SEIS and EIS Tax Relief for Founders: The 2026/27 Playbook

Most founders first meet SEIS and EIS when an angel investor asks a blunt question: “Are you SEIS or EIS eligible?” If you hesitate, the conversation stalls. These two schemes are HMRC-backed tax reliefs for people who invest in early-stage UK companies, and they make your round far easier to close. But the rules sit with you, the founder, not the investor. You check eligibility, you apply for advance assurance, you issue the shares in the right order, and you file the compliance forms afterwards. Get one step wrong and your investors lose their relief.

In short: SEIS gives investors 50 percent income tax relief on up to £200,000 a year, with a lifetime company cap of £250,000. EIS gives 30 percent relief on up to £1 million per investor per year. Get HMRC advance assurance before issuing shares, issue SEIS shares first and EIS shares at least a day later, then file SEIS1/EIS1.

This guide is written for founders planning a pre-seed or seed raise in the 2026/27 tax year. All limits and rules are stated as of October 2026. If you are earlier in the journey and still choosing your route into business, read our franchise vs starting your own business guide, which covers where SEIS and EIS fit into the independent startup path.

What is SEIS?

SEIS is HMRC’s flagship scheme for very early-stage UK companies. It lets individual investors claim 50 percent income tax relief on money they invest in qualifying startups. For founders, SEIS is the sharpest tool in the pre-seed round: it halves the effective risk for the first angels who back you, which is often the difference between a round that closes and one that does not.

The headline facts, as of October 2026:

• Investor relief: 50 percent income tax relief on up to £200,000 invested per tax year.
• Company cap: £250,000 total SEIS investment per company, for its lifetime. This is the official figure in gov.uk guidance. Some sites publish £500,000. That figure is wrong.
• Company age: you must have been carrying on a new trade for no more than 3 years (some competitor pages say 2 years; the official limit is 3).
• Company size: fewer than 25 employees and gross assets of no more than £350,000 immediately before the share issue.
• Capital gains: investors pay no capital gains tax if they sell the shares after at least 3 years.

One point causes constant confusion, so let me settle it plainly. The company does not claim SEIS. Your investors claim the relief on their own Self Assessment tax returns. Your job is to make the company eligible, get HMRC’s advance assurance, issue the shares correctly, and hand investors their SEIS3 certificates.

What is EIS?

EIS is the older, larger sibling scheme for companies that have moved beyond SEIS or grown past its limits. It gives investors 30 percent income tax relief and carries no capital gains tax on qualifying gains held for 3 years, plus loss relief and inheritance tax relief (Business Property Relief) in some circumstances.

The headline facts, as of October 2026, including the changes made by Finance Act 2026 for investments on or after 6 April 2026:

• Investor relief: 30 percent income tax relief on up to £1 million per tax year (£2 million where at least £1 million goes into knowledge-intensive companies).
• Company limits: £10 million per year and £24 million lifetime (£20 million per year and £40 million lifetime for knowledge-intensive companies).
• Company age: shares must be issued within 7 years of the company’s first commercial sale (10 years for knowledge-intensive companies).
• Company size: fewer than 250 employees and gross assets of no more than £30 million immediately before the share issue.
• Capital gains: no CGT on gains if shares are held for at least 3 years, plus CGT deferral relief on other gains reinvested into EIS shares.

As with SEIS, the relief belongs to the investor. The company creates the conditions for it to be claimed.

SEIS vs EIS: the differences that matter for founders

	SEIS	EIS
Investor income tax relief	50 percent	30 percent
Investor annual limit	£200,000	£1 million (£2 million with KICs)
Company lifetime limit	£250,000	£24 million (£40 million KICs)
Company annual limit	Part of the £250k cap	£10 million (£20 million KICs)
Company age	Trading under 3 years	First issue within 7 years of first sale (10 for KICs)
Employees	Fewer than 25	Fewer than 250
Gross assets	£350,000 or less	£30 million or less before issue
Typical stage	Pre-seed, prototype	Seed to Series B
CGT on exit	Exempt after 3 years	Exempt after 3 years

A “knowledge-intensive company” (KIC) is a business that spends a high share of its costs on innovation, typically research and development or one that employs many skilled people. If you are a deep-tech or science-led startup, check the KIC criteria in the HMRC Venture Capital Schemes Manual, because the limits are far more generous. All figures above are as of October 2026.

Does your startup qualify for SEIS or EIS?

Run through this checklist before you spend time on an application.

