Two Schemes, One Job
The Seed Enterprise Investment Scheme and the Enterprise Investment Scheme both exist to make people put money into small private companies that might well fail. They do it by moving part of the risk from the investor onto the Exchequer.
SEIS is the early one. It gives 50 percent income tax relief on up to £200,000 invested per tax year, and the companies it targets are barely trading.
EIS is the later one. It gives 30 percent income tax relief on up to £1 million per tax year, or £2 million where the excess goes into knowledge-intensive companies, and the companies it targets are growing.
That much is in every guide. What most of them skip is that on 6 April 2026 the EIS company limits roughly doubled and SEIS was not touched at all, and that the two schemes now sit further apart than at any point since SEIS was introduced in 2012. If you are raising money or writing a cheque this year, that gap is the thing worth understanding.
This guide covers both schemes from both sides, the investor's and the company's, because the conditions run in parallel and a failure on either side costs the investor the relief.
What Changed on 6 April 2026
Finance Act 2026 made the EIS and Venture Capital Trust rules considerably more generous on the company side, following announcements at the Autumn Budget on 26 November 2025.
| EIS company test | To 5 April 2026 | From 6 April 2026 |
|---|---|---|
| Annual investment limit | £5 million | £10 million |
| Annual limit, knowledge-intensive | £10 million | £20 million |
| Lifetime limit | £12 million | £24 million |
| Lifetime limit, knowledge-intensive | £20 million | £40 million |
| Gross assets before investment | £15 million | £30 million |
| Gross assets after investment | £16 million | £35 million |
The investor-facing terms did not move. EIS relief is still 30 percent on £1 million a year. The employee limit is still fewer than 250 full-time equivalents, or 500 for a knowledge-intensive company. The age limit is still seven years from first commercial sale, or ten for knowledge-intensive. The minimum holding period is still three years.
One relief did get worse. Venture Capital Trust income tax relief was cut from 30 percent to 20 percent from April 2026. VCTs keep their tax-free dividends and their five year holding period, but the upfront relief no longer matches EIS.
SEIS got nothing. The company can still raise a maximum of £250,000 in total, must have gross assets under £350,000, must have fewer than 25 employees, and must have been trading for less than three years. Those figures have been unchanged since 6 April 2023, and before that they had been unchanged since 2012.
Our reading of the reform
The gap between the two schemes has roughly doubled overnight. Before April 2026 an EIS company could raise 48 times as much over its life as an SEIS company. It can now raise 96 times as much. On gross assets, an EIS company could be about 43 times the size of an SEIS company at the point of investment. It can now be about 86 times the size.
That is a deliberate choice, and a defensible one if you think the binding problem in UK venture funding is that good companies outgrow the schemes before they stop needing them. Plenty of people do think that, and the £15 million gross assets test had genuinely become a nuisance for capital-heavy businesses.
But it means the scheme aimed at the smallest companies is now the only part of the venture capital reliefs that has not been reviewed in three years, and the funding band that most owner-managed businesses actually get stuck in is the one between £250,000 and £2 million. Nothing in the April 2026 package touches it. A company that needs £600,000 to get to its first real revenue is in exactly the same position it was in last year, with SEIS exhausted and EIS investors who would rather wait.
There is a counterargument worth putting honestly, because it is ours and not everyone's. HMRC's own figures show that in 2024/25 the average amount raised per SEIS company was about £114,000, against a £250,000 cap. Most companies are nowhere near the ceiling. That suggests the cap is not what is holding SEIS raises down, and that raising it would mostly help companies that are already the best at raising money. The same statistics show the average EIS raise was about £420,000, against an annual limit that has just gone from £5 million to £10 million. The reform helps the top of the distribution, which is where the noise comes from.
The Reliefs, in Order of What They Are Worth
Almost every article leads with the income tax relief because it is the biggest percentage. On a successful investment it is usually the smallest of the benefits.
