The Seed Enterprise Investment Scheme (SEIS) is a UK government initiative launched in 2012 to boost economic growth by encouraging private investment in early-stage companies. As part of the venture capital schemes framework, SEIS helps smaller businesses secure crucial funding while offering generous tax incentives to investors. It works alongside the Enterprise Investment Scheme (EIS) and serves as the ideal starting point for very early-stage companies.
This guide covers all you need to know including company and investor eligibility, application steps, key benefits, sector specifics and compliance requirements.
Key takeaways
- SEIS offers one of the most generous tax reliefs for investing in early-stage UK startups.
- It provides upfront income tax relief, capital gains tax exemptions, loss relief, and inheritance tax benefits.
- Companies must meet strict eligibility, trading, and fund usage criteria.
- Advance assurance is crucial to reassure investors and ease the application process.
- SEIS and EIS can be used sequentially to fund different stages of growth.
- Professional advice is recommended to ensure maintaining eligibility and compliance.
This article has been updated and republished on 03 November 2025 to include the latest insights on Seed Enterprise Investment Scheme, tax benefits, eligibility criteria, apply, updates etc.
SEIS Tax Benefits for Investors
Understanding the tax advantages available through SEIS is important for attracting investors to your startup. The scheme offers some of the most generous tax reliefs in the UK:
Income Tax Relief
Investors can receive 50% income tax relief on investments up to £200,000 per tax year. This means an investor contributing £200,000 can claim up to £100,000 in income tax relief regardless of their marginal tax rate. The relief is available to both UK residents and non-UK residents, making SEIS an internationally attractive investment opportunity.
Investors can elect to treat all or part of their investment as if it were made in the previous tax year. This provides flexibility for tax planning purposes.
Capital Gains Tax (CGT) Exemption
Profits from selling SEIS shares are completely exempt from Capital Gains Tax provided the shares have been held for at least three years and income tax relief was claimed and not withdrawn. This provides a significant incentive for long-term investment.
CGT Reinvestment Relief
One of SEIS’s most powerful features is the ability to shelter capital gains from other assets. Investors can reduce capital gains made on the disposal of other assets by 50% up to a maximum of £100,000 per annum. The gain must arise in the tax year for which SEIS income tax relief is claimed (either the year of investment or the preceding year if carry-back is used). This relief is only available if some income tax relief has been claimed.
Loss Relief
If an SEIS investment doesn’t succeed, investors can offset the loss against other income or gains. This provides valuable downside protection. It makes SEIS investments less risky than they might otherwise appear.
Inheritance Tax Relief
SEIS shares may qualify for Business Property Relief from inheritance tax after being held for at least two years. This is not technically part of the SEIS itself but results from meeting overlapping conditions.
Eligibility Requirements for Companies
To qualify for the SEIS scheme, your company must meet specific criteria:
Company requirements
- Establishment: Must be a UK resident company or have a permanent establishment in the UK
- Trading period: Cannot have been trading for more than three years when the investment is received
- Gross assets: Maximum of £350,000 at the time shares are issued
- Employees: Fewer than 25 full-time equivalent employees when shares are issued
- Stock exchange: Cannot be listed on a recognised stock exchange
- Control: Must not control another company unless it’s a qualifying subsidiary
- Previous schemes: Cannot have previously received EIS or VCT investment
Capital Raising Limits
Companies can raise up to £250,000 through SEIS. This amount includes any de minimis state aid received in the three years up to and including the investment date. State Aid grants therefore reduce the maximum SEIS entitlement available.
Funds raised must be spent within three years of the share issue on:
- Qualifying trade activities
- Preparing to carry out a qualifying trade
- Research and development expected to lead to a qualifying trade
Qualifying Trades
The company must operate in an approved sector. Certain activities are excluded from qualifying including:
- Financial services
- Property development
- Leasing activities
- Legal and accounting services
- Many other specific trades
The business must be run as a commercial enterprise with the objective of generating profit. It must have long-term growth and development plans.
Risk to Capital Condition
A critical requirement introduced to prevent tax-motivated investments is the risk to capital condition. This means:
- The company must intend to grow and develop its trade over the long term
- The investment must carry genuine risk that investors could lose more capital than they gain as a net return
- No arrangements should be in place to protect investors from risk or guarantee returns
- The company cannot have arrangements that prioritise certain investors or allow early withdrawal
HMRC will examine factors including the company’s income sources, asset structure, use of subcontractors and marketing approach when assessing this condition.
