SEIS and EIS in 2026: the founder's guide to tax-efficient fundraising in the UK

If you are raising from angels in the UK, the Seed Enterprise Investment Scheme (SEIS) and the Enterprise Investment Scheme (EIS) are probably the most powerful tools you have. They let an investor claim back 30% to 50% of what they put in against their income tax, shelter the upside from capital gains tax and soften the downside if things go wrong. For many angels, a round that is not SEIS or EIS eligible is simply not a round they will join.

The rules were widened on 6 April 2026, so a lot of what is written online is now out of date. This guide sets out how both schemes work today, who qualifies, the traps that cost founders their investors' relief and two practical checklists you can work through before your next raise.

What are SEIS and EIS?

Both are government schemes, set out in the Income Tax Act 2007, that give individual investors tax relief for subscribing in cash for new ordinary shares in small, unquoted, higher-risk UK trading companies. The company does not receive the relief; the investor does. But because the relief makes the investment far more attractive, eligible companies find it materially easier to raise money, on better terms.

SEIS is for the very earliest stage: a company less than three years into its first trade, raising its first £250,000. EIS picks up from there and runs all the way to growth rounds, with a lifetime cap of £24 million (£40 million for knowledge-intensive companies). A company will often use SEIS for its first cheque and EIS for everything after, sometimes in the same round.

SEIS vs EIS at a glance (limits from 6 April 2026)

A worked example makes the point. An investor who puts £100,000 into an SEIS company reduces their income tax bill by £50,000 that year. If the company fails outright, loss relief on the remaining £50,000 at the additional rate brings the real cash at risk down to roughly £27,500. If the company succeeds and is sold after three years, the gain is free of capital gains tax. That asymmetry is why experienced angels ask about SEIS and EIS before they ask about your valuation.

What investors get

Under SEIS

• 50% income tax relief on up to £200,000 invested per tax year, with the option to carry the investment back to the previous tax year.
• No capital gains tax on the SEIS shares if they are held for at least three years and the income tax relief was claimed.
• Reinvestment relief: half of a capital gain reinvested into SEIS shares in the same tax year is exempt from CGT, within the £200,000 annual limit.
• Loss relief: if the shares are sold at a loss or become worthless, the loss (net of the income tax relief already received) can be set against income or gains.

Under EIS

• 30% income tax relief on up to £1 million per tax year, rising to £2 million where the extra is invested in knowledge-intensive companies, again with a carry-back option.
• No capital gains tax on the EIS shares if held for at least three years and income tax relief was attributable to them.
• Deferral relief: a gain on any asset can be deferred, without limit, by reinvesting it in EIS shares in the window from one year before to three years after the gain.
• Loss relief on the same basis as SEIS.

Two practical points. First, the relief is a reduction in tax actually due, so an investor with little or no UK income tax liability cannot use it, and without the income tax relief there is no CGT exemption either. Second, every relief depends on the shares being held, and the company staying qualifying, for three years from the date of issue. HMRC can claw relief back for up to six years after that if a condition is breached.

Does your company qualify?

HMRC applies a gateway test first, the risk to capital condition: the company must have genuine objectives to grow and develop over the long term, and there must be a real risk that investors could lose more than they get back in income, growth and tax relief. A company set up to deliver a single project, to hold assets or to return a reliable income is unlikely to pass, however well it meets the detailed rules below. Only once this gate is cleared do the detailed conditions matter.

SEIS company conditions

• Carrying on, or preparing to carry on, a new qualifying trade that began less than three years before the shares are issued, and no other trade before it.
• Gross assets under £350,000 immediately before the issue, counted without deducting liabilities.
• Fewer than 25 full-time equivalent employees at the time of issue.
• No more than £250,000 raised in total under SEIS and any de minimis state aid in the previous three years.
• No EIS or VCT money received before the SEIS shares are issued. SEIS always comes first.
• Unquoted, independent (not a 51% subsidiary of another company), with a UK permanent establishment and not in financial difficulty.
• The money must be spent on the qualifying business activity within three years.

