Raising investment and need SEIS tax relief clarity?
SEIS tax relief is one of the most generous incentives in the UK for backing early-stage companies. When you combine it with the right SEIS or EIS Advance Assurance support, it becomes a powerful way to raise investment and make your funding round far more attractive.
If you are building a start-up, understanding how SEIS works helps you bring investors on board with confidence. If you are an investor, it shows you exactly what reliefs you can claim and when they apply.
We will keep things simple and focus on what matters, from eligibility to tax relief examples that show the real cost of investing.
In this guide, you’ll learn:
- What SEIS tax relief actually covers
- How much income tax and Capital Gains Tax relief investors can claim
- Who qualifies for SEIS as a company and as an investor
- How SEIS works in practice, with clear examples
- How ASAs, convertible loans and early exits affect your tax relief
- How to secure SEIS advance assurance and make your round investor-ready
Raising investment and need SEIS tax relief clarity?
What is SEIS tax relief?
SEIS tax relief is a government incentive that rewards individuals for investing in very early-stage companies. It offers generous tax benefits to balance the higher risk of backing young start-ups.
Under the Seed Enterprise Investment Scheme, investors can claim up to 50% income tax relief on qualifying investments. They may also benefit from Capital Gains Tax relief and loss relief if the company does not succeed.
SEIS is designed to help founders raise their first round of capital by making the opportunity more appealing to private investors. When used properly, it can unlock funds that might otherwise be out of reach.
Here is SEIS at a glance:
- Up to 50% income tax relief on investments up to £200,000 a year.
- No Capital Gains Tax on profits if shares are held for three years.
- Loss relief if the company fails.
- 50% Capital Gains reinvestment relief on qualifying gains.
- Companies can raise up to £250,000 through SEIS.
- Companies must have gross assets of £350,000 or less.
If you want to grow your business and raise funds earlier, SEIS is a smart way to give investors confidence while keeping your round simple.
SEIS tax relief rates and limits explained
Understanding SEIS tax relief starts with knowing the current limits. These set the maximum amount a company can raise and how much tax relief an investor can claim.
The figures have increased in recent years, so it’s important to work with the correct thresholds. Using outdated limits is a common mistake and can slow investment rounds.
Here is a clear breakdown of the current SEIS limits.
Investor limits
Investor rule | Current limit |
Maximum investment per tax year | £200,000 |
Income tax relief rate | 50% of the amount invested |
Minimum holding period | 3 years |
Carry back to previous tax year | Yes, if limits allow |
This means an investor putting in £20,000 can claim £10,000 in income tax relief. If their tax bill is lower than the relief available, they may carry some of it back to the previous year.
Company limits
Company rule | Current limit |
Maximum SEIS funding | £250,000 total |
Gross asset cap | £350,000 at the time of share issue |
Trading requirement | Trading for less than 3 years |
Maximum employees | Fewer than 25 |
These limits apply at the point shares are issued, not when the company was incorporated.
If your business later raises EIS investment, the SEIS round must always be completed first.
Types of SEIS relief available
You will see these terms throughout this guide:
- Income tax relief – Cuts an investor’s income tax bill by 50% of their investment.
- Capital Gains Tax relief – No CGT is due on gains if shares are held for three years.
- Capital Gains reinvestment relief – Investors can exempt 50% of a recent gain if it is reinvested into SEIS shares.
- Loss relief – If the company fails, investors can offset their remaining loss against income or gains.
These reliefs work together to reduce the real financial risk of investing in a young company. That is why SEIS is so effective for early fundraising.
What SEIS tax relief covers
SEIS tax relief combines several different tax benefits. Together, they reduce the risk for investors and make it easier for founders to raise their first round of capital.
SEIS is one of the most effective tools for early fundraising. With the right guidance, you can make your first investment round smoother and more compelling for investors.
Income tax relief
Income tax relief is the core benefit of SEIS. Investors can claim 50% of the amount invested, up to £200,000 a year. This reduces their income tax bill for the year of the investment, or the previous year if they carry the relief back.
The investment must be in new, ordinary shares paid for in cash. It also needs to pass HMRC’s “risk to capital” test, which checks that the investor is genuinely taking entrepreneurial risk.
Capital Gains Tax disposal relief
If an investor holds SEIS shares for at least three years, any profit on the sale is free from Capital Gains Tax. This can make a successful exit significantly more rewarding.
