Raising money as a small business is hard. Angel investors and early-stage funds take on real risk when they back a company that has no long track record. To encourage them, the UK government created two schemes that offer substantial tax reliefs to qualifying investors: the Seed Enterprise Investment Scheme (SEIS) and the Enterprise Investment Scheme (EIS). If you are trying to attract outside investment, understanding these schemes is essential.

This article is general information, not financial or legal advice. Rules and figures change, so always check the latest guidance on GOV.UK or speak to a qualified professional.

What Are SEIS and EIS?

Both schemes were created by HMRC to encourage private investment into smaller, higher-risk companies. In simple terms, they give investors a range of tax benefits in return for putting money into qualifying businesses. The idea is that by reducing the financial risk for the investor, the government makes it more likely that promising small companies can find the backing they need to grow.

SEIS is aimed at very early-stage companies — often those just starting out or in their first couple of years. EIS covers a broader range of businesses that have moved beyond the seed stage but are still growing and relatively small. The two schemes share a similar structure but differ on key thresholds, limits, and relief rates. Because these figures are set by government and can change with each Budget, you should always check the current limits and conditions on GOV.UK before making any decisions.

Why Investors Like These Schemes

Tax relief is the core attraction. Under both SEIS and EIS, qualifying investors can claim back a percentage of the amount they invest against their income tax bill. On top of that, if they hold the shares for the required period and eventually sell them at a profit, they may pay no Capital Gains Tax on those gains. And if the investment does not work out — which is always a possibility with early-stage companies — they can claim loss relief to offset some of the loss against their other income or gains.

For an angel investor weighing up whether to back your business, these reliefs can make a meaningful difference to the effective cost of the investment. A proportion of their downside risk is effectively shared with the government, which can tip the balance in your favour.

For a small business founder, SEIS or EIS status can be the difference between an investor saying yes and saying no — not because the idea is better, but because the numbers work for the investor.

What It Means for Your Company

To offer SEIS or EIS-qualifying shares, your company has to meet a set of conditions set by HMRC. These cover areas including:

  • The size of your company (number of employees, gross assets).
  • How long your company has been trading.
  • The type of trade you carry out — some activities are excluded.
  • How the money raised must be used.
  • The structure of the shares you issue.

Because these rules are detailed and the consequences of getting them wrong can be serious (investors losing their reliefs if the company turns out not to qualify), it is strongly advisable to get professional advice before you start approaching investors on the basis of SEIS or EIS.

Advance Assurance: Worth Getting

Before you raise money, you can apply to HMRC for what is called advance assurance. This is not a guarantee, but it is HMRC confirming that, based on the information you have provided, it appears your company would qualify for the relevant scheme at the time of investment.

Many investors — particularly those who have been investing for a while — will ask whether you have advance assurance before they commit. Having it in place speeds up the process and gives everyone more confidence. Applying for advance assurance is free, though the process requires careful preparation. You will need to describe your business and how you plan to use the investment in some detail.

Note that advance assurance is not the final approval. The actual compliance statement (the document investors use to claim their relief) is issued after the shares are issued and you have submitted the relevant forms to HMRC.

How to Find Out If Your Business Qualifies

The rules around SEIS and EIS are genuinely complex, and the guidance on GOV.UK runs to considerable detail. Rather than trying to assess your own eligibility from a summary like this one, the practical steps are as follows:

  1. Read the HMRC guidance for SEIS and EIS on GOV.UK to get a feel for the main conditions.
  2. Speak to an accountant or tax adviser who has experience with these schemes. Many accountants who work with start-ups and growing businesses will have done this before.
  3. If you are working with an accelerator, incubator, or business support organisation, ask whether they can point you to advisers or networks familiar with SEIS and EIS investment.
  4. Consider applying for advance assurance once you have taken advice and are confident you qualify.

A Few Things to Be Aware Of

It is worth being clear-eyed about what these schemes can and cannot do for you. SEIS and EIS make your company more attractive to a certain type of investor, but they do not replace the need for a strong business proposition. Investors still want to see a credible team, a real market opportunity, and a plan for how their money will be used.

Also bear in mind that taking on equity investment means giving up a share of ownership in your business. This is a significant decision and one that is worth thinking through carefully alongside other funding options. Our guide on grants versus loans covers some of the trade-offs, and if you are also exploring non-dilutive funding, our article on government grants for UK small businesses is worth a read alongside this one.

Summary

  • SEIS suits very early-stage companies; EIS suits slightly larger or more established growing businesses.
  • Both schemes offer investors income tax relief, CGT exemption on gains, and loss relief — check current rates and limits on GOV.UK.
  • Your company must meet HMRC's qualifying conditions before you can offer these reliefs.
  • Advance assurance from HMRC is free and makes fundraising smoother.
  • Get qualified advice before approaching investors on the basis of SEIS or EIS.