Rules and ethics
Part of SEIS vs EIS: which startup tax relief fits your round?
SEIS vs EIS: which startup tax relief fits your round?
Compare SEIS and EIS on company age, gross assets, employee numbers and investor limits, and see which startup tax relief a UK founder can offer.
What to take away
- SEIS fits a young companyup to £250,000 raised, and investors can claim 50% income tax relief.
- EIS fits an older or larger companyup to £5 million a year and £12 million lifetime, with 30% relief.
- Company age, gross assets and employee numbers decide which scheme is available, not founder preference.
- Order mattersSEIS investment must come before any EIS or VCT money.
- Both need qualifying shares, a qualifying trade and usually HMRC advance assurance.
The tests decide, not the founder
A founder cannot simply choose the scheme with the better relief. HMRC's eligibility tests turn on facts about the company at the date the shares are issued: how long it has traded, what its gross assets are and how many people it employs. Those conditions sit in primary legislation, and the current text is in the Income Tax Act 2007 on legislation.gov.uk.
SEIS vs EIS eligibility tests
SEIS
- Time since first sale
- 3 years
- Gross assets before issue
- Up to £350,000
- Employees
- Fewer than 25
- Maximum company raise
- £250,000
EIS
- Time since first sale
- 7 or 10 years
- Gross assets before issue
- Up to £15 million
- Employees
- Fewer than 250
- Maximum company raise
- £5m a year, £12m lifetime
SEIS is the tighter scheme. A company must be within three years of its first commercial sale, hold gross assets of no more than £350,000 before the share issue and employ fewer than 25 people.
EIS is broader. A company must be within seven years of first commercial sale, or ten years if it is knowledge-intensive. Gross assets must be no more than £15 million before the issue and £16 million afterwards, and the company must employ fewer than 250 people. A company can raise £5 million a year and £12 million in total.
The limits side by side
SEIS
- Time since first commercial sale
- 3 years
- Gross assets before the issue
- Up to £350,000
- Employees
- Fewer than 25
- Maximum company raise
- £250,000
- Investor income tax relief
- 50%
- Investor annual cap
- £200,000
EIS
- Time since first commercial sale
- 7 years, or 10 for knowledge-intensive companies
- Gross assets before the issue
- Up to £15 million, and £16 million afterwards
- Employees
- Fewer than 250
- Maximum company raise
- £5 million a year, £12 million lifetime
- Investor income tax relief
- 30%
- Investor annual cap
- £1 million, or £2 million with a knowledge-intensive focus
Investors face different limits as well. SEIS income tax relief is 50% of the amount subscribed and is capped at £200,000 per investor per tax year. EIS relief is 30%, capped at £1 million, or £2 million where at least £1 million goes into knowledge-intensive companies.
Investor limits side by side
SEIS
- Income tax relief
- 50%
- Annual cap
- £200,000
- Knowledge-intensive cap
- Not applicable
EIS
- Income tax relief
- 30%
- Annual cap
- £1 million
- Knowledge-intensive cap
- £2 million
Sequencing: SEIS first, then EIS
A company that has already taken EIS or VCT investment cannot normally issue SEIS shares later. The usable order is therefore SEIS first, then EIS once the company has moved past the SEIS age or asset tests. Reversing that order removes 50% relief from the earliest investors, which weakens the pitch to angels.
What this means for your investor conversations
Relief changes the net cost of a share, so it belongs in the discussion rather than the small print. A 50% deduction makes a SEIS share cheaper to hold than an EIS share on identical terms, and that difference shapes how startup funding is priced across equity, debt and grant routes.
Records, assurance and deadlines
Advance assurance is not compulsory, but most angel groups and syndicates ask for it before they commit. HMRC's guidance on applying for the Enterprise Investment Scheme sets out the process, and the same approach applies to SEIS.
Money raised must be spent on the qualifying business: within three years for SEIS and two years for EIS. A four-step file helps:
- Confirm trading history, gross assets and headcount at the proposed share issue date.
- Check the trade is not an excluded activity and the shares carry no preferential rights.
- Apply for advance assurance and keep the response with the board papers.
- Issue the shares, file the compliance statement and give investors their certificates.
A funding workflow from cash decision to controlled diligence keeps the share register, board minutes and HMRC correspondence in one place before investors ask for them.
When neither scheme fits
Some companies fall outside both schemes, whether through age, asset levels or an excluded trade. The finance and support pages on GOV.UK list grants, loans and other routes a founder can compare. Individual cases still need a qualified adviser, because share rights and trading history decide the answer.
Common questions
Can a company use SEIS and EIS together?
Yes, but in sequence. Separate share issues can qualify under different schemes, provided the SEIS shares are issued before any EIS or VCT money arrives. Each round is then measured against its own limits.
Do investors claim both reliefs on the same shares?
No. A share issue is either SEIS or EIS. The rate follows the scheme it qualifies under, so an investor claims 50% on SEIS shares or 30% on EIS shares, not both.
How long must the shares be held?
Three years, under both schemes. Selling earlier, or taking value back from the company, can withdraw the relief and trigger a clawback.
What should a founder do before promising relief?
Agree the share terms and the eligibility position with a qualified adviser, then use advance assurance to test the answer with HMRC. This article is general guidance only.