1. Income tax relief
SEIS: 50 percent. EIS: 30 percent. You reduce your income tax bill by that share of what you invested.
The limit nobody mentions until it bites: relief cannot exceed the income tax you actually owe. It is a reduction in liability, not a cash payment.
Take someone on a £60,000 salary in 2026/27. With a £12,570 personal allowance, £37,700 taxed at 20 percent and £9,730 at 40 percent, their income tax bill is £11,432. If they put £50,000 into SEIS companies, the relief is nominally £25,000. They can only use £11,432 of it this year.
That is where carry back earns its keep. You can elect to treat some or all of an investment as made in the previous tax year and set the relief against that year's liability instead. Our investor above carries half the investment back, uses another £11,432 of relief against 2025/26, and recovers £22,864 in total. The last £2,136 is simply lost, because there is no carry forward.
Work out your income tax liability before you decide how much to invest, not after. This is the single most common reason people end up with relief they cannot use.
2. Capital Gains Tax exemption on the way out
Hold the shares for at least three years, keep the income tax relief, and any gain on disposal is free of Capital Gains Tax entirely. There is no cap on this one.
This is the relief that matters on a good outcome. Put £20,000 into an SEIS company and sell four years later for £200,000 and the £180,000 gain is exempt. Outside the scheme, that gain less the £3,000 annual exempt amount at the 24 percent higher rate would cost £42,480 in tax. The income tax relief on the way in was £10,000.
So on the outcome everyone is hoping for, the exemption is worth more than four times the headline relief. It is also the relief most at risk from impatience, because it depends on holding for three years and on the income tax relief not being withdrawn.
3. Loss relief, which is the real product
Most of these companies fail. The schemes know that, and the combination of income tax relief and loss relief is what makes the arithmetic tolerable.
If the shares become worthless, your allowable loss is what you invested less the income tax relief you already had. You can set that loss against income in the year of disposal or the previous year, at your marginal rate, rather than against capital gains.
Here is a total loss on £20,000, for an additional rate taxpayer.
| SEIS | EIS | |
|---|---|---|
| Invested | £20,000 | £20,000 |
| Income tax relief | £10,000 (50%) | £6,000 (30%) |
| Allowable loss | £10,000 | £14,000 |
| Loss relief at 45% | £4,500 | £6,300 |
| Net cost of a total failure | £5,500 | £7,700 |
| Share of capital genuinely at risk | 27.5% | 38.5% |
For a 40 percent taxpayer the figures are £6,000 and £8,400, so 30 percent and 42 percent.
Read that table again, because it is the whole point of the schemes and it almost never appears in the marketing. An additional rate taxpayer putting £20,000 into an SEIS company is risking £5,500 of their own money. The government is carrying the rest. That is not a reason to invest in a bad company, and it is emphatically not a reason to skip the diligence, but it does explain why sensible people write cheques into businesses with no revenue.
4. CGT deferral and reinvestment relief
These two get confused constantly, and they are different reliefs.
EIS deferral relief lets you postpone a capital gain from any asset by reinvesting it into EIS shares. There is no limit on the amount deferred, but it is a deferral, not an exemption. The gain comes back into charge when the EIS shares are sold or the conditions are broken. Deferral relief is also available to people who are connected with the company and cannot claim the income tax relief, which makes it useful in situations where nothing else is.
SEIS reinvestment relief exempts 50 percent of a gain reinvested into SEIS shares, on gains of up to £200,000, so a maximum exemption of £100,000. This one genuinely wipes the tax out rather than deferring it.
If you sold a property or a business in the same tax year, these reliefs change the calculation significantly, and the interaction with Business Asset Disposal Relief is worth modelling before you commit.
Who Can Claim, and the Rule That Catches Founders
You must be a UK taxpayer, and you must not be connected with the company.
Connection has two main routes. The first is financial interest: you are connected if you and your associates hold more than 30 percent of the ordinary share capital, the issued share capital, the voting power, or the rights to assets on a winding up. Associates include spouses, parents, children and business partners, but not siblings.