EIS company conditions

• Carrying on a qualifying trade on a commercial basis, with no more than about 20% of activities falling within the excluded list.
• Gross assets of no more than £30 million immediately before the issue and £35 million immediately after.
• Fewer than 250 full-time equivalent employees (500 for knowledge-intensive companies).
• Shares issued within seven years of the company's first commercial sale (ten for knowledge-intensive companies), unless one of the statutory exceptions for follow-on and new-market funding applies.
• No more than £10 million raised from SEIS, EIS, VCT and similar sources in the 12 months to the issue date, and £24 million over the company's life (£20 million and £40 million respectively for knowledge-intensive companies). Breaching the annual limit disqualifies the whole issue.
• Unquoted, independent, with a UK permanent establishment and not in financial difficulty.
• The money must be employed in the qualifying business activity within two years, and must not be used to buy another company, trade or goodwill.

Trades that are excluded

Most product, software and services businesses qualify. The main exclusions are dealing in land, shares or commodities, property development, farming and forestry, hotels and nursing homes, banking, insurance and other financial activities, legal and accountancy services, leasing, energy generation, shipbuilding and coal and steel production. A business whose income is mainly royalties and licence fees is also excluded, unless the intellectual property was created by the company itself.

The share and investor conditions that trip founders up

In our experience most failed claims have nothing to do with the business and everything to do with mechanics. These are the points we check on every round.

• Ordinary shares only. The shares must be full-risk ordinary shares: non-redeemable, with no preferential right to dividends or to assets on a winding-up. Even a small preference is fatal, and creating a new class of shares with lesser rights can accidentally give the SEIS or EIS shares a preference.
• Cash before shares. The subscription must be paid in full, in cash, before the shares are issued and registered. An undertaking to pay, or money arriving a day late, is one of the most common reasons relief is lost. Make sure the bank account is open and the funds have cleared.
• New money, not converted debt. Converting a loan or loan note into shares raises no new money and does not qualify. If you use an advance subscription agreement, take advice on its terms and apply for advance assurance before you sign it.
• No pre-arranged exits or risk protection. Anti-dilution rights, put or call options over the shares, guaranteed buy-backs or anything else designed to protect the investor's capital will disqualify the shares. A plain pre-emption right is fine.
• The 30% test. The investor, together with their spouse, civil partner, parents, children and business partners, must not hold more than 30% of the shares, votes or rights to assets. Nor may they otherwise control the company.
• Employees cannot claim. Directors can, in some circumstances (unpaid directors under EIS, and executive or non-executive directors under SEIS), but an employee or an employee's associate cannot.
• No value back. If the company repays a loan, buys back shares, transfers an asset cheaply or otherwise gives value to the investor in the restricted period, relief is lost. Under SEIS the restricted period runs from incorporation; under EIS from a year before the issue. Both end three years after the issue.
• Genuine commercial reasons. The subscription must be for commercial reasons and not part of a tax avoidance arrangement, and the structure must not have been set up mainly to access the relief.

How the process works, step by step

1. Check eligibility. Work through the checklists below with your advisers, gather the latest accounts, articles, shareholders' agreement, business plan and any prior funding paperwork, and resolve anything that does not fit before you approach HMRC.
2. Apply for advance assurance. This is an online application to HMRC's Venture Capital Reliefs Team confirming that the company and the proposed issue should qualify. HMRC will only consider it if you name the investors or fund managers you have approached, and will not engage if the risk to capital condition looks doubtful. Responses are currently taking around four to six weeks. Apply before you sign any subscription or advance subscription agreement.
3. Issue the shares correctly. Funds in first, then the board resolution, then the register of members. If you are combining SEIS and EIS, issue the SEIS shares first and the EIS shares at least a day later in a separate tranche.
4. Submit the compliance statement. Once the company has traded for four months (or, for SEIS, spent at least 70% of the money), submit form SEIS1 or EIS1 online. The EIS1 must be filed within two years of the end of the tax year of issue. A compliance statement cannot be withdrawn or swapped afterwards, so get the scheme right first time.
5. Issue the certificates. HMRC authorises the company (form EIS2 or the SEIS equivalent, sent by email with a unique investment reference) to issue SEIS3 or EIS3 certificates to each investor. Investors use these to claim relief in their tax return.
6. Stay qualifying for three years. Spend the money on the qualifying activity in time, keep the shares ordinary, avoid giving value back to investors and notify HMRC within 60 days if anything changes. Most of the conditions are tested throughout the three-year period, not just at the start.