Company requirements

1. A UK limited company, unquoted. SEIS and EIS require a limited company registered in the UK that is not listed on a stock exchange. If you are currently a sole trader, you need to incorporate first. Our sole trader vs limited company guide explains why incorporation also matters for tax and credibility.
2. A qualifying trade. Most trades qualify, including manufacturing, software, and services. Excluded activities include dealing in land or property, financial activities, legal and accountancy services, receiving royalties, and some property-backed businesses. If your trade sits near an excluded activity, get advice before applying.
3. The risk-to-capital condition. HMRC must be satisfied the company genuinely aims to grow and develop and that investors face a real risk of losing capital. Safe, asset-backed returns dressed up as startup equity will fail this test.
4. Full-risk ordinary shares. Investors must get full-risk ordinary shares with no preferential rights, no guarantees, and no arrangements that protect them from normal commercial risk.

Founder and investor requirements

• Founders and directors cannot claim relief on their own company. The 30 percent rule says anyone who is “connected” to the company, meaning anyone holding more than 30 percent of the shares or voting power, or who is an employee or director in most cases, is disqualified from claiming relief. A founder putting their own money in gets no SEIS or EIS relief on it. Do not pitch your round on relief you cannot receive.
• Investors must pay cash. SEIS and EIS shares must be paid for in cash. Shares issued in return for services, debt conversion without fresh cash, or unpaid share capital do not qualify.

How does advance assurance work?

Advance assurance is HMRC’s pre-issue confirmation that your planned share issue is likely to qualify. It is not legally required. In practice, professional angels and syndicates treat it as non-negotiable and will not sign until they see it.

Step-by-step: applying for advance assurance

1. Check eligibility first. Run the company and trade checklist above and confirm the scheme, SEIS or EIS or both, fits your stage and figures.
2. Write a substantive business plan. HMRC expects a real plan with financial forecasts, typically 15 to 20 pages with modelling, explaining what the company does, how the money will be used, and the growth case. Our business plan guide covers the structure HMRC assessors expect.
3. Prepare the supporting documents. You will typically need: the business plan and financial forecasts; the latest accounts if any; a cap table showing current shareholdings; the articles of association; details of any shareholder agreement; evidence of investor interest (emails or term sheets showing the round is real); and a description of how the funds will be spent.
4. Apply to HMRC’s Venture Capital Reliefs Team. Applications go to the Small Company Enterprise Centre. You can apply for SEIS and EIS assurance at the same time. A reported September 2026 example: a fintech secured dual assurance for £250,000 under SEIS plus £700,000 under EIS in one process.
5. Wait for the response. Reported timelines vary from about 4 to 8 weeks for straightforward applications to 12 to 16 weeks for complex ones. These are reported ranges from advisers and founders, not official HMRC service standards. Apply early: three months before you need the money is a sensible buffer.
6. Do not issue shares before assurance. You can technically issue without it, but no serious investor will commit, and a failed application after issue leaves you with an unfixable problem.

What to do if assurance is delayed or refused

If weeks pass without a response, follow up through the Venture Capital Reliefs Team rather than issuing shares in the meantime. If HMRC refuses assurance, you cannot simply reapply with the same facts; the first application has to be right. A refusal usually means eligibility was not demonstrated, the business plan was too vague, or investor interest was not evidenced. Fix the substance, with professional advice, before approaching HMRC again.

In what order do you issue SEIS and EIS shares?

This is the single most expensive detail to get wrong. The rule is simple:

1. Issue SEIS shares first.
2. Issue EIS shares at least a day later. SEIS and EIS shares cannot be issued on the same day.
3. The SEIS amount counts toward EIS lifetime caps. Money raised under SEIS is included in the £24 million EIS lifetime limit (£40 million for KICs), so plan the sequencing across rounds with your accountant.

Worked example: a £450,000 seed round

Imagine your company has advance assurance for £250,000 under SEIS and £700,000 under EIS, and you want to close £450,000 now.

• Day 1: issue £250,000 of SEIS shares to your first angels. This uses the entire SEIS lifetime cap.
• Day 2 or later: issue £200,000 of EIS shares to the remaining investors.
• Result: the SEIS investors claim 50 percent income tax relief (£125,000 of relief on £250,000 invested). The EIS investors claim 30 percent (£60,000 of relief on £200,000 invested). The round closes at £450,000 and £700,000 of EIS capacity remains for the next round.

If you had issued the EIS shares first, or on the same day, the SEIS relief could have been lost entirely.

What happens after the investment? SEIS1, SEIS2 and SEIS3

Compliance does not end when the money lands. The company owes its investors a documented process.