The second is employment. An employee of the company is connected, and so, for EIS, is a paid director.
Here the two schemes part company, and founders should pay attention.
Under SEIS, being a director does not block relief, paid or unpaid. A founder-director can subscribe for their own SEIS shares and claim the 50 percent relief, provided they stay under the 30 percent threshold.
Under EIS, a paid director is connected and cannot claim, subject to two exceptions. An unpaid director can claim. And a business angel can claim: someone who invests first and is appointed as a paid director afterwards, having had no previous connection with the company.
The practical consequence is a one-way door. A founder who wants to put their own money in on relievable terms should generally do it at the SEIS stage, because once the company is on EIS and they are drawing a salary as a director, the route usually closes. We have seen founders discover this after the SEIS allocation is spent.
There is a second irreversible ordering rule, and it catches more companies than it should. A company that has already received EIS or VCT investment can never afterwards raise money under SEIS. SEIS has to come first, or not at all. If a company takes a small EIS round because an investor's adviser suggested it, the entire £250,000 SEIS allocation disappears permanently, along with the 50 percent relief that would have made the next round easier to fill.
Qualifying as a Company
The investor gets the relief, but the company has to satisfy the conditions, and if it breaches them the investor loses the relief. This is why the diligence runs both ways.
| Condition | SEIS | EIS from 6 April 2026 |
|---|---|---|
| Maximum the company can raise | £250,000 lifetime | £10m a year, £24m lifetime |
| Gross assets | Under £350,000 before the issue | Under £30m before, £35m after |
| Employees | Fewer than 25 | Fewer than 250 |
| Age of trade | Under 3 years | Within 7 years of first commercial sale |
| Minimum holding period | 3 years | 3 years |
| Money must be spent | Within 3 years | Within 2 years |
Both schemes also require a permanent establishment in the UK, shares that are new, full-risk ordinary shares paid up in cash with no preferential rights to dividends, assets or redemption, a qualifying trade, and satisfaction of the risk to capital condition.
The excluded trades list is long and unforgiving. Property development, dealing in land, financial and leasing activities, legal and accountancy services, farming, hotels and nursing homes, and generating most kinds of electricity are all outside the schemes. If a substantial part of your business is on that list, no amount of structuring makes it qualify.
The risk to capital condition is the one that decides marginal cases. It asks two things: whether the company is genuinely trying to grow and develop over the long term, and whether there is a real risk the investor will lose more than they get back in tax relief. It was introduced in 2018 specifically to stop capital-preservation products dressed up as venture investments, and it is a purposive test rather than a checklist, which means it is applied by judgement.
The Advance Assurance Squeeze
This is the part of the 2026 picture that founders should actually be planning around, and it is missing from almost every guide because it does not appear in the rules. It appears in the statistics.
Advance assurance is HMRC's non-binding opinion, given before the shares are issued, that a proposed investment would qualify. It is voluntary. In practice most investors will not commit without it.
HMRC's published figures for advance assurance requests tell a clear story.
| 2024/25 | 2025/26 | |
|---|---|---|
| SEIS applications | 3,285 | 4,085 |
| SEIS approved | 85% | 76% |
| EIS applications | 3,185 | 3,310 |
| EIS approved | 76% | 72% |
SEIS applications rose by roughly a quarter in a single year while the approval rate fell nine points. In round numbers, about 500 SEIS applications were turned down in 2024/25 and about 995 in 2025/26. The number of rejections doubled.
One honest caveat, because it matters. The 2025/26 figures are published as approvals to date, so applications still in the queue drag the percentage down and the final rate will be higher than 76 percent. The direction is real. The size of the fall probably is not, and anyone quoting nine points as settled fact is overreading the table.
Even allowing for that, two things follow. HMRC is applying the risk to capital condition harder than it was, and the volume of applications has grown faster than the number of companies that actually go on to raise. In 2024/25, 4,085 SEIS advance assurance applications were filed against 2,430 companies that actually raised SEIS money. A significant share of applications are speculative, template-driven, or filed before the business plan is ready.
