What Is SEIS? A Plain-English Guide to the Seed Enterprise Investment Scheme

What is SEIS? At its simplest it is the Seed Enterprise Investment Scheme, a UK government scheme that rewards people for backing brand new companies. An investor gets half of what they put in back as income tax relief, and a qualifying company can raise up to £250,000 this way. It exists for a simple reason: the very start of a business is the hardest place to raise money, so the government softens the risk with tax relief.

This is the complete guide. It covers what SEIS is, how it works step by step, what a company needs to qualify, every relief an investor can claim, how SEIS sits next to EIS and VCT, the risks, where the scheme stands today, and the words you will keep meeting. Each section gives you the plain version and links to a deeper article if you want to go further.

What is SEIS in practice

SEIS is one of a small family of UK venture capital schemes. It was introduced in 2012 to tackle a specific problem: brand new companies are the riskiest place to put money, so investors tend to avoid them, which leaves good ideas unable to raise the first cash they need. That gap has a name, the equity gap, and SEIS is the government’s answer to it.

The deal is straightforward. The government gives up some tax it would otherwise collect, and in return private individuals are encouraged to back very early-stage companies. A qualifying company can raise up to £250,000 under the scheme, and the people who invest can claim a set of generous tax reliefs, starting with half of their investment back off their income tax bill.

SEIS did not appear in isolation. It joined an older family of schemes, EIS from 1994 and Venture Capital Trusts from 1995, extending the same idea to the very earliest and riskiest stage that those schemes did not reach. That is why the three are so often mentioned in the same breath.

If you want the simplest possible version first, start with our beginner’s guide, then come back here for the full picture.

What SEIS is not

It helps to clear up a few things SEIS is often mistaken for, because the misunderstandings lead people astray.

• It is not a savings product. Your money is not protected, there is no guaranteed return, and you can lose the lot. The reliefs reward risk, they do not remove it.
• It is not only for tech. Any genuine, growing trade can qualify as long as it is not on the excluded list. Plenty of SEIS companies are not software businesses at all.
• It is not the same as crowdfunding. You may meet SEIS on a crowdfunding platform, but SEIS is the tax scheme, not the platform. The reliefs work the same however you invest.
• It is not automatic. A company has to qualify and be cleared by HMRC, and an investor has to hold the shares and claim correctly. Miss a condition and the relief can disappear.
• It is not tax advice in a box. What the reliefs are worth depends entirely on your own tax position, so the same investment is worth more to some people than to others.

Keep those in mind and the rest of SEIS makes more sense.

Who SEIS is for

Three groups meet around SEIS, and the scheme looks a little different to each.

Founders use SEIS to raise the first outside money for a new company. For a founder, SEIS makes an early round more attractive, because the reliefs make backing an unproven company easier to say yes to. Our founder desk covers eligibility, advance assurance and running a compliant round.

Investors, often angel investors or friends and family, put money in and claim the reliefs. For an investor, SEIS is a way to support early companies while taking some of the sting out of the risk. Our investor desk covers the reliefs, due diligence and how to claim.

Advisers, mostly accountants and lawyers, sit alongside both, making sure the rules are followed and the paperwork is right. Our adviser desk is the technical reference for them.

Whichever group you are in, the same scheme is doing two jobs at once: getting money to companies that need it, and giving the people who provide that money a reason to take the risk.

How SEIS works, step by step

The order of events matters, because the tax relief only appears at the end. Here is the usual sequence.

1. Advance assurance. Before raising, a company often asks HMRC for advance assurance, an informal indication that it looks likely to qualify. It is not compulsory and not a guarantee, but investors usually want to see it.
2. The shares are issued. Investors put in their money and the company issues them ordinary shares. The money has to be genuinely at risk, so these cannot be safe, preference-style shares.
3. The company trades and spends. The company must have been trading for at least four months and have spent at least 70% of the money raised before the next step.
4. The compliance statement. The company files form SEIS1 with HMRC, confirming it has met the conditions.
5. HMRC authorises. If HMRC is satisfied, it authorises the company to issue certificates.
6. SEIS3 certificates. The company gives each investor a SEIS3 certificate, the document that unlocks their relief.
7. The investor claims. The investor claims through their Self Assessment tax return, using the SEIS3.

