SEIS/EIS
SEIS vs. EIS: What’s the Difference and Which One is Right for You?
Introduction
For most startups, securing the first round of investment is one of the hardest challenges. Investors are often hesitant to fund early-stage businesses due to high risk and uncertainty.
This is where the Seed Enterprise Investment Scheme (SEIS) plays a crucial role. The UK government introduced SEIS to de-risk early-stage startup investment by offering significant tax reliefs to investors.
By making startup investing more attractive, SEIS increases the likelihood of securing funding. Many angel investors, venture capital firms, and early-stage funds specifically look for SEIS-eligible startups because of the benefits it provides.
In this guide, we’ll cover:
Why investors hesitate to fund early-stage startups
How SEIS tax reliefs encourage investment
How SEIS-backed startups attract more investors
Practical steps to use SEIS in your fundraising strategy
By the end, you’ll understand why SEIS can be a game-changer for your startup’s fundraising success.
Why Early-Stage Investors Hesitate
Angel investors and early-stage funds are often reluctant to invest in new startups due to the following risks:
High failure rates – Many startups fail within their first few years.
Lack of financial history – Investors prefer businesses with proven traction.
Long exit timelines – Startups take years before delivering returns.
Uncertain market fit – Early-stage companies often pivot or fail to gain traction.
Because of these factors, investors are cautious, making it difficult for startups to secure their first backers.
SEIS directly addresses these concerns by reducing investor risk and increasing potential rewards.
How SEIS De-Risks Startup Investment
SEIS provides significant tax incentives that minimize downside risk and boost returns for investors.
SEIS Tax Benefits for Investors
50% Income Tax Relief – Investors can claim back half of their investment against their tax bill.
Capital Gains Tax (CGT) Exemption – No CGT on shares held for at least 3 years.
Loss Relief – If the investment fails, investors can offset losses against tax, reducing downside risk.
Inheritance Tax (IHT) Relief – SEIS shares are exempt from IHT after 2 years.
SEIS vs. EIS: Which One is Right for Your Startup?
Lifetime Limits:
SEIS: Raise up to £250,000
EIS: Raise up to £12 million (or £20m for KICs)
Company Age:
SEIS: Startups less than 3 years old
EIS: Startups less than 7 years old (or up to 10 years for KICs)
Employee Limits:
SEIS: Fewer than 25 employees
EIS: Fewer than 250 employees (or 500 employees for KICs)
Tax Relief for Investors:
SEIS: 50% income tax relief on investment
EIS: 30% income tax relief on investment
Capital Gains Tax (CGT) Benefits:
SEIS: No CGT if shares are held for 3+ years
EIS: No CGT if shares are held for 3+ years
Loss Relief:
SEIS: Offset up to 45% of losses
EIS: Offset up to 45% of losses
Maximum Per Investor:
SEIS: £200,000 per tax year
EIS: £1 million per tax year (or £2 million for knowledge-intensive companies)
How to Use SEIS in Your Fundraising Strategy
Now that you know why SEIS attracts investors, here’s how to leverage it effectively.
Step 1: Get SEIS Advanced Assurance
SEIS Advanced Assurance is a pre-approval from HMRC, confirming that your startup qualifies.
Most investors will require this before committing funds.
It proves eligibility and makes your startup more credible.
Learn how to apply for SEIS Advanced Assurance.
Step 2: Market Your SEIS Eligibility to Investors
Clearly state that your startup is SEIS-approved in investor materials.
List your startup on SEIS-focused investment networks.
Step 3: Target SEIS Investors & Angel Networks
Some investment groups specialize in SEIS startups, including:
UK Business Angels Association (UKBAA)
Angel Investment Network
SEIS Venture Capital Funds
Crowdfunding platforms like Seedrs & Crowdcube
Final Thoughts: SEIS as a Fundraising Game-Changer
SEIS removes major investor concerns, making your startup far more investable.
Lower risk for investors = More funding opportunities.
Bigger investment pool = Easier access to capital.
Faster funding rounds = Quicker startup growth.