Our view, from the applications we see: the rejections cluster around companies that cannot articulate what the money is for. A business plan that says the company will "scale operations and expand market presence" fails the growth and development test not because it is untrue but because it is unfalsifiable. HMRC is reading these applications as evidence of intent, and an application that could have been written about any company in any sector reads as exactly that.
Allow eight to twelve weeks, apply with a real plan and a real use of funds, and do not file the application as a box-ticking exercise at the same moment you start talking to investors.
How to Claim
The sequence matters and the timing catches people out.
The company issues the shares first. Nothing can be claimed until the shares exist and the money has been paid.
The company then files a compliance statement, form SEIS1 or EIS1, with HMRC. It cannot do this until it has been trading for four months or has spent at least 70 percent of the SEIS money, and it must be filed within two years of the end of the tax year in which the shares were issued.
HMRC authorises the company on form SEIS2 or EIS2.
The company issues certificates to investors on form SEIS3 or EIS3. Until you have that certificate, you cannot claim anything, and the wait between investing and receiving it is routinely six to twelve months.
The investor claims on the Self Assessment tax return, in the Additional Information pages, or by asking HMRC to adjust a PAYE code for relief in-year. The claim deadline is generous: up to five years after the 31 January following the tax year of investment. For shares issued in 2026/27, that is 31 January 2033.
The generous deadline is not an invitation to leave it. The certificate you need in 2033 is a piece of paper issued by a company that may not exist by then. Claim when the certificate arrives, and keep it with the return.
When the Relief Is Taken Away
Relief is withdrawn or reduced if, within three years of the share issue, you sell the shares, you become connected with the company, the company stops qualifying, or you receive value from the company.
That last one is the trap, because "value" is broader than it sounds. A loan from the company, the repayment of a loan you previously made to it, the purchase of an asset from the company at below market value, or the release of a debt all count. A director's loan repaid at the wrong moment can withdraw relief on an investment made two years earlier.
Read that alongside how directors' loan accounts work in practice, because in small companies money moves between the director and the company informally and nobody logs it as a scheme event.
Note also that the three year clock for the holding period runs from the date the shares are issued, or from the start of trading if that is later. For SEIS companies that raise before they trade, the later date usually applies, and people get this wrong.
Where the Money Actually Goes
Two figures from HMRC's statistics for 2024/25 are worth knowing before you decide whether these schemes are relevant to you.
Sector. Information and communication took £550 million of EIS investment, which is 35 percent of the total, and £115 million of SEIS, which is 42 percent.
Geography. Companies registered in London and the South East raised £948 million of EIS, or 60 percent of the total, and £181 million of SEIS, or 66 percent.
So two thirds of SEIS money goes to two regions, and a software company in London is operating in a well-served market with advisers who do this weekly. A manufacturer in the Midlands is not, and will find fewer investors who recognise the certificate when it arrives.
This is not an argument against the schemes outside London and outside tech. It is an argument for expecting the raise to take longer and for getting the advance assurance in hand earlier, because the investors you approach are less likely to have done one before.
Our View
The reliefs are sold on the upside and bought for the downside. Every pitch deck leads with 50 percent, and every serious investor we deal with is actually looking at the net cost of a total loss. At 27.5 percent for SEIS at the additional rate, the scheme converts a speculative bet into something closer to a rational allocation. Anyone marketing these schemes on the income tax relief alone is describing the smallest benefit on a good outcome and the least interesting one on a bad outcome.
April 2026 fixed a problem at the top and left the one in the middle. Doubling the EIS limits helps capital-intensive scale-ups that were running out of room, and the gross assets change in particular was overdue. But the average EIS raise is around £420,000 against a limit that just went to £10 million, and the average SEIS raise is around £114,000 against a cap that did not move. The gap between what SEIS allows and what EIS investors will look at is where most owner-managed companies stall, and it is now wider than it has ever been.