Seed Enterprise Investment Scheme advice for Investors
Investors can receive SEIS tax benefits if they:
- Are individual taxpayers (not corporate entities)
- Hold no more than 30% of the company’s shares
- Are not employees of the company (though directors are permitted to invest)
- Do not have close relatives employed by the company
Strategic considerations
Investors should be aware that:
- SEIS shares can be difficult to sell on secondary markets as tax reliefs only apply to new share subscriptions
- All conditions must be maintained for three years to retain tax benefits
- Investments carry significant risk given the early-stage nature of companies
- Professional financial advice from an FCA-authorised adviser is essential
How to apply for SEIS?
Applying for SEIS involves several key steps to help your company secure investor interest and qualify for valuable tax reliefs.
Careful preparation especially with your documents and advance assurance will not only speed up the process but also demonstrate credibility to potential backers. Below is a step-by-step overview reflecting current HMRC best practices.
Step 1: Check eligibility
Ensure your company meets all qualifying conditions before engaging with investors.
Step 2: Seek Advance Assurance (Recommended)
While not mandatory, obtaining advance assurance from HMRC provides investors with confidence that their investment will likely qualify for tax relief. You’ll need to submit:
- Business plan
- Financial forecasts
- Most recent accounts
- Details of the amount you plan to raise
- Explanation of how you meet the risk to capital condition
Shares must be:
- Fully paid up in cash when issued
- Full-risk ordinary shares
- Non-redeemable
- Without special rights to company assets (limited preferential dividend rights are permitted)
Step 4: Submit compliance statement
After your company has either traded for at least four months or spent at least 70% of the funds raised, submit a compliance statement (Form SEIS1) to HMRC. If approved, HMRC will provide:
- A letter of authorisation
- A Unique Investment Reference (UIR) number
- Compliance certificates (Form SEIS3) for each investor
This process typically takes 15 to 45 working days.
Step 5: Provide certificates to Investors
Investors need the compliance certificate and UIR number to claim their tax relief through their Self Assessment tax return. They have up to five years from 31 January following the tax year of investment to make their claim.
SEIS and EIS: Complementary Schemes
If your company qualifies for both schemes, SEIS must be used first. After exhausting your SEIS limit, you can then access EIS funding. EIS allows companies to raise larger amounts (up to £5 million per year, £12 million lifetime) though with lower income tax relief rates (30%).
This sequential approach makes SEIS and EIS powerful tools for funding your company’s growth journey from earliest stages through to scale-up.
Recent SEIS Scheme updates
These changes have resulted in substantial growth in SEIS usage. Companies raised over £240 million through the scheme in 2023-24, representing a 51% increase from the previous year.
Why SEIS matters for Startups?
The Seed Enterprise Investment Scheme has helped over 15,000 businesses secure essential early-stage funding since its launch. For startups, SEIS offers:
- Competitive advantage in attracting investors through generous tax incentives
- Reduced cost of capital as investors factor in tax benefits
- Validation through HMRC advance assurance
- Credibility with professional investors familiar with venture capital schemes
For innovative companies in sectors like information technology, sustainable industries and scientific research, SEIS has become an essential component of early-stage fundraising strategy.
Getting professional SEIS advice
Given the complexity of qualifying conditions and the three-year compliance period, obtaining professional Seed Enterprise Investment Scheme advice early in your planning process is important. Tax advisers, accountants and legal professionals experienced with venture capital schemes can help you:
- Structure your company to maintain SEIS eligibility
- Prepare documentation for advance assurance applications
- Navigate the compliance statement process
- Advise investors on claiming their tax reliefs
- Avoid common pitfalls that could disqualify investments
Remember that falling foul of even a single condition can result in the withdrawal of all tax reliefs from your investors. This could potentially damage relationships and your reputation in the investment community.
Conclusion
The Seed Enterprise Investment Scheme represents one of the most generous tax incentive programs available to early-stage companies in the UK. With careful planning, professional guidance and attention to qualifying conditions, SEIS can be a powerful tool for securing the capital your startup needs to grow while providing attractive returns to investors willing to back innovative businesses.
Whether you’re a startup founder exploring funding options or an investor seeking tax-efficient opportunities, understanding the SEIS scheme and its benefits is essential for making informed decisions in the UK’s vibrant entrepreneurial ecosystem.
Frequently Asked SEIS Questions (2025)
How long does SEIS approval take?
Advance assurance decisions often take 6–8 weeks, but complex cases or missing information can delay this.
Can a company use SEIS and EIS in sequence?
Yes. After raising the full £250,000 SEIS cap, companies can pursue EIS for additional, larger funding rounds.
Is SEIS open to non-UK startups?
No. However, overseas companies with a permanent establishment and agent in the UK can qualify.
What is a ‘qualifying trade’?
This refers to an active business that is not excluded by sector (like property development, finance, or energy generation for export).
What happens if rules are breached during the three-year period?
HMRC can reclaim tax reliefs from both the company and investors, making it essential to maintain compliance for three years after share issue.