You can compare this with the relief available under EIS in our guide to claiming EIS tax relief, which applies to more established companies.
Capital Gains reinvestment relief
If an investor sells an asset and reinvests the gain into SEIS shares, they can exempt 50% of that gain from Capital Gains Tax. It is a separate relief from disposal relief, and both can apply at different stages.
Loss relief
If the company fails, SEIS allows investors to offset their remaining loss against their income tax or Capital Gains Tax bill. This reduces the real amount at risk.
For example, an investor paying tax at 40% who loses £10,000 after income tax relief can claim £4,000 in loss relief. Their actual economic loss becomes £6,000.
Loss relief is one of the reasons investors take SEIS seriously, even when backing companies at the earliest stage.
To see how these benefits compare with EIS, review our overview of the difference between SEIS and EIS. It shows how each scheme works as your company grows.
SEIS relief is only available on ordinary shares, so always check your share structure before issuing any investment.
SEIS eligibility rules for companies
To qualify for SEIS tax relief, your company must meet a set of conditions at the time the shares are issued. These rules make sure the scheme supports genuinely early-stage, high-risk businesses.
An SEIS-qualifying company must:
- Be established in the UK or have a permanent UK base.
- Carry on a new and genuine trading activity.
- Have been trading for less than three years.
- Have fewer than 25 employees.
- Hold no more than £350,000 in gross assets when the shares are issued.
- Have never raised investment through EIS or a Venture Capital Trust.
- Use the funds for growth, development or research.
Certain sectors are excluded from SEIS. These include financial services, property development, energy generation, and activities involving leasing or letting. If you are unsure about your trade category, our guide to the SIC code in the UK can help you identify the right classification for your company.
Your company can have subsidiaries, but they must also meet SEIS eligibility rules. You must also pass HMRC’s risk-to-capital condition, which focuses on whether the business is set up to grow and whether investors are genuinely taking on commercial risk.
If your business qualifies, SEIS can become the most effective way to raise early investment and build momentum in your first funding rounds.
Who can claim SEIS tax relief as an investor
SEIS tax relief is designed for individuals who invest their own money into young, high-risk companies. To qualify, an investor must meet specific rules set by HMRC.
An investor must:
- Be a UK taxpayer.
- Invest in new, ordinary shares that carry full risk.
- Not control the company or hold more than 30% of its shares or voting rights.
- Not be employed by the company. This includes partners and associates.
- Not have any linked loans connected to their investment.
There is one important exception. Directors are allowed to claim SEIS tax relief, provided they are not connected by financial interest. This makes SEIS particularly attractive for founders who wish to invest alongside outside investors.
Investors must hold their shares for at least three years. Selling early, receiving value from the company, or becoming “connected” during this period may lead to a withdrawal of relief.
If investors want to compare SEIS with later-stage reliefs, they may find our guide on the advantages of share capital helpful when planning future rounds.
SEIS is built to support genuine entrepreneurial risk. Meeting these investor conditions ensures the relief stays available and avoids any issues when it is time to claim.
How to claim SEIS tax relief step by step
Claiming SEIS tax relief is straightforward once the right steps are followed. Both the company and the investor have roles in the process.
1. Check the company qualifies
The company must meet the SEIS rules at the time shares are issued. This includes trading for less than three years and having gross assets below £350,000.
2. Secure advance assurance
Advance assurance is not mandatory, but it reassures investors that the company is likely to qualify. Most founders choose to obtain it before raising funds.
3. Make the investment
The investor subscribes for new, ordinary shares and pays in cash. These shares must be full risk with no special rights.
4. The company submits the SEIS1 form
Once a portion of the investment has been used for trading, the company sends form SEIS1 to HMRC. You can review the official process in the Seed Enterprise Investment Scheme: detailed guidance on GOV.UK.
5. HMRC issues SEIS3 certificates
After reviewing the SEIS1, HMRC issues SEIS3 forms to the company. Each investor receives their own certificate.
6. The investor claims the relief
Investors claim the relief through Self Assessment using the SEIS3. If they pay tax through PAYE, they may be able to send the form directly to their tax office.
SEIS relief can be claimed up to five years after the 31 January filing deadline for the tax year in which the investment was made.