Advance assurance deserves a word of its own. It is HMRC looking at a company’s plans and saying, in effect, this looks like it would qualify. It does not bind HMRC and it is not the relief itself, but investors treat it as a green light, and many will not commit without it. Applications can take a few weeks, so founders usually start early.

So an investor does not get relief the moment they hand over money. They get it once the company has traded, spent and been cleared by HMRC. Our how SEIS works guide walks through the timing in more detail.

What a company needs to qualify

Not every company can offer SEIS. Broadly, it has to be small, young and genuinely trading. These are the main tests.

• Young. The qualifying trade must be less than three years old, measured from when the company first started trading.
• Small on people. Fewer than 25 full-time equivalent employees when the shares are issued.
• Small on assets. Gross assets under £350,000 immediately before the shares are issued.
• A capped raise. No more than £250,000 under SEIS in total, across the life of the company.
• A real trade. A genuine, commercial trade with a UK presence. Some activities are excluded, such as dealing in land, most financial activities and property-backed trades.
• Real risk. The investment must meet the risk-to-capital condition, which means the company genuinely intends to grow and the investor’s money is genuinely at risk.
• Independent. The company must not be controlled by another company, and SEIS must be used before any EIS money on the same shares.

The excluded activities surprise people, so they are worth a note. SEIS is meant for genuine, growing trades, so it shuts out things that look more like holding assets than building a business: dealing in land or commodities, most financial services, leasing, legal and accountancy services, property development, farming, running hotels or nursing homes, and generating most kinds of energy. If your company’s main activity is on that list, SEIS is unlikely to be open to it.

Each of these has detail that can catch people out, and getting one wrong can cost the relief. The full breakdown is in SEIS rules and limits.

What an investor gets: the reliefs in full

The reliefs are the reason SEIS exists, so it is worth understanding each one properly. There are four, and an investor can use more than one at a time.

1. Income tax relief of 50%

This is the headline. You can claim back half of what you invest against your income tax bill. Put in £20,000 and you can take £10,000 off your tax. You can invest up to £200,000 in a single tax year, and you can carry a claim back to the previous year if it suits your position. To keep the relief, you have to hold the shares for at least three years.

2. Capital gains reinvestment relief

If you have made a capital gain elsewhere and you reinvest it into SEIS shares, half of that reinvested gain can be exempt from Capital Gains Tax, within the same £200,000 limit. It is a way of sheltering a gain while backing a new company.

3. Capital gains disposal relief

If you hold your SEIS shares for at least three years and the company does well, any gain you make when you sell those shares is free of Capital Gains Tax. The reward for taking the risk and staying in is that the upside, if it comes, is untaxed.

4. Loss relief

Because many early companies fail, SEIS cushions the downside. If your shares end up worthless, you can set the loss, after taking off the income tax relief you already had, against your income or your capital gains. For a higher-rate taxpayer, the 50% up front combined with loss relief means the real amount at risk is a good deal smaller than the headline figure.

The mechanics of claiming, and the way these reliefs interact, are covered in how SEIS tax relief works and summarised in the reliefs at a glance.

A worked example

Numbers make this clearer than rules. Say you are a higher-rate taxpayer and you invest £20,000 in a qualifying SEIS company.

Straight away you can claim 50% income tax relief, which is £10,000 off your income tax bill for the year, provided you have at least that much tax to relieve. So although you have put in £20,000, the amount genuinely out of pocket is already down to £10,000.

Now fast forward three years, the minimum you must hold the shares. Two things can happen.

