SEIS and EIS explained for founders (and how to give investors their relief)

A note before you start: the figures here are the rules for 2026/27, and the detail matters. This article explains the schemes so you know what you're dealing with. Before you rely on any of it, confirm the current rules with HMRC or an adviser who specialises in SEIS and EIS.

Why these two acronyms matter so much

If you're raising from UK angels, you'll hear "SEIS" and "EIS" within the first few minutes of most conversations. For many angels, the schemes are the difference between yes and no.

SEIS and EIS are government tax reliefs designed to get individuals to back young, risky companies like yours. They give the investor part of their money back through their tax bill, take the tax off any gain, and soften the blow if the company fails. That turns a frightening bet into a more sensible one.

For you, the founder, they matter in two ways. Being eligible makes you more investable, because angels actively look for it. And you have a job to do: the investor's relief only becomes real if you run the process correctly, in the right order, and stay within the rules for at least three years. Promise relief you can't deliver and you lose trust you'll want for your next round.

SEIS and EIS at a glance (2026/27)

The EIS company limits rose on 6 April 2026. Before then, most companies could raise £5 million a year and £12 million in their lifetime, with gross assets of £15 million before an issue and £16 million after. Those older limits still apply to "specified companies". Broadly, these are companies whose activities include producing or generating electricity, or its transmission, distribution, supply, wholesale or cross-border exchange, and Northern Ireland businesses trading in goods within the scope of the Northern Ireland Protocol. The definition is technical, so check HMRC's EIS guidance on GOV.UK if it could apply to you. EIS itself is legislated to run for shares issued before 6 April 2035.

The short version: SEIS is earlier, smaller and more generous to the investor, with tighter limits. EIS is for later, larger rounds, with higher limits and slightly less relief per pound. Many companies use both: SEIS to get going, EIS to grow.

What your investors actually get

Your investors care about four reliefs, and it helps to be able to explain them in a sentence each.

• Income Tax relief. 50% of the investment for SEIS, 30% for EIS, taken off their Income Tax bill. They can treat the investment as made in the previous tax year if that suits them better.
• No Capital Gains Tax on a gain. If they hold the shares for at least three years and the Income Tax relief hasn't been withdrawn, any gain when they sell is free of CGT.
• Loss relief. If the shares are sold at a loss, the loss (minus the Income Tax relief already received) can be set against their income for that tax year or the one before.
• Help with other gains. Under SEIS, a gain reinvested in SEIS shares can be exempt on half of the amount invested, up to £100,000 in a tax year. Under EIS, a gain can be deferred by investing it in EIS shares between one year before and three years after the sale that created it.

What that means on a £10,000 cheque

Illustration only: an investor who pays 45% Income Tax puts in £10,000, and the company later fails completely.

On SEIS, the investor's real downside on £10,000 is £2,750, before any CGT reinvestment relief. That's why the "SEIS-eligible" line on your deck carries so much weight.

Which companies qualify

At the time the shares are issued, an SEIS company must:

• have a permanent establishment in the UK;
• be carrying on, or preparing to carry on, a new qualifying trade that's no more than 3 years old;
• have gross assets of no more than £350,000;
• have fewer than 25 full-time equivalent employees;
• not have raised more than £250,000 under SEIS in total;
• not have received EIS or venture capital trust investment;
• not be controlled by another company.

An EIS company has to meet similar tests with the higher limits in the table above.

Both schemes exclude certain trades, whatever the company's size. The excluded list includes dealing in land and property development, banking, insurance and other financial activities, legal and accountancy services, farming and forestry, and running hotels or nursing homes. Most software, product and technology businesses are qualifying trades, but check yours before you promise relief.

Which investors qualify

The reliefs are for outside investors taking a genuine risk, so people too close to the company are excluded.

• The 30% rule. An investor can't claim if they and their associates (such as a spouse, parents or children) hold more than 30% of the company's shares, voting rights or rights to its assets on a winding-up.
• Employees. Employees generally can't claim. SEIS allows directors to claim. Under EIS, paid directors are generally excluded unless their payments are "permitted payments", such as reimbursed expenses, though unpaid directors can claim. There's an important exception for "business angels": an investor who becomes a paid director can still qualify if they had no prior connection with the company, were issued the shares before becoming a director, and are paid reasonable remuneration.
• Founders. Most founders hold well over 30%, so they can't claim relief on their own shares.

What the shares must be

• Full-risk ordinary shares, paid up in full, in cash, when they're issued.
• Not redeemable, and with no special rights to the company's assets.
• Issued in the right order. You can't use SEIS once the company has received EIS or venture capital trust investment, so SEIS shares must be issued before any EIS shares. Many companies issue them on separate days to make the order unarguable.

The "paid in cash when issued" rule catches founders who raise on convertible loan notes. Shares issued by converting a loan are issued in exchange for debt, not cash, so they generally don't qualify. An advance subscription agreement can work if it meets HMRC's conditions, but the terms need care. Our guide to convertible notes and SAFEs for UK founders explains the difference.

Spending the money

SEIS money must be spent within 3 years of the share issue. EIS money must be spent within 2 years of the investment, or of the date you started trading if that's later. Either way it has to go on the qualifying trade, preparing for it, or qualifying research and development. Buying shares in other companies generally isn't allowed.

Hiring, product development, marketing and equipment for the trade are the usual uses. If part of your spend is on R&D, it may also support a claim for R&D tax relief, which has its own rules.

The founder's job: the SEIS and EIS timeline

Being a good investment isn't enough. The relief happens only if you work through these steps in order.