SEIS, convertible loans and Advance Subscription Agreements
SEIS tax relief only applies to new shares issued for genuine commercial investment. This creates important differences between convertible loans and Advance Subscription Agreements.
Convertible loans
A convertible loan is debt that may convert into shares in the future. Because the money is lent to the company rather than subscribed as equity, it does not qualify for SEIS.
HMRC treats the conversion of a loan into shares as a debt repayment, not a purchase of new shares. Since the money does not count as new equity raised for trading or growth, SEIS relief is not available.
This often surprises founders, so it is worth checking our guide to the 10 common SEIS and EIS pitfalls if you are planning your first funding round.
Advance Subscription Agreements
An Advance Subscription Agreement, or ASA, is different. It is a commitment to buy shares in advance, with no option for repayment. Because it is not a loan, it may qualify for SEIS if all scheme conditions are met.
ASAs can work well when you need early funds before a valuation is finalised. They must still meet HMRC rules, and many companies choose to seek advance assurance to confirm this.
What founders should do
If you need early capital, an ASA is usually the safer route for SEIS. Convertible loans remain useful in some scenarios, but not if your goal is to offer investors tax relief.
Getting the structure right at the start helps you avoid delays when submitting your SEIS1 and reduces the risk of rejected relief claims.
What happens if the company fails or the investor exits early
SEIS tax relief depends on holding the shares for at least three years and not receiving value from the company during that period. If either condition is broken, some or all of the relief may be withdrawn.
If the company fails
If the business closes before the three-year mark, investors can claim loss relief. This allows them to offset their remaining loss against their income tax or Capital Gains Tax bill.
For example, if an investor loses £5,000 after their income tax relief is applied, and they pay tax at 40%, they can claim £2,000 in loss relief. Their real loss becomes £3,000.
If the investor receives any value from the company during the wind-up, such as a repayment or distribution, HMRC will withdraw a portion of the income tax relief. This clawback is limited to the amount originally given.
If the investor sells early
Selling shares within three years triggers a withdrawal of relief. HMRC will reclaim part or all of the income tax relief, and any gain made on the sale becomes taxable.
Investors exploring options after exit often compare this with later-stage Capital Gains Tax planning. Getting the timing right ensures the investor keeps every part of the relief they are entitled to.
How Sleek helps you maximise SEIS tax relief
Raising investment is easier when your SEIS application is clear, complete and investor-ready. Sleek helps founders structure their round correctly so they can offer investors the full SEIS tax relief with confidence.
We start by checking if your company meets the eligibility rules and, if needed, helping you complete your company registration. We then prepare your SEIS advance assurance, making sure your share structure, business plan and investment documents meet HMRC standards.
Our team also supports you after the raise. We help with record-keeping, accounting and ongoing compliance so your SEIS claims stay secure from start to finish.
Raising investment and need SEIS tax relief clarity?
FAQs on SEIS tax relief
How do you claim SEIS tax relief?
You claim SEIS tax relief using the SEIS3 certificate issued after HMRC approves the company’s SEIS1 form. This is done through Self Assessment or, in some cases, directly with your tax office.
What is SEIS tax relief?
SEIS tax relief is a government incentive that offers income tax relief, Capital Gains Tax relief and loss relief to individuals investing in young UK start-ups. Its aim is to reduce risk and encourage early-stage investment.
How does SEIS tax relief work for investors?
Investors receive up to 50% income tax relief on the amount invested, plus CGT relief if they hold their shares for three years. If the company fails, they can also claim loss relief to reduce their remaining loss.
Who qualifies for SEIS as an investor?
Investors must be UK taxpayers, hold under 30% of the company and not be employed by the business. Directors can qualify as long as they are not connected by financial interest.
What companies qualify for SEIS?
A company must be trading for less than three years, have gross assets below £350,000 and employ fewer than 25 people. It must also carry on a qualifying trade and have a permanent place of business in the UK.
Do you need advance assurance for SEIS?
Advance assurance is not required, but it helps investors feel confident their relief will be approved. Most start-ups obtain it before raising their first round.
What happens if SEIS shares are sold early?
Selling within three years triggers a withdrawal of the relief. HMRC may reclaim the income tax relief, and any gain becomes taxable.
Disclaimer: The preceding information is not legal advice. This content is aimed to provide general guidance. For more formal or legal advice, contact Sleek directly.