1. Trade and spend. The company must begin trading (or already be trading) and spend the funds on the qualifying trade. As a rule of thumb drawn from HMRC practice, you can file the compliance statement once you have traded for 4 months or spent at least 70 percent of the money raised.
2. File SEIS1 (or EIS1) with HMRC. This is the company’s compliance statement confirming the shares, investors, and conditions. It must be filed within 2 years of the share issue. Filing it too early, before the conditions are met, is a common founder mistake.
3. Receive SEIS2 (or EIS2) from HMRC. This is HMRC’s authorisation letter confirming it accepts the compliance statement.
4. Send SEIS3 (or EIS3) certificates to each investor. Only then can investors claim their relief on their Self Assessment tax return. Investors can also carry the relief back one tax year if they had enough income tax liability that year, a detail worth relaying to your angels.

Chase this process proactively. Investors waiting months for certificates remember the delay at follow-on time.

What can go wrong: the founder pitfalls that kill relief

• Issuing shares before the cash arrives. HMRC reports this as one of the most common failure reasons. The investment funds must land in the company bank account before, or at the same time as, the shares are issued. Make sure your business bank account is fully operational before closing day.
• Issuing SEIS and EIS on the same day. See the sequencing rules above. One day apart is the minimum.
• Preferential share rights. Any preference, put option, or downside protection on the shares disqualifies the issue. Full-risk ordinary shares only.
• Connected investors. Anyone holding more than 30 percent, or directors and their associates, cannot claim. Check the cap table before promising relief.
• Raising less than the assured amount. This does not invalidate the assurance, but file the compliance forms for the amount actually issued and keep the paperwork consistent.
• Pivoting or being acquired within 3 years. Relief can be withdrawn if the company ceases to qualify. Investors may have to repay relief. Factor this into any acquisition or major pivot in years one to three.
• Non-UK investors. Overseas investors can invest, but SEIS and EIS income tax relief only helps them if they have UK income tax liability to offset. Manage expectations in the pitch.
• Stale assurance. Advance assurance relates to a specific share issue and set of facts. If months pass or the facts change, re-confirm with HMRC rather than relying on an old letter.

How do SEIS and EIS interact with grants and other reliefs?

Grants and de minimis state aid

If your company has received grant aid, such as an Innovate UK award, in the last 3 years, that aid may count toward the £250,000 SEIS company cap under de minimis state aid rules. Almost no founder content explains this, and it can quietly reduce how much SEIS you can raise. List all grant income in your advance assurance application. Our grants guide explains how public funding interacts with private fundraising.

Stacking reliefs

SEIS and EIS are investor-level reliefs, so they sit naturally alongside company-level reliefs. Many startups combine SEIS or EIS fundraising with R&D tax credits claimed on the company’s corporation tax return, and later with Patent Box on qualifying profits. Our R&D tax credits guide explains the company side, and the corporation tax mechanics are covered in our corporation tax guide. This is normal practice, but each scheme has its own conditions, so take advice on the combination.

Context: VCT and EMI changes from April 2026

Two adjacent changes are worth knowing for 2026/27. Venture Capital Trust (VCT) income tax relief fell from 30 percent to 20 percent from April 2026, which has made direct EIS investment relatively more attractive to angels. The Enterprise Management Incentives (EMI) scheme for employee share options was also expanded from April 2026, which matters when you start hiring with equity. Both changes are reported by advisers; confirm the current position before relying on them in a pitch.

A real-numbers example: what an investor actually risks

Take an angel investing £20,000 in your SEIS round who pays income tax at the 40 percent rate.

• Income tax relief: 50 percent of £20,000 = £10,000 off their tax bill.
• Effective at-risk amount: £20,000 minus £10,000 = £10,000.
• Worst case: if the company fails and the shares become worthless, loss relief can offset the remaining £10,000 against their income at 40 percent, worth up to £4,000.
• Total worst-case loss: roughly £6,000 on a £20,000 investment.

That arithmetic is what makes SEIS rounds fundable. For EIS at 30 percent relief, the equivalent £20,000 investment risks £14,000 after relief, with loss relief on the balance. This is exactly the story to tell in your pitch deck, and it is why advance assurance belongs in your data room before the first investor meeting.

Frequently asked questions

1. Is advance assurance legally required for SEIS or EIS?

No, it is not a legal requirement. In practice, professional angels and syndicates will not invest without it, so treat it as essential.

2. How long does the SEIS or EIS advance assurance process take?

Reported timelines run from about 4 to 8 weeks for straightforward applications to 12 to 16 weeks for complex cases. These are adviser and founder reports, not official HMRC service standards. Allow three months in your fundraising plan.