Your SEIS readiness checklist

Your EIS readiness checklist

Combining SEIS and EIS in the same round

It is common, and sensible, to use both schemes in a single raise (often called an SEIS/EIS dual raise): SEIS for the first £250,000 and EIS for the balance. The rules are strict about sequence. The SEIS shares must be issued first, with the EIS tranche issued at least a day later, and the gross assets test for SEIS is applied immediately before the SEIS issue (ignoring the SEIS money itself). The old requirement to spend 70% of the SEIS funds before raising EIS was abolished in 2015. The single biggest risk is administrative: if the company files an EIS compliance statement by mistake for shares meant to be SEIS, it cannot be withdrawn and the SEIS relief is lost.

What changed on 6 April 2026

Following the Autumn 2025 Budget, the Finance Act 2026 roughly doubled the EIS company limits. The gross assets ceiling rose from £15 million to £30 million before the issue (£16 million to £35 million after). The annual raise limit rose from £5 million to £10 million, and from £10 million to £20 million for knowledge-intensive companies. The lifetime limit rose from £12 million to £24 million, and from £20 million to £40 million for knowledge-intensive companies. The SEIS thresholds, which were last increased in April 2023, are unchanged. Separately, the Finance Act 2024 extended both schemes to 2035, so there is no cliff edge in sight.

The practical effect is that many scale-ups that had outgrown EIS are back inside it, and later-stage rounds can now include EIS angels alongside institutional money. If you ruled EIS out in the past because of the £15 million or £12 million limits, it is worth looking again.

Frequently asked questions

Can founders claim SEIS or EIS on their own shares?

Usually not. Founders typically hold more than 30% or are employees, either of which disqualifies them. A founder with a small stake who is a director but not an employee may qualify, particularly under SEIS, but it needs to be checked carefully against the connection rules.

Is advance assurance compulsory?

No, but almost every investor will insist on it, and it is the only way to find out in advance whether HMRC agrees the company qualifies. It is also where most structural problems surface while they can still be fixed. Treat it as a mandatory step.

Can we use a convertible loan note or an advance subscription agreement?

Converting a loan note into shares does not qualify, because no new money is raised at the point of issue. Advance subscription agreements can work but only if they are drafted to HMRC's requirements, with a fixed longstop date for issuing the shares, no interest and no right to a refund. Take advice before you sign one and apply for advance assurance first.

What happens if we breach a condition within three years?

The company must notify HMRC within 60 days and the investors' relief is withdrawn or reduced, which usually means a tax bill for the investor and a difficult conversation for the founder. Typical triggers are buying back shares, paying off a loan to an investor, issuing a new share class with lesser rights, a trade sale structured as a share exchange or a subsidiary slipping below 90% ownership. Plan transactions around the three-year window.

Do overseas investors benefit?

Only if they have a UK income tax liability to set the relief against. The relief is a reduction in UK tax due, so an investor with no UK tax to pay gets no income tax relief and, in consequence, no CGT exemption. Non-resident investors may still value loss relief and the signalling benefit of HMRC assurance, but they should take their own advice.

How long does the whole process take?

Allow four to six weeks for advance assurance once a complete application is submitted, so start as soon as you have investors in conversation. The compliance statement can only be filed after four months of trading (or 70% spend for SEIS), and HMRC then issues the certificates. Investors typically receive their SEIS3 or EIS3 within a few months of closing.

"The schemes are generous but unforgiving. Almost every lost claim we see comes from paperwork and sequencing, not from the business itself."

This article is general information, not legal or tax advice, and reflects the law as at 13 October 2026. The conditions are detailed and depend on your facts, so take advice before relying on any of the reliefs described.