SEIS (Seed Enterprise Investment Scheme) and EIS (Enterprise Investment Scheme) are HMRC tax-relief schemes that incentivise UK individual investors to back early-stage UK companies. SEIS suits pre-seed and seed-stage rounds with a £500,000 lifetime company cap and 50% income tax relief for investors. EIS suits Series A and later rounds, with a £10 million annual cap from April 2026 (£20 million for knowledge-intensive companies) and 30% income tax relief.

This guide covers SEIS and EIS basics, eligibility for both the company and investors, advance assurance, share-issue mechanics, and the most common compliance mistakes.

SEIS basics

SEIS was introduced in 2012 to support the very earliest-stage UK companies. The scheme parameters from April 2025:

  • Company lifetime SEIS limit: £500,000 (raised from £250,000 in April 2025)
  • Investor income tax relief: 50% on up to £200,000 of investment per tax year per investor
  • CGT reinvestment relief: 50% relief on capital gains reinvested into SEIS shares
  • Loss relief: if the SEIS investment fails, investors can claim loss relief against income tax
  • CGT exemption on disposal: gains on SEIS shares held for at least three years are CGT-free

For a company at seed stage, SEIS is effectively a 50% subsidy on equity raised from individual UK investors — they put in £100,000 and HMRC refunds £50,000 of their income tax bill. This makes early-stage UK fundraising significantly easier.

EIS basics

EIS was introduced in 1994 and has supported larger early-stage rounds since. From April 2026 the limits expanded substantially:

  • Annual EIS limit per company: £10 million (raised from £5 million)
  • Annual EIS limit for knowledge-intensive companies (KICs): £20 million (raised from £10 million)
  • Lifetime EIS limit per company: £24 million (KICs £40 million)
  • Investor income tax relief: 30% on up to £1 million per year (£2 million if at least £1 million invested in KICs)
  • CGT deferral relief: capital gains can be deferred by reinvesting into EIS shares
  • Loss relief: as for SEIS
  • CGT exemption on disposal: gains on EIS shares held for at least three years are CGT-free

EIS is the standard scheme for Series A and growth-stage rounds. The April 2026 limit increase doubled the annual ceiling for both standard companies and KICs, materially expanding eligibility for larger rounds.

Eligibility for the company

The company must satisfy a battery of tests at the date of the share issue and (for many tests) for at least three years afterwards.

Trade test

The company must carry on a qualifying trade. Excluded activities include:

  • Land and property dealing
  • Financial activities (banking, insurance, money lending)
  • Receiving royalties or licence fees (with limited exceptions)
  • Providing legal or accountancy services
  • Operating hotels and nursing homes
  • Coal and steel production
  • Property development

The list of excluded activities is detailed and HMRC publishes guidance with examples.

UK permanent establishment

The company must have a permanent UK establishment.

Number of employees

For SEIS: fewer than 25 full-time-equivalent employees at the date of issue. For EIS: fewer than 250 (500 for KICs).

Gross assets

For SEIS: gross assets must not exceed £350,000 immediately before the SEIS issue. For EIS from April 2026: £30 million pre-investment and £35 million post-investment.

Age of company

For SEIS: less than three years old (defined as time since first commercial sale).

For EIS standard: typically less than seven years from first commercial sale (10 years for KICs). The “first commercial sale” rule was added to focus EIS on growth-stage companies rather than mature businesses raising additional capital.

Independence

The company must not be controlled by another company.

Eligibility for the investor

The investor must:

  • Be a UK individual subject to UK income tax (some non-residents qualify)
  • Not be connected with the company (no more than 30% holding, no employee/director relationship beyond limited “qualifying business angel” carve-out for EIS)
  • Hold the shares for at least three years to retain the income tax relief

Connected persons (and certain employees and directors) are usually disqualified from claiming relief. The qualifying business angel rule in EIS gives a limited carve-out for directors who become directors after investing, on conditions.

Advance assurance from HMRC

Advance assurance is a pre-clearance from HMRC that a proposed share issue will qualify for SEIS or EIS relief. It is not a binding decision, but in practice gives investors confidence to commit.

The application is online to HMRC’s Small Companies Enterprise Centre. Required information:

  • Business plan and forecasts
  • Articles of association
  • Existing share capital and proposed issue terms
  • List of intended investors (or details of the expected raise)
  • Latest accounts (where available)

Turnaround is typically four to eight weeks. Approval is normally given for the proposed structure and amount; changes may require resubmission.