The ordering rules are the expensive ones, and they are invisible at the time. SEIS before EIS, always, with no way back. Founder investment at the SEIS stage rather than the EIS stage. Advance assurance before the conversation with investors rather than during it. None of these are difficult. All of them are irreversible, all of them get decided in the first year of a company's life by people who are thinking about product rather than tax, and each one can cost six figures of relief.
Advance assurance has quietly become the hard part. The statutory conditions are published and checkable. The risk to capital condition is a judgement, and the judgement is getting stricter while applications rise. The companies that get through are not the ones with the cleverest structure, they are the ones that can say plainly what they will do with the money and why it might not work. That is also, as it happens, what a decent investor wants to read.
Do not let the tax tail wag the investment. The relief reduces the cost of a loss, it does not reduce the probability of one. Around half of these companies will not return the capital. The schemes are well designed for people building a portfolio of small positions in businesses they understand, and poorly suited to someone putting a single large sum into one company because the relief looked attractive in March.
How IAK Can Help
We work with startups and limited companies across North London and Hertfordshire on both sides of these schemes.
For companies raising money, that means checking the qualifying conditions properly before anything is drafted, preparing an advance assurance application that answers the risk to capital condition rather than restating the business plan, getting the share class and the articles right so the shares are genuinely full-risk ordinary shares, and filing the SEIS1 or EIS1 compliance statement on time so your investors get certificates they can actually use. It also means telling you when the answer is no, which is cheaper to hear before the round than after it.
For investors, our personal tax team handles the claim on the return, the carry back election where your liability will not absorb the relief, loss relief when an investment fails, and the interaction with CGT deferral and reinvestment relief across tax years. Our tax planning service covers the part that happens earlier, which is working out how much relief you can actually use before you decide what to commit.
If you are raising a seed round, thinking about investing, or holding shares in a company that has just failed and wondering what you can recover, get in touch for a free consultation. Our Capital Gains Tax calculator will give you a rough position in the meantime, and our guides to R&D tax credits and valuing a business cover the two questions that usually come up in the same conversation.
Sources
- Tax relief for investors using venture capital schemes, GOV.UK, for the 50 percent and 30 percent relief rates, the £200,000 and £1 million annual investor limits, the three year holding period, carry back, CGT disposal relief, deferral and reinvestment relief, loss relief, the connected persons and 30 percent rules, the SEIS3 and EIS3 certificate process and the five year claim deadline.
- Enterprise Investment Scheme and Seed Enterprise Investment Scheme: 2026, GOV.UK, for the 2024/25 figures of 3,735 EIS companies raising £1,575 million and 2,430 SEIS companies raising £276 million, the advance assurance application numbers and approval rates for 2024/25 and 2025/26, and the sector and regional concentration figures.
- Autumn Budget 2025: higher number of companies eligible for VC and EIS tax reliefs, Mills & Reeve, for the increases from 6 April 2026 to the annual, lifetime and gross assets limits and the reduction in VCT income tax relief.
- Budget 2025: what founders need to know about the new VCT and EIS reforms, Lewis Silkin, for confirmation that SEIS limits were left unchanged and for the accompanying EMI changes.
- Enterprise Investment Scheme and Venture Capital Trusts scheme extension, GOV.UK, for the extension of the sunset clause to shares issued before 6 April 2035.
- Direct taxes: rates and allowances for 2026/27, House of Commons Library, for the £12,570 personal allowance, the £50,270 higher rate threshold, the £125,140 additional rate threshold and the freeze to 2030/31 used in the worked examples.
- SEIS and EIS: a guide for UK small businesses raising investment, Federation of Small Businesses, for the company-side conditions and the practical sequence of a raise.
- EIS, SEIS and VCT tax efficient investments, a guide for investors, BDO, for the comparison of the three schemes and the treatment of loss relief.