SEIS: Seed Enterprise Investment Scheme Planning Guide

The Seed Enterprise Investment Scheme (SEIS) is the smaller, higher-relief sibling of EIS, designed to encourage investment into very early-stage UK businesses. With income tax relief of 50 per cent — the most generous available to ordinary investors under any UK tax scheme — SEIS rewards those willing to accept significant risk with commensurately significant tax efficiency.

This guide explains how SEIS works, how it differs from EIS, what risks investors must understand, and how the scheme can be integrated into a broader HNW financial plan.

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What Is SEIS?

SEIS was introduced in 2012 and extended and expanded in subsequent Budgets. It targets the very earliest stage of a company's life: pre-revenue, seed-stage businesses that are typically too small and too early to access institutional funding. The government's intention is to crowd in private capital into a stage of the market where capital is structurally scarce.

To qualify as a SEIS company, the business must:

• Be UK-established and conducting a qualifying trade
• Have been trading for less than 3 years at the point of investment (note: older companies cannot access SEIS)
• Have gross assets below £350,000 before the investment
• Have fewer than 25 full-time equivalent employees
• Not have previously raised EIS or VCT funding (though SEIS can precede future EIS rounds)
• Have a permanent establishment in the UK

The scheme was expanded from April 2023: the company investment limit rose from £150,000 to £250,000, and the investor annual subscription limit rose from £100,000 to £200,000 (split across two consecutive tax years, maximum £100,000 per year).

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The Reliefs: What SEIS Offers

1. Income Tax Relief — 50 Per Cent

The headline figure: investors receive income tax relief at 50 per cent on qualifying investments of up to £200,000 over two consecutive tax years (£100,000 per year). This is set against income tax liability — not taxable income — so a higher rate taxpayer investing £100,000 receives a £50,000 reduction in their tax bill directly.

For a 45 per cent additional rate taxpayer, investing £100,000:

• Income tax relief: £50,000
• Effective cost of investment: £50,000
• If the company fails entirely, the net amount at risk is £50,000
• Loss relief against income (at 45 per cent): £22,500
• Maximum real loss after all reliefs: £27,500 on a £100,000 investment

This "worst case" scenario — total company failure, full relief claimed — illustrates why SEIS is sometimes described as "protected" investment. The protection is real; so is the possibility of losing the remaining £27,500.

2. CGT Reinvestment Relief

SEIS's CGT relief operates differently from EIS. Rather than deferral, SEIS offers exemption: 50 per cent of the capital gain reinvested into qualifying SEIS shares is exempt from CGT permanently (not just deferred). The April 2023 changes raised the amount an investor can subscribe each year (and so the gain that can be sheltered), but the proportion of the reinvested gain that is exempt remains 50 per cent.

For example, an investor realises a £200,000 gain and invests £200,000 in qualifying SEIS shares. Up to 50 per cent of the gain — £100,000 — may be permanently exempted, provided the SEIS investment is qualifying. At the current CGT rate of 24 per cent for higher/additional rate taxpayers, this represents £24,000 of permanent CGT saving.

Note that this is separate from and additional to the income tax relief: both can apply to the same SEIS investment.

3. CGT Disposal Relief

Growth within the SEIS investment (from the initial cost, not after the income tax relief) is exempt from CGT on disposal, provided shares are held for at least three years and income tax relief was obtained. This mirrors the EIS disposal relief.

4. Loss Relief Against Income

If an SEIS company fails and the investment becomes worthless, the investor can claim loss relief against income rather than capital gains. This is calculated on the amount invested less any income tax relief received (the net amount at risk). At a 45 per cent marginal rate, this loss relief is significantly more valuable than claiming the loss against capital gains.

5. Inheritance Tax Business Relief

SEIS shares held for at least two years and remaining in qualifying status normally qualify for Business Relief. From 6 April 2026, however, 100 per cent Business Relief is capped at £2.5 million of combined qualifying assets per estate (the £1 million cap originally announced in the October 2024 Budget was raised to £2.5 million in December 2025, and the allowance is transferable between spouses or civil partners), with the value above that threshold attracting 50 per cent relief — so very large holdings are no longer wholly exempt. Given the very early stage of SEIS companies, the two-year holding requirement should be achievable for most investments, though compliance with qualifying conditions must be maintained throughout.