For the broader transactional context including subscription documentation, see how to issue shares in a private limited company.

Issuing SEIS/EIS shares

The mechanics:

Shares must be ordinary shares with limited preferences

SEIS and EIS shares must be fully-paid ordinary shares. Preferential rights (priority on liquidation, fixed dividends) are restricted; modest preferences are allowed but the rules are strict.

Subscription must be for cash

Shares must be issued for cash, paid up in full at the time of issue. Sweat equity, IP for shares, or convertible loans turning into shares can disqualify the relief.

Compliance certificate (SEIS3 or EIS3)

The company submits a compliance statement (form SEIS1 or EIS1) to HMRC after the share issue. HMRC then issues compliance certificates (SEIS3 or EIS3) to each investor, who uses them to claim tax relief through Self Assessment or PAYE adjustment.

The compliance statement must be submitted within two years of the share issue (or four months after the company has been trading for four months, whichever is later).

For specialist help on SEIS/EIS rounds, find a corporate accountant for your funding round.

Common compliance mistakes

Five mistakes that cost relief:

Sweat-equity or IP-for-shares

Issues for non-cash consideration disqualify SEIS/EIS relief. Founder shares and sweat-equity arrangements must be carefully separated from SEIS/EIS rounds.

Convertible loan trap

A convertible loan that converts into SEIS/EIS shares typically does not qualify, because the consideration is the loan-to-equity conversion, not cash. Use Advance Subscription Agreements (ASAs) instead, which can qualify for SEIS/EIS if structured carefully.

Wrong share class

Preference shares with material rights, or share classes designed to give specific protections, often disqualify relief. Take advice on share-class structure before issue.

Connected investor rule

Investors who are connected to the company (over 30% stake, employee, or close relative) cannot claim relief. The rules are strict and apply for the full three-year holding period.

Missing the compliance statement deadline

Forgetting to file SEIS1 or EIS1 within the deadline means investors cannot claim relief. The deadline is two years from share issue or four months after four months of trading, whichever is later.

Key takeaways

  • SEIS lifetime company limit is £500,000 (since April 2025) with 50% investor relief up to £200,000
  • EIS annual company limit is £10 million from April 2026 (£20 million for KICs) with 30% investor relief up to £1 million
  • Apply for HMRC advance assurance before completing investor rounds
  • Shares must be ordinary, fully paid in cash, with limited preferences
  • File SEIS1 or EIS1 compliance statement within two years
  • Convertible loans, sweat equity, and connected investors typically do not qualify

Frequently asked questions

What is the difference between SEIS and EIS? SEIS is for the earliest-stage companies with a £500,000 lifetime cap and 50% investor relief. EIS is for larger and slightly later-stage rounds with a £10 million annual cap from April 2026 and 30% investor relief. Many companies do an SEIS round first, then graduate to EIS.

How long do I have to apply for SEIS or EIS advance assurance? There is no fixed deadline, but advance assurance must be in place before investors commit. Apply 4 to 8 weeks before the planned round close to allow for HMRC turnaround.

Can my employees get SEIS or EIS relief on shares I issue them? Generally no. Employees and directors are usually treated as connected persons and disqualified from relief, with limited “qualifying business angel” carve-outs for EIS where the investor becomes a director after the investment.

Do convertible loans qualify for SEIS or EIS relief? No, not directly. The conversion of debt to equity does not qualify because the consideration is not cash. Advance Subscription Agreements (ASAs) can qualify if structured to include a long-stop conversion date and the right form.

What happens if my company stops being eligible during the three-year holding period? Relief is clawed back. If the company ceases to carry on the qualifying trade, becomes controlled by another company, or otherwise breaches the rules within three years of issue, investors lose the relief proportionally.

Useful resources

GOV.UK — SEIS overview https://www.gov.uk/guidance/venture-capital-schemes-apply-for-the-seed-enterprise-investment-scheme

GOV.UK — EIS overview https://www.gov.uk/guidance/venture-capital-schemes-apply-to-use-the-enterprise-investment-scheme

HMRC — Advance assurance application https://www.gov.uk/guidance/venture-capital-schemes-apply-for-advance-assurance