SEIS vs EIS vs VCT: How the Three Schemes Compare
The differences in relief, stage, limits and risk between the three UK venture capital schemes, and which fits which situation.
In this article
SEIS, EIS and VCT are the UK’s three venture capital tax schemes, and people meet the acronyms together long before anyone explains the difference. The short version of SEIS vs EIS vs VCT: SEIS backs the very start of a company and gives 50% income tax relief, EIS backs the growth stage and gives 30%, and a VCT is a listed fund that spreads your money across many companies for the same 30%. This guide sets them side by side so the right one is obvious for your situation.
The three schemes in thirty seconds
SEIS, the Seed Enterprise Investment Scheme, is for brand new companies: under 3 years trading, fewer than 25 staff, raising up to £250,000. Investors get half their money back in income tax relief.
EIS, the Enterprise Investment Scheme, is SEIS’s older sibling for bigger, later raises. The relief is 30%, and the amounts are much larger: investors can put in up to £1 million a year, or £2 million where the excess goes into knowledge-intensive companies.
VCT, the Venture Capital Trust, is different in kind: you buy shares in a listed trust, and a professional manager invests the pot into qualifying companies. Relief is 30% on up to £200,000 a year, and dividends from the trust are tax free.
SEIS vs EIS vs VCT, side by side: the numbers
| SEIS | EIS | VCT | |
|---|---|---|---|
| Income tax relief | 50% | 30% | 30% |
| Your annual limit | £200,000 | £1m (£2m with KICs) | £200,000 |
| What you hold | Shares in one company | Shares in one company | Shares in a listed fund |
| Minimum holding | 3 years | 3 years | 5 years |
| Gains on exit | Tax free after 3 years | Tax free after 3 years | Tax free |
| Dividends | Taxable | Taxable | Tax free |
| Loss relief | Yes | Yes | No |
| Carry back | 1 year | 1 year | No |
| Company stage | Under 3 years old | Generally under 7 years from first sale (10 for KICs) | Fund invests across stages |
The real difference is the risk ladder
The rates make sense once you see the schemes as rungs. SEIS sits at the riskiest rung, first money into unproven companies, so it carries the biggest relief and the biggest chance of loss. EIS companies are further along, with revenue and a track record, so the relief steps down to 30%. A VCT spreads your money across dozens of holdings under professional management, the least concentrated risk of the three, and adds tax-free dividends as its distinctive reward. More relief always means more risk, never a better deal. Our guide to the risks of SEIS is blunt about the top rung.
For founders: it is a sequence, not a choice
Companies do not pick a favourite; they climb. A typical path raises up to £250,000 under SEIS first, then moves to EIS for later rounds, and the law enforces the order: SEIS money must come before EIS money on a share issue. If you are raising, start with whether your company qualifies and the advance assurance guide.
For investors: stage, involvement, and appetite
- Choose SEIS if you want to back individual companies at the very start, can afford real losses, and want the 50% relief plus loss relief as your cushion.
- Choose EIS for the same direct involvement one stage later, with bigger cheques and a slightly gentler failure rate.
- Choose a VCT if you want exposure without picking companies, value tax-free dividends, and accept a 5-year hold and no loss relief.
Many experienced investors use more than one: SEIS and EIS for conviction bets, a VCT for spread. What the reliefs are worth depends entirely on your own tax position, which is a conversation for a professional, not a website.
Where the schemes rhyme
All three exist for the same policy reason, pulling private capital into young UK trading companies, so they share DNA: genuine commercial trades only, excluded activities (property, finance, energy generation and the rest), real risk to capital, and reliefs that arrive through your tax return rather than at the till. And all three are education-grade complicated at the edges, which is why the glossary exists.
One company, three moments
The neatest way to see the three schemes is to follow one imaginary company. Year one: two founders, a prototype and no revenue. They raise £250,000 under SEIS; their earliest backers take 50% relief for carrying the biggest risk. Year three: the product sells, and the company raises £1.5 million under EIS; these later investors take 30% for a risk that is real but smaller. Year six: the company is one of thirty holdings inside a VCT that bought in during its growth round, and the trust’s shareholders collect tax-free dividends from a portfolio, not a punt. Same company, three schemes, three risk prices.
Fees, paperwork and other practicalities
- Direct SEIS or EIS: you carry the diligence and the paperwork, one SEIS3 or EIS3 certificate per company, claimed through Self Assessment. No management fees, no diversification unless you build it yourself.
- SEIS or EIS funds: a manager deploys for you, certificates arrive as investments complete, and fees reduce the raw return. Reliefs are unchanged because you beneficially own each holding.
- VCTs: one listed share, one dividend stream, relief claimed once. The five-year minimum hold is longer, and selling early surrenders the income tax relief.
Three mix-ups that cost people money
- Treating 50% as safety. SEIS relief is the price of the riskiest rung, not a discount on a safe one. Half your money is still fully exposed, which is why loss relief exists.
- Confusing EIS deferral with exemption. Reinvesting a gain into EIS parks the tax bill; it comes back when you exit. SEIS reinvestment relief permanently exempts half the reinvested gain. Different instruments, frequently muddled.
- Missing the VCT hold period. Three years for SEIS and EIS, five for VCTs. Diarise the anniversary before you ever need liquidity.
Each scheme in one sentence
SEIS: first money into brand new companies, 50% relief, highest risk, £200,000 a year. EIS: growth money into proven-but-young companies, 30% relief, up to £1 million a year. VCT: a managed, listed portfolio of such companies, 30% relief, tax-free dividends, five-year hold. Founders should start with whether SEIS fits; investors with what the reliefs are worth.
Common questions
What is the difference between SEIS and EIS?
Stage and rate. SEIS backs companies under 3 years old raising up to £250,000 and gives 50% income tax relief. EIS backs later companies raising far more and gives 30%. SEIS must be used before EIS on a raise.
Can a company raise under both SEIS and EIS?
Yes, and most ambitious ones do: SEIS first up to its £250,000 lifetime cap, then EIS for later rounds, with the SEIS shares issued first.
Which gives the highest tax relief?
SEIS, at 50%, because it carries the highest risk. EIS and VCTs give 30%, with a VCT adding tax-free dividends and the least concentrated risk.
Do VCTs have loss relief?
No. Loss relief applies to SEIS and EIS shares. VCT risk is managed by diversification instead.
