1. What Is the SEIS Scheme?
The Seed Enterprise Investment Scheme (SEIS) is a UK government initiative designed to encourage investment in early-stage startups by offering significant tax reliefs to individual investors who buy new shares in qualifying companies.
2. Why Was the SEIS Scheme Created?
Launched in 2012, SEIS helps:
- Startups raise early capital
- Investors reduce financial risk
- The economy by stimulating innovation and job creation
3. SEIS vs. EIS: What’s the Difference?
- SEIS is for startups in their first 2 years, raising up to £250,000
- EIS (Enterprise Investment Scheme) is for more mature startups, allowing up to £12 million
Both schemes offer tax reliefs, but SEIS is more generous due to the higher risk involved.
4. SEIS Tax Reliefs for Investors
- 50% income tax relief on investments up to £200,000/year (as of 2023/24)
- Capital Gains Tax (CGT) exemption on profits from SEIS shares held for 3+ years
- Loss relief if the business fails
- CGT reinvestment relief (up to 50% CGT exemption on gains reinvested into SEIS)
5. SEIS Eligibility Criteria for Startups
To qualify, a company must:
- Be UK-based and carry out a qualifying trade
- Have been trading for less than 3 years
- Have under £350,000 in gross assets
- Employ fewer than 25 full-time employees
- Not previously raised funds under SEIS (except in same 3-year window)
- Raise no more than £250,000 through SEIS
6. SEIS Eligibility Criteria for Investors
Investors must:
- Be UK taxpayers
- Not be employees of the company (but can be directors)
- Not hold more than 30% of the company’s shares
- Hold shares for at least 3 years to retain relief
7. How Startups Apply for SEIS
- Apply for Advance Assurance from HMRC (optional but recommended)
- Issue shares and receive investment
- Complete and submit SEIS1 form to HMRC after trading starts
- Receive SEIS3 certificates to distribute to investors
8. How Investors Claim SEIS Relief
- Use the SEIS3 certificate provided by the company
- Claim relief on your self-assessment tax return
- Relief applies to the tax year of investment or can be carried back one year
9. Common SEIS Scheme Sectors
Startups in these sectors often use SEIS:
- Technology and apps
- E-commerce
- Food and drink brands
- Green energy
- Fintech
- Health and wellness
- Digital media and gaming
10. Risks and Considerations
For Investors:
- High risk: early-stage businesses often fail
- Shares are illiquid (not easily sold)
For Startups:
- Must stay compliant to avoid disqualifying investors’ relief
- Restrictions on how funds are used (e.g., no buying existing shares)
Frequently Asked Questions
Is SEIS income tax relief automatic?
No—you must claim it on your tax return using SEIS3.
Can I get SEIS and EIS relief for the same company?
Yes, but at different times—SEIS must be used first.
Do I need to use all £200,000 SEIS allowance in one company?
No—you can split it across multiple SEIS-qualifying startups.
How long does it take to get SEIS approval from HMRC?
Advance Assurance may take 4–8 weeks; post-investment approval also varies.
Can foreign investors use SEIS?
Only if they pay UK income tax.
What if the company fails?
You can claim loss relief against income or capital gains tax.
Conclusion
The SEIS scheme offers an incredible opportunity for UK startups and investors. For startups, it opens the door to early-stage funding. For investors, it delivers generous tax reliefs with the added benefit of supporting innovation and entrepreneurship.