The Enterprise Investment Scheme (EIS) gives UK investors 30% Income Tax relief on up to £1 million per year invested in qualifying companies. The Seed Enterprise Investment Scheme (SEIS) gives 50% Income Tax relief on up to £200,000 per year invested in very early-stage startups. Both are central to UK startup fundraising — most rounds rely on at least one of them.

This guide covers the schemes from both sides — what investors get, what companies must meet, and how to navigate Advance Assurance.

Investor benefits

EIS

• 30% Income Tax relief on up to £1m invested per tax year (£2m if at least £1m is in knowledge-intensive companies).
• CGT exemption on gains from EIS shares held for 3+ years.
• CGT deferral — capital gains realised elsewhere can be deferred by reinvesting into EIS shares.
• Loss relief — losses can be set against income (rather than against capital gains), useful when an investment fails.
• IHT business relief — EIS shares are generally exempt from Inheritance Tax after 2 years (with restrictions phased in from April 2026 under Autumn Budget 2024 reforms).

SEIS

• 50% Income Tax relief on up to £200,000 invested per tax year.
• CGT exemption on gains from SEIS shares held for 3+ years.
• CGT reinvestment relief — 50% relief on capital gains rolled into SEIS shares.
• Loss relief — same as EIS.

The relief is generous because the risk is high — most early-stage startups fail.

Qualifying company conditions

EIS — the company must:

• Have a permanent establishment in the UK.
• Have gross assets not exceeding £15 million immediately before the share issue.
• Have fewer than 250 full-time-equivalent employees (or 500 for knowledge-intensive companies).
• Be carrying on a qualifying trade (most trades qualify; excluded trades include dealing in land, finance, professional services, leasing).
• Be no more than 7 years old from first commercial sale (or 10 years for knowledge-intensive companies).
• Not raise more than £5 million in EIS, SEIS, VCT, and certain state-aid grants in any 12 months (or £10 million for knowledge-intensive companies).
• Not raise more than £12 million in lifetime EIS funding (or £20 million for knowledge-intensive companies).

SEIS — the company must:

• Have a permanent establishment in the UK.
• Be carrying on a new qualifying trade (started in the last 3 years).
• Have gross assets not exceeding £350,000.
• Have fewer than 25 full-time-equivalent employees.
• Be no more than 3 years old.
• Not have raised more than £250,000 lifetime SEIS.

A typical UK startup will raise SEIS first (up to £250,000), then graduate to EIS for the larger rounds.

Conditions investors must meet

EIS

• Not "connected" to the company — i.e. not an existing 30%+ shareholder, not an employee (directors can invest but face additional rules).
• Hold the shares for at least 3 years from issue (or 3 years from when the company started trading, if later).
• Must not receive value back from the company outside the normal course (no special loans, no inflated salaries, no rent above market).

SEIS

• Largely the same as EIS, with the additional constraint that the investor cannot hold more than 30% of the company at any point during the SEIS qualifying period.
• Director-investors are common in SEIS (unlike EIS where direct director investment is more restricted).

Advance Assurance

Advance Assurance is HMRC''s non-binding pre-approval that a planned share issue will qualify for EIS/SEIS relief. It''s not strictly required — companies can issue shares and apply for the SEIS1/EIS1 certificates afterwards — but in practice, no UK investor will write a cheque without seeing Advance Assurance first.

Application:

1. Submit to HMRC the proposed structure, business plan, financials, share terms, and director details.
2. Processing time: typically 8-12 weeks (though HMRC has been faster recently).
3. Outcome: Advance Assurance letter (positive) or a refusal with reasons.

A clean Advance Assurance is one of the single biggest unlocks for a UK SEIS/EIS round. Time the application — get it in well before you need it.

How the schemes interact

Companies can move from SEIS to EIS over time as they grow. Practical rules:

• SEIS shares must be issued and the investment received BEFORE any EIS shares for the same investor.
• Most companies do SEIS in year 1, then move to EIS by year 2-3.
• Don''t mix SEIS and EIS in the same share issue — investors need clear, separate share classes (or at least separate share issuance dates).
• Use specialist platforms (Crowdcube, Seedrs, SeedLegals, Capdesk) or a SEIS/EIS-experienced lawyer to handle the mechanics — DIY mistakes cost relief.

Common mistakes

• Receiving value back: paying yourself rent above market rate, or a salary unrelated to work done, can invalidate relief for all investors.
• Issuing shares before Advance Assurance: technically allowed, but if HMRC later refuses you''ve disrupted your cap table.
• Multiple share classes: SEIS/EIS shares must be ordinary shares with no preferential rights (subject to limited exceptions for liquidation preferences post the 2018 changes).
• Director loans: certain related-party loans from EIS investors back to the company can be deemed value received and break relief.
• Late SEIS1/EIS1 filing: the company must file within set time limits — typically within 2 years of share issue. Late filing can lose the investor relief.

What to do this year

• If you''re raising your first round: get Advance Assurance done before approaching investors. £100-£250 of SeedLegals fees or £500-£1,500 with a lawyer.
• If you''re investing: insist on seeing Advance Assurance before committing. Verify the company''s eligibility in writing.
• If you''ve issued shares: the company must issue compliance statements (SEIS1/EIS1) so investors can claim relief on their Self Assessment. Don''t delay this.