Introduction
For most startups, securing the first round of investment is one of the hardest challenges. Investors are often hesitant to fund early-stage businesses due to high risk and uncertainty.
This is where the Seed Enterprise Investment Scheme (SEIS) plays a crucial role. The UK government introduced SEIS to de-risk early-stage startup investment by offering significant tax reliefs to investors.
By making startup investing more attractive, SEIS increases the likelihood of securing funding. Many angel investors, venture capital firms, and early-stage funds specifically look for SEIS-eligible startups because of the benefits it provides.
In this guide, we’ll cover:
Why investors hesitate to fund early-stage startups
How SEIS tax reliefs encourage investment
How SEIS-backed startups attract more investors
Practical steps to use SEIS in your fundraising strategy
By the end, you’ll understand why SEIS can be a game-changer for your startup’s fundraising success.
Why Early-Stage Investors Hesitate
Angel investors and early-stage funds are often reluctant to invest in new startups due to the following risks:
High failure rates – Many startups fail within their first few years.
Lack of financial history – Investors prefer businesses with proven traction.
Long exit timelines – Startups take years before delivering returns.
Uncertain market fit – Early-stage companies often pivot or fail to gain traction.
Because of these factors, investors are cautious, making it difficult for startups to secure their first backers.
SEIS directly addresses these concerns by reducing investor risk and increasing potential rewards.
How SEIS De-Risks Startup Investment
SEIS provides significant tax incentives that minimize downside risk and boost returns for investors.
SEIS Tax Benefits for Investors
50% Income Tax Relief – Investors can claim back half of their investment against their tax bill.
Capital Gains Tax (CGT) Exemption – No CGT on shares held for at least 3 years.
Loss Relief – If the investment fails, investors can offset losses against tax, reducing downside risk.
Inheritance Tax (IHT) Relief – SEIS shares are exempt from IHT after 2 years.
SEIS vs. EIS: Which One is Right for Your Startup?
Lifetime Limits:
SEIS: Raise up to £250,000
EIS: Raise up to £12 million (or £20m for KICs)
Company Age:
SEIS: Startups less than 3 years old
EIS: Startups less than 7 years old (or up to 10 years for KICs)
Employee Limits:
SEIS: Fewer than 25 employees
EIS: Fewer than 250 employees (or 500 employees for KICs)
Tax Relief for Investors:
SEIS: 50% income tax relief on investment
EIS: 30% income tax relief on investment
Capital Gains Tax (CGT) Benefits:
SEIS: No CGT if shares are held for 3+ years
EIS: No CGT if shares are held for 3+ years
Loss Relief:
SEIS: Offset up to 45% of losses
EIS: Offset up to 45% of losses
Maximum Per Investor:
SEIS: £200,000 per tax year
EIS: £1 million per tax year (or £2 million for knowledge-intensive companies)
How to Use SEIS in Your Fundraising Strategy
Now that you know why SEIS attracts investors, here’s how to leverage it effectively.
Step 1: Get SEIS Advanced Assurance
SEIS Advanced Assurance is a pre-approval from HMRC, confirming that your startup qualifies.
Most investors will require this before committing funds.
It proves eligibility and makes your startup more credible.
Learn how to apply for SEIS Advanced Assurance.
Step 2: Market Your SEIS Eligibility to Investors
Clearly state that your startup is SEIS-approved in investor materials.
List your startup on SEIS-focused investment networks.
Step 3: Target SEIS Investors & Angel Networks
Some investment groups specialize in SEIS startups, including:
UK Business Angels Association (UKBAA)
Angel Investment Network
SEIS Venture Capital Funds
Crowdfunding platforms like Seedrs & Crowdcube
Final Thoughts: SEIS as a Fundraising Game-Changer
SEIS removes major investor concerns, making your startup far more investable.
Lower risk for investors = More funding opportunities.
Bigger investment pool = Easier access to capital.
Faster funding rounds = Quicker startup growth.
SEIS or EIS? Get expert help choosing the right scheme.
The wrong choice could mean missing out on tax relief or investor interest. Speak to an SEIS/EIS specialist today and make the right funding decision.