The company does well. You sell your shares for, say, £60,000. Because you held them at least three years and kept your relief, the £40,000 gain is free of Capital Gains Tax. You keep all of it.

The company fails and the shares are worthless. You have already had £10,000 back through income tax relief. On the remaining £10,000 you can claim loss relief against your income. For a 45% taxpayer that is roughly another £4,500 back, which brings the real loss down to about £5,500 on a £20,000 investment.

That is the shape of SEIS in one example: a capped, cushioned downside in exchange for taking a real risk, and an untaxed upside if the company succeeds. The exact figures depend on your own tax position, which is why advice matters.

SEIS vs EIS vs VCT

SEIS is the smallest and earliest of three related schemes, and people often mix them up.

• SEIS is for the very start. 50% income tax relief, up to £200,000 a year, into companies under three years old with fewer than 25 staff, which can raise up to £250,000.
• EIS, the Enterprise Investment Scheme, is for slightly later, larger raises. 30% income tax relief, up to £1 million a year, more for knowledge-intensive companies, into bigger businesses.
• VCT, the Venture Capital Trust, lets you invest in a managed, listed fund that itself backs qualifying companies. 30% relief, up to £200,000 a year, with the fund doing the picking.

Which should you use? For a founder it is usually not a choice but a sequence: SEIS for the first £250,000, then EIS as the company grows. For an investor it comes down to stage and appetite. SEIS is the earliest and riskiest with the biggest relief, EIS is a step later, and a VCT hands the picking to a professional manager in exchange for a slice of the returns.

Many companies use SEIS first, up to the £250,000 limit, then move on to EIS for later rounds. For investors, the choice is really about stage, and how much risk and involvement you want. We set them side by side in SEIS vs EIS vs VCT.

The risks you must not skim

SEIS exists to reward risk, so the risk is real, and no amount of tax relief changes that. Early-stage companies fail, and a large share of them do. The shares are illiquid, which means you usually cannot sell them when you want to, and there may be no buyer at all. The reliefs reduce the downside, but they do not remove it, and they are worth nothing if you did not have the tax bill to relieve in the first place.

The sensible approach is the same one experienced angel investors use. Only invest money you can genuinely afford to lose. Spread it across several companies rather than betting on one. Do proper due diligence on each. And take professional advice before you commit, because your own tax position changes what the reliefs are actually worth to you. We go deeper in the risks of SEIS.

One more warning, a behavioural one. Do not let the tax tail wag the investment dog. A weak company is still a weak company with 50% relief, and the relief is worthless if the business was never worth backing. Judge the investment first, then let the reliefs improve a decision you would have been glad to make anyway.

How the relief can be lost

Getting the relief is one thing, keeping it is another. The income tax relief can be reduced or withdrawn if certain things happen in the three years after you invest.

• You sell too soon. Dispose of the shares within three years and the income tax relief is clawed back.
• You become connected. If you end up holding more than 30% of the company, or become an employee outside the allowed cases, you can lose the relief.
• You receive value. Taking money or benefits out of the company, such as a loan back to yourself, can reduce the relief.
• The company breaches its conditions. If the company stops being a qualifying company within the period, its investors can be affected.

Most of these are avoidable with a little care, and a good adviser will flag them early. Founders should read our guide on common mistakes that break SEIS status, and investors should keep an eye on the same conditions from their side.

Is SEIS still open?

Yes. SEIS is open and, unlike some reliefs, it was made a permanent part of the tax system rather than a temporary measure. It has also grown. From 6 April 2023 the limits were raised: the amount a company can raise went from £150,000 to £250,000, the gross assets limit from £200,000 to £350,000, the trading age from two years to three, and the annual investor limit from £100,000 to £200,000.

One thing is worth checking before you rely on it. The related EIS and VCT schemes carried a sunset clause that has been extended to April 2035, and SEIS is generally treated as continuing alongside them. Rules do change at Budgets, so for anything you are about to act on, confirm the current position on gov.uk. We keep the scheme status up to date.

