SEIS Explained: What It Means for Your Startup Raise

If you are raising your first round in the UK, one of the first questions angel investors will ask is: ‘Is it SEIS eligible?’ For many early-stage investors, the answer decides whether they invest at all.

This guide explains what SEIS is, how the SEIS scheme works for founders and investors, which companies qualify, and how to use it to make your raise easier.

What is SEIS?

SEIS stands for the Seed Enterprise Investment Scheme. It is a UK government scheme that gives generous tax reliefs to people who invest in very young, small companies. It exists because seed-stage investing is risky, and the reliefs make that risk easier for investors to accept.

For founders, SEIS does not put money in your bank directly. It makes your company far more attractive to investors, which can mean a faster round, more investors and sometimes better terms.

How SEIS investment works for investors

An individual investing in an SEIS-qualifying company can get:

• 50% income tax relief on investments of up to £200,000 per tax year. Invest £10,000 and they can reduce their income tax bill by £5,000.
• No capital gains tax on any gain when they sell SEIS shares held for at least three years.
• Reinvestment relief on gains from other assets reinvested into SEIS shares.
• Loss relief if the company fails, so they can offset the loss against their income.

Put together, an investor’s real money at risk can be a small fraction of the cheque they write. Take a £20,000 investment. Income tax relief brings the net cost down to £10,000. If the company fails, a 45% taxpayer can claim loss relief on that £10,000, worth £4,500. Their real exposure is about £5,500, or roughly 27p in every pound. That is why many UK angels invest only in SEIS or EIS deals.

To claim, investors must not be ‘connected’ to the company, for example by holding more than 30% of it or being a paid employee. That usually means founders cannot claim SEIS relief on their own shares.

Which companies qualify for SEIS?

According to HMRC’s SEIS guidance, when shares are issued your company must meet these rules:

Your company must also carry on a ‘qualifying trade’. Some activities are excluded, including dealing in land, financial services and property development. If your business model is near one of these lines, take advice early.

Share and spending rules

SEIS shares must be full-risk ordinary shares, paid for in cash when issued. They cannot carry preferential rights to the company’s assets on a winding up. This matters when you negotiate your round: a standard investor liquidation preference can break SEIS eligibility. Our guide, What Is a Term Sheet? A Guide for UK Founders, explains how this shows up in deal terms.

You must spend the money within three years on your qualifying trade or on research and development, and keep following the rules for at least three years after the shares are issued.

Did SEIS change in 2026?

No. The November 2025 Budget raised the EIS limits from April 2026, but the SEIS limits stayed the same. The £250,000 company limit and £350,000 gross assets cap still apply. Many founders now raise an SEIS round first, then use EIS for later money.

Planning your SEIS round

Because the £250,000 limit applies to the company as a whole, plan how you use it. Many founders raise the full SEIS allowance in a first close, then bring in EIS investors for any money above that. For example, a £400,000 pre-seed round might be £250,000 under SEIS and £150,000 under EIS, with the SEIS shares issued at least a day before the EIS shares.

Keep a simple record of each investor, the scheme they are investing under, the share issue date and the amount. You will need these details for the SEIS1 and EIS1 forms, and investors will ask for them at tax time. Timing matters too: investors can carry SEIS income tax relief back to the previous tax year, so rounds that close near 5 April often move faster. If you are unsure how to split a round between the two schemes, ask an accountant who works with startups to check the numbers before you issue any shares.

How to use SEIS in your startup raise

1. Check you qualify. Confirm your trading date, gross assets and trade type before talking to investors.
2. Apply for advance assurance. This is optional, but most angels expect it. You ask HMRC whether your share issue is likely to qualify through the advance assurance service. Leave several weeks for a decision.
3. Build your pitch around it. Tell investors clearly that the round is SEIS eligible and how much of the £250,000 allowance is left.
4. Issue SEIS shares first. If you combine SEIS and EIS in one round, the SEIS shares must be issued before the EIS shares, at least a day earlier.
5. File the SEIS1 compliance statement. After you have traded for four months or spent 70% of the money, submit the SEIS1 to HMRC.
6. Send SEIS3 certificates to investors. Once HMRC approves, you issue certificates so investors can claim their relief.

Common SEIS mistakes founders make

• Taking EIS or VCT money first, which rules out SEIS completely.
• Agreeing share rights or a liquidation preference that break the scheme rules.
• Issuing shares before advance assurance is in place, then struggling to close investors.
• Paying founders or directors in ways that make them ‘connected’ and lose investor relief.
• Forgetting to file the SEIS1 and leaving investors waiting for their certificates.

Frequently asked questions

What is SEIS in simple terms?

A UK scheme that gives investors 50% income tax relief and other tax breaks for backing very early-stage companies.

How much can I raise under SEIS?

Up to £250,000 in total, including other small state aid received in the past three years.

Is advance assurance required?

No, but most SEIS investors will want to see it before they commit.

Can I use SEIS and EIS in the same round?

Yes, as long as the SEIS shares are issued before the EIS shares.

Final thoughts

SEIS is one of the most useful tools a UK founder has at pre-seed. It lowers the risk for investors and gives them a clear reason to say yes. But eligibility is only the starting point. Investors still need a credible business, a clear story and evidence that the problem is real.

If you are preparing a pre-seed round, our pre-seed pitch deck service helps you present an SEIS-eligible opportunity that investors understand fast. You can also read why pre-seed in 2026 takes more than a good idea, and learn what an angel investor looks for.