SEIS and EIS: A Guide to the UK's Enterprise Investment Schemes

The Seed Enterprise Investment Scheme (SEIS) and the Enterprise Investment Scheme (EIS) are government-backed programmes designed to channel private capital into early-stage UK businesses. They do this by offering investors some of the most generous tax reliefs available in the UK tax system.

The reliefs are generous precisely because the investments are risky. Early-stage and small company investing has a high failure rate — HMRC estimates that a meaningful proportion of SEIS and EIS investments result in partial or total loss of capital. Anyone considering SEIS or EIS should understand both the tax benefits and the underlying investment risk with equal clarity.

What Are SEIS and EIS?

SEIS targets the earliest-stage companies: businesses raising up to £250,000 in total SEIS funding, which are genuinely new (generally less than 3 years old), and have fewer than 25 employees and gross assets under £350,000 before the investment.

EIS targets slightly more established — though still small and early-stage — companies. Following reforms effective 6 April 2026, EIS companies can raise up to £10m per year (up from £5m) with a lifetime limit of £24m (up from £12m); knowledge-intensive companies (KICs) can raise £20m per year with a lifetime cap of £40m. EIS companies must have been trading for fewer than 7 years (or 10 years for KICs), have fewer than 250 employees (500 for KICs), and gross assets not exceeding £30m before the investment (increased from £15m in April 2026).

Both schemes require investors to be genuinely at risk — you are investing in shares with no guaranteed return, and you must hold the shares for a minimum of three years to retain the reliefs.

The Tax Reliefs: SEIS

Income tax relief: 50% of the amount invested, offset against your income tax bill for the year of investment (or the prior year, by election). On a £100,000 SEIS investment, you receive a £50,000 reduction in your income tax liability. This relief is given immediately — it does not depend on the outcome of the investment.

CGT reinvestment relief: Capital gains realised on other assets in the same or prior tax year can be sheltered by reinvesting the proceeds into SEIS. Up to 50% of the gain can be exempted from CGT.

CGT exemption on disposal: If you hold SEIS shares for three years and the company qualifies throughout, any gain on disposal is free of CGT. The 50% income tax relief reduces your effective base cost, but the growth above that — if any — is entirely tax-free.

Loss relief: If the investment fails (as many do), you can claim loss relief against income tax. The net loss after income tax relief is the effective loss. For example: invest £100,000 → receive £50,000 income tax relief → effective exposure is £50,000 → if company fails completely, claim loss relief on £50,000 at your marginal rate (45% for additional rate taxpayers = £22,500 further tax reduction) → effective net loss from total failure: £27,500 from a £100,000 investment. This is the "worst case" with the tax reliefs.

IHT Business Property Relief (BPR): SEIS shares qualify for BPR after 2 years, making them 100% exempt from IHT while held. This adds a further benefit for IHT planning.

The Tax Reliefs: EIS

Income tax relief: 30% of the amount invested, offset against income tax. Maximum annual investment qualifying for EIS relief: £1,000,000 per year (or £2,000,000 if at least £1,000,000 is invested in knowledge-intensive companies).

CGT deferral: Capital gains from other asset disposals can be deferred indefinitely by investing into EIS (not sheltered outright, as in SEIS — deferred until the EIS shares are sold). This is particularly useful for timing gains.

CGT exemption on disposal: Same as SEIS — after 3 years, gains on disposal are CGT-free.

Loss relief: Same mechanism as SEIS, but starting from a lower income tax relief rate (30%).

IHT BPR: Same 2-year qualifying period applies.

The Investment Risk: Read This Carefully

The reliefs exist because these investments are genuinely high-risk. HMRC does not publish definitive failure rates, but independent analyses of early-stage UK company investing consistently show that a significant proportion of companies fail within 5 years. Some funds that aggregate SEIS/EIS investments diversify across 20-30 companies to manage this risk — but even diversified funds will see a proportion of zero returns.

The tax reliefs do not make a bad investment into a good one. They make the economics of higher-risk investing more attractive for those who can genuinely afford to lose capital. SEIS and EIS are not savings products.

Who Are SEIS and EIS Suited To?

Income tax reducers: Higher and additional rate taxpayers who have a significant income tax liability in a given year — perhaps from a business sale, a bonus, or an inheritance — can use SEIS/EIS to reduce that liability immediately. The timing works: SEIS relief can be carried back one year, and EIS relief is claimable in the year of investment.

CGT deferrers: An individual who has sold a business or property and faces a CGT bill can invest EIS proceeds to defer that gain, buying time to plan and potentially benefiting from lower rates or annual exemptions in future years.

IHT planners: Individuals with large taxable estates who can genuinely afford to lock up capital in illiquid, high-risk investments for 2+ years can use SEIS/EIS holdings to remove value from their IHT estate after the 2-year BPR qualifying period.

The international dimension: UK tax residence is required to claim these reliefs. If you are not UK resident in the year of investment, you cannot claim SEIS or EIS income tax relief. Non-UK investors in SEIS/EIS companies get no equivalent benefit in their home jurisdiction (unless a separate home-country provision exists).

For internationally mobile individuals — returning to the UK, maintaining UK residence — understanding whether you will be UK resident for the tax year of investment is important before committing. EIS CGT deferral can be claimed by UK residents; if you leave the UK after claiming deferral, the deferred gain may crystallise.

SEIS/EIS Funds vs Direct Investment

Most private investors access SEIS and EIS through specialist funds that spread capital across a portfolio of qualifying companies. This diversification reduces — but does not eliminate — the risk of losing capital.

SEIS and EIS funds must still comply with all scheme rules, and the underlying companies must maintain their qualifying status throughout the three-year holding period. If a company loses qualifying status (for example, by being acquired by a non-qualifying buyer), reliefs may be clawed back.

Direct investment in a single company concentrates the risk but may give the investor more insight into the business and control over the timing of their investment.

Compliance and Practical Points

• Reliefs require the company to issue an SEIS 3 or EIS 3 compliance certificate before the investor can claim on their self-assessment return.
• Investment must be in newly issued ordinary shares — purchases on a secondary market do not qualify.
• You cannot be "connected" to the company (broadly: more than 30% shareholding or employment with the company).
• The three-year qualifying period begins from the date shares are issued (or the date the company began trading, if later).

How Global Investments Can Help

SEIS and EIS sit at the intersection of tax planning and early-stage investment. Global Investments can help clients assess whether these schemes are appropriate for their circumstances — including their tax position, investment horizon, risk appetite, and liquidity requirements. We work with specialist SEIS/EIS fund managers and tax advisers to ensure investments are structured correctly and reliefs are claimed properly. As with all investments in this guide, the value of investments can fall as well as rise, and you may not recover the amount invested.