“EIS and SEIS aren’t just tax reliefs – they’re fundraising superpowers for early-stage startups.”🔗

The EIS and SEIS have been incredibly successful at encouraging this private investment and more than £32billion has been invested into 56,000 startups since the schemes were launched.

It has also meant that the UK is one of the best places for startups to raise investment, so you’re in the right place!

What are these tax reliefs?🔗

There are slightly different tax reliefs available with the two schemes. SEIS is the first scheme a startup would usually use and therefore it has slightly more generous reliefs (as very early-stage companies are usually higher risk) than the EIS.

• For an investor, the SEIS could mean that if they were to invest £10,000 in a startup through the SEIS they could claim back the initial £5,000 income tax relief. If it failed, they could also claim £2,250 of loss relief, reducing their actual loss on the £10,000 investment to £2,750.
• Under the EIS, if an investor were to invest £10,000 in a startup they could claim back the initial £3,000 income tax relief. If it then failed, they could also claim £3,150 of loss relief reducing their actual loss on the £10,000 investment to £3,850.

For both schemes, if your startup did well, the investors wouldn’t pay any Capital Gains Tax when the shares got sold.

Why Founders Should Care About EIS and SEIS🔗

EIS and SEIS can help you secure investment for your startup by helping to mitigate the risk for investors. This could mean you have a better chance of securing funding. While many angel investors and funds actively use these schemes, you’ll find that a surprising number of potential investors are unaware of them.

Here’s what you could do:🔗

• Tell everyone: Make sure extended family, friends, and potential investors know about these tax reliefs.
• Reach out to Angels and Investors: go to events, network, reach out on LinkedIn. Most investors don’t require a ‘warm introduction’ and there is a really supportive ecosystem out there.
• Look into EIS and SEIS Funds: These funds pool money from multiple investors and can often invest larger amounts than individual angels. Make sure you check what the fund invests in and at what stage, as often they have specific requirements about which companies they’ll consider. A full list of EIS and SEIS funds is available through the EIS Association’s directory here.

Another huge advantage? Many investors bring more than just money. They provide mentorship, introductions, and hands-on help, which can be invaluable for early-stage startups.

Can all startups use the SEIS and EIS?🔗

Not every business qualifies. There are rules around company size, sector, and age, among other criteria. For example:

• Your startup must have a permanent establishment in the UK.
• Check excluded activities (e.g., financial services, property development) that do not qualify. This list of ‘excluded activities’ can be found here.
• Funds raised must be used for growth and development – not to repay debts or acquire existing businesses.

It’s essential to ensure you meet the ‘Risk to Capital’ condition, meaning the investor’s money must genuinely be at risk.

You can check if your startup is likely to qualify using our checklist below:

Next Steps:🔗

• Advance Assurance
  HMRC offers an Advance Assurance service that allows you to show potential investors that their investment is likely to qualify for SEIS or EIS. You don’t have to apply for this but it can be very helpful. While it’s not a guarantee, it’s a powerful tool to give investors confidence that your startup is likely to qualify. Most funds and angel investors will expect to see this before investing.

• Plan Your Fundraising Timeline
  Raising investment takes time – often three to six months or more. This includes due diligence and waiting for HMRC approvals, which can take several weeks. Start fundraising early – six to 12 months before you need the funds.

• Ongoing Compliance
  The rules around EIS and SEIS don’t just apply when you get the investment – they continue for years afterward. Failure to comply with this could mean your investors lose the tax relief so make sure you are aware of the requirements.

Common Pitfalls to Avoid🔗

While SEIS and EIS are powerful tools, it’s important to be aware of these common mistakes:

• Not getting professional advice: Mistakes can be costly and the schemes can be complicated. There are examples where investors have missed out on millions of £ of tax relief because things have been done in the wrong order and we would always recommend getting professional advice.

• Shares must be held by investors for a minimum of 3 years to qualify for the reliefs. If the shares are sold within this time period, investors would usually be required to pay back the relief.

• Some Funds charge startups fees when they invest. These could be initial fees or ongoing. You can take a look at this table to see who typically charges what. The key thing is to be aware of these fees and to factor them into any financial plans.

• You can’t use the SEIS after you use the EIS. Make sure you use them in the right order and if you are using both in one funding round, make sure you issue the SEIS and EIS shares on different days (SEIS first!).

• Parents, grandparents, children, grandchildren and spouses of anyone with a controlling interest in the company (more than 30% of the shares or an employee of the company) cannot invest through the schemes. Siblings and aunts/uncles are eligible though.

Conclusion: Securing Investment🔗

Raising capital as an early-stage founder is never easy, but SEIS and EIS are powerful schemes which can help you find private investment. These schemes help thousands of startups secure funding every year and can be an important part of your growth strategy.

To make the most of the SEIS and EIS, check if your business qualifies, consider applying for Advance Assurance, and seek professional advice to navigate the complexities. With careful planning and a clear understanding of these schemes, you’ll be well-positioned to attract the investment you need to grow and scale your business.