3. Can I apply for advance assurance before I have investors lined up?

Yes, and you should. HMRC wants evidence of investor interest, such as emails or draft term sheets, but you do not need signed commitments before applying.

4. Can a founder or director invest in their own company under SEIS?

The company can accept the money, but the founder cannot claim SEIS or EIS relief on it. The 30 percent connected-person rule disqualifies anyone holding more than 30 percent of shares or voting power, and directors in most cases. Keep founder capital and angel capital clearly separated in the cap table.

5. Can SEIS and EIS be used together, and in what order?

Yes. Issue SEIS shares first, then EIS shares at least a day later. Never issue them on the same day, or the SEIS relief can be lost.

6. What is the difference between SEIS and EIS?

SEIS is for very early-stage companies: 50 percent investor relief, a £250,000 company lifetime cap, trading under 3 years, fewer than 25 employees. EIS is for later-stage companies: 30 percent investor relief, £10 million per year and £24 million lifetime company limits (higher for KICs, as of April 2026), within 7 years of first sale.

7. What is the SEIS1 filing deadline?

File the SEIS1 compliance statement within 2 years of the share issue, and only once the conditions are met (broadly, 4 months of trading or 70 percent of funds spent).

8. Can non-UK investors join a SEIS round?

Yes, but SEIS and EIS income tax relief only benefits investors with UK income tax liability to offset. Make this clear before they commit.

9. Who counts as a connected person under the 30 percent rule?

Anyone holding more than 30 percent of the company’s shares or voting power, plus associates such as spouses and business partners, and employees or directors in most cases. Connected people cannot claim relief.

10. What documents does HMRC need for advance assurance?

A business plan with financial forecasts (typically 15 to 20 pages), latest accounts, a cap table, the articles of association, shareholder agreement details, evidence of investor interest, and a description of how the funds will be used.

11. Can SEIS tax relief be taken back?

Yes. Relief is withdrawn if the shares are sold within 3 years or the company ceases to qualify, for example through a pivot into an excluded trade or an acquisition that ends the qualifying conditions. Investors would have to repay.

12. What is the risk-to-capital condition?

HMRC’s test that the company genuinely aims to grow and that investors face a real risk of losing their money. Arrangements with guaranteed returns or downside protection fail it.

13. What can I spend SEIS investment on?

The funds must be spent on the qualifying trade of the company, covering genuine business growth: product development, hiring, marketing, and operating costs tied to growth. Personal drawings or debt repayment to connected parties are red flags.

14. What happens if we lose EIS or SEIS status after investment?

HMRC withdraws the relief and investors must repay what they claimed. This is why the 3-year compliance window matters and why major pivots or acquisitions in that period need advice first.

15. What if we raise less than the amount stated in advance assurance?

The assurance is not invalidated. File the SEIS1 or EIS1 for the amount actually issued and keep the paperwork consistent with what happened.

16. Can I get advance assurance for SEIS and EIS at the same time?

Yes. You can apply for both in one process, as demonstrated by a reported September 2026 case where a fintech secured £250,000 of SEIS and £700,000 of EIS assurance together.

17. Do I need a shareholder agreement for a SEIS advance assurance application?

Not necessarily, but HMRC wants to see the terms of the share issue, so have your articles of association and any shareholder or subscription agreements ready. A single founder should still document the round properly.

18. How does SEIS interact with grants I have already received?

Grant aid received in the last 3 years may count toward the £250,000 SEIS company cap under de minimis state aid rules. Declare all grant income in your application.

The founder’s order of operations

If you take one page from this guide, make it this checklist:

1. Confirm you are a UK limited company with a qualifying trade. If you are still at the idea stage, map the full journey in our starting a business guide.
2. Check the SEIS company limits against any grants received in the last 3 years (de minimis).
3. Write the business plan and forecasts, and gather the document pack.
4. Apply to HMRC’s Venture Capital Reliefs Team for advance assurance, three months before you need the money.
5. Issue SEIS shares first, EIS shares at least a day later, with funds in the company bank account before shares are issued.
6. Trade and spend, then file SEIS1 or EIS1 within 2 years, and send SEIS3 or EIS3 certificates to every investor.
7. Stay compliant for 3 years: full-risk ordinary shares, qualifying trade, no preferential deals.

This guide explains how SEIS and EIS work for founders based on HMRC guidance current as of October 2026. It is general information, not professional tax advice. Scheme rules change, and your company’s facts matter, so check the current position on gov.uk and speak to a qualified accountant before you issue shares.