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SEIS vs EIS: Key Differences

	SEIS	EIS
Max annual investment	£200,000	£1 million (£2m for KICs)
Income tax relief	50%	30%
Company gross assets	£350,000	£15 million
Company employees	<25	<250
Company age	<3 years trading	<7 years (10 years KICs)
CGT on disposal	Exempt (if held 3yrs)	Exempt (if held 3yrs)
CGT relief on reinvestment	50% exemption	Deferral only
IHT Business Relief	Yes (2yr+ hold)	Yes (2yr+ hold)
Loss relief against income	Yes	Yes
Prior EIS/VCT funding	Not permitted	Permitted (with conditions)

The practical implication: SEIS targets micro-companies at seed stage, where risk is highest but reliefs are most generous. SEIS investments should ideally be followed by EIS funding rounds in a successful company — allowing the investor to continue backing the business with EIS after the SEIS limit is exhausted.

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HMRC Advance Assurance

SEIS-qualifying companies can apply to HMRC for advance assurance before raising funds. This gives prospective investors confidence that the company will qualify for SEIS, though assurance is not an absolute guarantee — conditions must be maintained throughout the investment period.

SEIS3 certificates are issued by HMRC once the shares are issued and a compliance statement is submitted. These certificates are what the investor uses to claim relief on their tax return; they may arrive 3–6 months after investment.

Advisers and investors should verify that the company has received advance assurance or, at minimum, confirm with a tax specialist that the company structure meets the qualifying conditions. Investing in a company that turns out not to qualify is not a misunderstanding HMRC will be sympathetic about.

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Risk of Total Loss

SEIS is explicitly designed for seed-stage companies. The vast majority of seed-stage businesses fail. Industry data consistently shows failure rates of 70–90 per cent for very early companies over a 10-year horizon. This is not a reason not to invest in SEIS — the reliefs are calibrated precisely to compensate for this risk — but it must be accepted and internalised before investing.

SEIS is appropriate for investors who:

• Have sufficient income to absorb the full tax relief in the year of investment
• Have capital gains available that can benefit from reinvestment relief
• Have other investments covering their core financial needs (SEIS should not be core allocation)
• Understand that the money may be entirely lost and can absorb that outcome
• Have a genuine interest in or connection with the early-stage company, or a trusted manager making the investment decisions

SEIS is not appropriate as a "safe" tax shelter or as a substitute for prudent investment. An investment driven primarily by tax considerations into a company the investor does not understand carries additional risk of the reliefs being challenged.

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SEIS Funds

As with EIS, SEIS funds provide diversification across multiple qualifying companies. A typical SEIS fund might invest in 10–20 companies across a cohort, reducing the binary risk of any single investment failing.

SEIS funds are typically offered alongside EIS funds by the same manager — often as a "SEIS/EIS" co-investment, where the investor takes SEIS in the earliest round and EIS in subsequent rounds of the same companies. This approach maximises both sets of reliefs across the investment lifecycle of a successful company.

Fees for SEIS funds tend to be higher than EIS funds — given the greater due diligence burden and management intensity of very early-stage companies — and are typically 2–3 per cent per year plus performance fees. Total cost of ownership should be modelled carefully.

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Practical Tax Return Considerations

SEIS reliefs must be claimed actively on the self-assessment tax return. Key points:

• Income tax relief can be claimed in the year of investment or carried back one year
• CGT exemption on reinvestment applies only if the investor claims income tax relief on the same investment
• SEIS3 certificates are required before relief can be claimed; if these are delayed, the relevant year's tax return may need to be submitted on account and amended later
• SEIS and EIS can be combined in the same tax year but are subject to their respective limits independently

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SEIS Within a Broader Tax Planning Framework

SEIS sits alongside EIS and VCT as a suite of venture-stage tax reliefs. The optimal allocation depends on the investor's specific circumstances:

• Investors with large income tax liabilities and appetite for high risk: SEIS first, EIS second
• Investors with CGT to manage: both SEIS (for reinvestment exemption) and EIS (for deferral) have a role
• Investors with IHT concerns: both SEIS and EIS are routes to Business Relief
• Investors who want lower risk with tax-free income: VCT is the appropriate vehicle

SEIS should not be used as a substitute for basic financial planning. Core liquidity, adequate protection (income protection, life assurance), and pension provision should all be in place before allocating capital to SEIS.

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This guide is for general information only and does not constitute regulated financial advice. SEIS investments carry significant risk of capital loss. Tax rules change; reliefs available today may not be available in the future. Seek independent professional advice before investing.

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How Global Investments Can Help

We work with HNW clients to assess whether SEIS — as part of a broader tax-efficient investment strategy — is appropriate for their individual circumstances. We evaluate income tax positions, CGT exposure, IHT liability, and overall portfolio context before making any recommendation. Where SEIS is appropriate, we can introduce clients to established fund managers with verifiable track records.

Contact our team to discuss whether SEIS belongs in your financial plan.