and your business structure will also be reviewed as part of the process.
The application and approval process
The process usually begins with the company applying for advance assurance from HMRC. This involves submitting a detailed business plan, financial forecasts, information about the intended use of funds, and details of the shares to be issued. HMRC reviews the application and, if satisfied, issues a letter of assurance that the company should qualify.
Once the investment is made, the company issues shares and completes the necessary compliance statement. Investors then claim their tax relief by including the investment in their self-assessment tax return. The company must send the required forms to HMRC within strict deadlines after the investment is received.
Practical tip: prepare clear, realistic forecasts that show how the investment will help the business reach specific milestones. Vague plans are often rejected. Many founders work with an accountant familiar with the schemes to avoid common mistakes in the paperwork.
What investors typically expect
Investors using SEIS and EIS are usually looking for companies with a clear route to growth, a capable founding team, and a realistic plan for using the funds. They expect to see evidence that the business has been de-risked to some degree, even at the seed stage, such as early customer interest, a working prototype, or a tested business model.
Most will want to understand the exit potential within a reasonable timeframe, although they know many early investments are high risk. They also expect good communication after the investment and reasonable access to information about progress. Being transparent about risks and challenges in your business plan helps build trust.
Founders should prepare to answer questions about their market, competitors, pricing, customer acquisition costs, and how the investment will be spent month by month. Practise explaining your numbers simply and honestly.
Practical steps for UK founders considering SEIS or EIS
- Decide on your company structure. Most use a limited company registered at Companies House. Ensure your articles of association allow the share classes needed for these schemes.
- Build a solid business plan and financial model. Include monthly cashflow forecasts for at least the next 18-24 months showing exactly how the investment money will be used.
- Research and approach suitable investors who have used the schemes before. Many angel networks and platforms focus on SEIS and EIS investments.
- Apply for advance assurance from HMRC before taking money. This step reduces the risk for investors and shows you are organised.
- Keep detailed records of all spending after the investment. HMRC may ask for evidence that the funds were used for a qualifying purpose.
- Consider seeking professional help from an accountant or adviser experienced in the schemes to check your eligibility and prepare the paperwork correctly.
Start these steps early because the process can take several months. Running a side hustle while keeping a full-time job is a common way to validate the idea before seeking SEIS or EIS funding.
When and how to explore these schemes
SEIS and EIS are most useful once you have validated your product or service with real customers and need capital to scale operations, marketing or team size. They are not usually the first money in the business; many founders begin with personal savings, friends and family, or small grants.
If you are based in West Yorkshire, local resources such as Loomworks in Liversedge can offer practical support and mentoring while you prepare your business for investment. Use the time to refine your plan and speak to potential investors before making a formal application.
Remember that these schemes are one route among many. Weigh the benefits of the tax reliefs against the reporting requirements and the expectations investors will have. Always verify the latest rules on GOV.UK and seek tailored advice for your situation.
Frequently asked questions
Can I use SEIS and EIS at the same time?
A company can raise money under SEIS first and then under EIS later as it grows, but there are strict rules about the order and total amounts. You cannot raise under both schemes at exactly the same time for the same shares. Check the current GOV.UK guidance carefully or speak to an adviser.
How long do I need to keep records after receiving SEIS or EIS investment?
You must keep clear records of how the investment money is spent for several years. HMRC can ask for evidence at any point that the funds were used for a qualifying business activity within the required timeframe. Good bookkeeping from day one avoids problems later.
Do I need to give away equity to use these schemes?
Yes, the schemes only apply to new shares issued to investors. The amount of equity you give up depends on the valuation agreed with investors. Many founders aim to raise enough to reach the next milestone while keeping a majority stake if possible.
What happens if my company fails after taking SEIS or EIS money?
Investors can usually still claim loss relief against their income tax or capital gains tax. The schemes are designed for high-risk investments, so failure is expected in some cases. However, you must follow all compliance rules up to that point.
Should I apply for advance assurance before talking to investors?
It is usually wise to have advance assurance or at least be well prepared before serious discussions. Investors feel more comfortable when they know HMRC has reviewed the plans. Starting the application early also forces you to sharpen your business plan.
Related reading: Essential website legal pages for UK ecommerce businesses, Building and nurturing an email list as a UK startup, Social media strategy for UK side-hustle businesses. Browse all starting a business guides or apply to Loomworks.