1. Get advance assurance (before you raise). You can ask HMRC whether your planned share issue is likely to qualify. It isn't compulsory, but angels routinely ask for it, and "we have advance assurance" removes much of their worry. Apply early, because it can take a while.
2. Issue the shares properly. Pass the board resolution, issue share certificates, update your register of members and your cap table, and file an SH01 with Companies House within one month. Our guide on how to issue shares and file an SH01 walks through it, and keeping your cap table clean saves trouble at the certificate stage.
3. Wait until you're eligible to file. For SEIS, that's once you've traded for at least 4 months or spent at least 70% of the money. For EIS, it's after 4 months of trading.
4. Submit the compliance statement. This is form SEIS1 or EIS1, sent through HMRC's online service, with a separate statement for each share issue. For EIS, it must go in within 2 years of the end of the tax year in which the shares were issued, or within 2 years of reaching the 4-month point if that's later. For SEIS, file as soon as you can: your investors can't claim until you do.
5. HMRC authorises the relief. When HMRC agrees, you get a letter of authorisation, a unique reference number and a compliance certificate: form SEIS3 or EIS3.
6. Give each investor their certificate. They use it to claim relief, usually through their Self Assessment return.
7. Stay compliant for at least three years after the share issue. The rules don't stop applying once the certificates are out.

What can cost your investors their relief

Within the three-year period, these can lead HMRC to withdraw the relief, sometimes years after the investment:

• the company stops carrying on a qualifying trade, or pivots into an excluded activity such as property or financial services;
• the company comes under the control of another company, for example through most acquisitions;
• an investor receives value back from the company, such as a share buyback or a loan;
• an investor sells their shares;
• an investor becomes connected to the company, for example by going over 30%;
• the money isn't spent on qualifying purposes within the time limit.

Joining the board isn't automatically fatal. Under the "business angel" exception, an investor who becomes a paid director keeps their relief if they had no prior connection with the company, were issued the shares before becoming a director, and are paid reasonable remuneration.

When relief is withdrawn, it's your investors who pay it back. Before any structural change in those three years, take advice. Our guide to SEIS and EIS compliance after you raise covers the ongoing checks in more detail.

Why the certificate is the moment that matters

Look at it from your investor's side. They transferred money months ago, partly for the tax relief. Then nothing visible happens while you trade for four months, file the compliance statement and wait for HMRC.

The SEIS3 or EIS3 arriving is the moment the promise is kept. It's what they hand to their accountant. A founder who gets certificates out promptly and correctly looks organised and trustworthy, which is exactly who an angel wants to back again. A founder who's vague about timing, or sends certificates with the wrong names or share numbers, undermines the relationship.

The hard way to run all this

Done by hand, SEIS and EIS administration is a series of forms, deadlines and lookups that's easy to drop while you're running the company. Advance assurance gets filed somewhere. Shares are issued, and the SH01 and cap table need updating. Months later, someone has to remember that the compliance statement is now possible, and fill it in from a spreadsheet of investors that may not match the cap table. One wrong figure means a correction with HMRC and an annoyed investor.

How Ledgers helps

Ledgers' funding rounds wizard captures the round and does the bookkeeping for it. It prepares your Companies House SH01, schedules the SEIS and EIS compliance milestones in your compliance calendar, and generates the data you paste into HMRC's online service. Your cap table lives in the same place, so the investor names, share numbers and amounts come from one source.

Underneath, your reconciled books show when each investor's money arrived and what it was spent on, which is the evidence HMRC and future investors ask for in due diligence. You, or your accountant, still submit the compliance statement and confirm the current rules with HMRC. The cap table, SEIS/EIS and funding rounds tools come with the Growth plan; Ledgers for startups shows how they fit together.

Your investors backed you partly for the relief, so make sure they get it on time. See the Growth plan, which includes funding rounds and SEIS/EIS.

Frequently asked questions

What's the difference between SEIS and EIS?

SEIS is for the earliest stage: investors get 50% Income Tax relief and the company can raise up to £250,000 in total. EIS is for later rounds: relief is 30%, but most companies can raise up to £10 million a year and £24 million in their lifetime. SEIS has to come before any EIS.

How much can my company raise under SEIS?

Up to £250,000 in total. The company must also have gross assets of no more than £350,000 and fewer than 25 full-time equivalent employees when the shares are issued, and its trade must be no more than 3 years old.

What are the EIS limits from April 2026?

Most companies can raise up to £10 million in any 12 months and £24 million in their lifetime (£20 million and £40 million for knowledge-intensive companies). Gross assets must be no more than £30 million before the issue and £35 million after.

What is an SEIS3 or EIS3 certificate?

It's the compliance certificate your investor needs to claim their relief. HMRC provides it after approving your compliance statement, and you give one to each investor. Without it, they can't claim.

Do I need advance assurance before raising under SEIS or EIS?

It isn't required, but most angel investors expect it. Advance assurance is HMRC's view, before you issue shares, that your share issue is likely to qualify.

Can I get SEIS relief on shares in my own company?

Only if you and your associates hold no more than 30% of the company and you're not an employee, though SEIS does allow directors. Most founders hold more than 30%, so they can't claim on their own shares.

Do convertible loan notes or SAFEs qualify for SEIS or EIS?

Shares issued by converting a loan generally don't qualify, because SEIS and EIS shares must be paid for in full, in cash, when issued. An advance subscription agreement can work if it meets HMRC's conditions, so take advice before you sign one.

Tools and guides for this

• Ledgers for startupsRunway, SEIS/EIS and R&D, with investor-ready numbers.
• Free runway calculatorUpload a bank statement and see your burn and runway.
• R&D tax reliefWhat counts, and what HMRC now checks.

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