SEIS by the numbers

SEIS is not a niche curiosity. In the 2024 to 2025 tax year, around 2,430 companies raised a total of £276 million under the scheme, up 14% on the year before, a rise HMRC links to the 2023 expansion of the limits. Most of that money went to information and communication companies, and, as with most UK investment, London and the South East took the largest share.

The figures move every year when HMRC publishes its statistics, so we keep a living page that tracks them. See the latest in SEIS statistics.

The direction of travel matters as much as the totals. Since the limits were raised in 2023, both the number of companies using SEIS and the money flowing through it have grown, which suggests the scheme is doing its job of pulling capital towards the earliest stage.

The words you will keep meeting

SEIS comes with its own vocabulary. These are the ones worth knowing from the start.

• Advance assurance. An informal indication from HMRC that a company looks likely to qualify. Reassuring for investors, but not a guarantee.
• SEIS1 and SEIS3. SEIS1 is the compliance statement the company files with HMRC. SEIS3 is the certificate the company then gives investors so they can claim.
• Gross assets. Broadly everything the company owns, which must be under £350,000 before the shares are issued.
• Qualifying trade. A genuine commercial trade that is not on the excluded list.
• Connected person. Someone too close to the company to claim, for example an employee or anyone holding more than 30%.
• Carry back. Treating an investment as if it were made in the previous tax year, to use the relief where it helps most.

The full list is in the SEIS glossary.

How to tell a genuine SEIS opportunity

Once you understand SEIS, the next question is usually how to tell a real, well-run opportunity from a shaky one. A few checks go a long way.

• Ask for advance assurance. A company that has it has already been looked at by HMRC. If there is none, ask why.
• Check the company actually qualifies. Age, employee numbers, gross assets and trade all matter, and a company close to the limits may tip over them during your holding period.
• Look at the business, not just the tax. The reliefs are only worth having if the company is worth backing. Read the plan, the numbers and the team as you would for any investment.
• Confirm you will get a SEIS3. Without that certificate you cannot claim, so make sure the company understands its obligations.
• Mind the connection rules. If you are close to the company, or about to be, check you are not caught by the rules that block relief.

Our SEIS due diligence guide turns this into a proper checklist.

Getting started

If you are a founder, the usual first steps are to check whether your company qualifies, get your paperwork in order, and apply to HMRC for advance assurance before you approach investors. Our founder desk and the SEIS Compass walk you through it.

If you are an investor, start by working out what the reliefs are actually worth to you, then do proper due diligence on any company before you commit, and make sure you will receive a SEIS3 so you can claim. Our investor desk covers both sides.

Either way, the golden rule holds: SEIS is a genuine tax break wrapped around a genuinely risky investment. Understand both halves before you act.

Common questions

Is SEIS a safe investment?

No. Investing in early-stage companies is high-risk and many fail. The tax reliefs reduce the downside but do not remove it, and the shares are hard to sell.

How much can I invest in SEIS each year?

Up to £200,000 per tax year, with 50% income tax relief, and you can carry a claim back to the previous year.

How long do I have to hold SEIS shares?

At least three years. If you sell earlier, the income tax relief is withdrawn.

Can a company use both SEIS and EIS?

Yes. A company usually uses SEIS first, up to £250,000, then EIS for later rounds. SEIS must come first on the same share issue.

Can I invest in my own company through SEIS?

Generally no. A person connected to the company, for example an employee or someone holding more than 30%, cannot claim the income tax relief, though a director can in defined cases.

What happens to my relief if the company fails?

If you have held the shares at least three years, the income tax relief already claimed stands, and loss relief can cushion the rest. Sell within three years and the income tax relief is clawed back.

How do I claim SEIS tax relief?

Through your Self Assessment tax return, using the SEIS3 certificate the company gives you after HMRC authorises its claim.