SEIS Explained: Tax Relief, Rules and Eligibility
Understand SEIS tax relief, company and investor eligibility, the £250,000 funding limit, advance assurance and how investors claim.
Written by Steve Livingston LLB FCA, IP Tax Solutions. Technical content reviewed 21 September 2026.
The Seed Enterprise Investment Scheme (SEIS) helps young companies raise equity investment by offering tax relief to qualifying individual investors. Income tax relief is 50% of an eligible subscription, subject to the investor's annual limit and available income tax liability. The company, the shares and the investor must each meet their own conditions.
This guide explains the current framework for new investments. If you are ready to approach HMRC, use our SEIS advance assurance application guide. If shares have already been issued, start with the SEIS1, SEIS2 and SEIS3 process.
SEIS limits at a glance
| Test | Current position |
|---|---|
| Investor subscription | Up to £200,000 can qualify for income tax relief in a tax year, taking account of any carry-back allocation. |
| Income tax relief | 50% of the qualifying subscription, limited by the investor's income tax liability. |
| Company fundraising | £250,000 SEIS headroom, with earlier SEIS investment and relevant de minimis aid considered under the statutory calculation. |
| Gross assets | No more than £350,000 immediately before the share issue, applying group rules where relevant. |
| Employees | Fewer than 25 full-time equivalent employees at issue, including the relevant group count. |
| Trade history | The trade must satisfy the new qualifying trade rules, including the three-year history test. Incorporation date alone does not answer this. |
The increased investor, fundraising, asset and trade-age limits took effect for shares issued on or after 6 April 2023. The statutory anchors are s.257AB, s.257DI, s.257DJ, s.257DL and s.257HF. These headline figures are not a complete eligibility checklist.
Which companies qualify for SEIS?
The issuing company needs a UK permanent establishment and must satisfy the independence, unquoted status, financial-health and qualifying-business requirements. It cannot simply act as an investment holding vehicle. Group structures need separate analysis of the subsidiaries and where the qualifying activity is carried on.
A new qualifying trade must not have been carried on, by the company or anyone else, more than three years before the share issue. Acquiring an existing business or moving it into a new company does not reset its history. The separate restriction on a company having previously carried on another trade also matters.
SEIS can support qualifying preparations and qualifying research and development intended to lead to a trade. Revenue is therefore not a prerequisite for every applicant. Conversely, being pre-revenue does not settle whether a trade has already begun. See s.257HG on qualifying business activities.
Certain activities are excluded. A qualifying trade must not consist to a substantial extent of excluded activities. HMRC normally accepts no more than 20% under a reasonable measure, but that is guidance on substantiality, not a statutory definition or automatic safe harbour. Software licensing can need particular attention to who created the intellectual property. Read HMRC's substantiality guidance and our software and SaaS guide.
Can a company use SEIS after EIS?
Prior EIS or VCT investment can prevent SEIS qualification. This is a separate prohibition, not just a deduction from the £250,000 figure. Relevant investments in qualifying subsidiaries must also be considered. When a round combines SEIS and EIS, the SEIS issue must be on an earlier day: issuing EIS shares later on the same day is insufficient. See s.257DK and our share sequencing guide.
Which investors qualify?
SEIS income tax relief is for individuals subscribing for new shares, not a company purchasing an investment or an investor buying an existing shareholder's shares. The investor must meet the employment, substantial-interest, linked-loan, value-received and other relevant restrictions.
Being a director does not itself breach the SEIS employee restriction. It does not, however, override the substantial-interest rules. More than 30% of the relevant share capital, voting power or winding-up rights can be disqualifying; control, associates, subsidiaries and rights to acquire interests also need consideration. A founder cannot assume that dilution immediately before investment cures an earlier breach.
Our SEIS investor and connected-persons guide explains the relevant periods and exceptions. For paid and unpaid directors across both schemes, use the separate director investment guide.
What shares and investment terms are allowed?
The shares must be subscribed for wholly in cash and fully paid when issued. They must meet the ordinary-share, redemption, dividend and winding-up rights rules. Not every dividend preference is prohibited, but the statutory restrictions are precise. Commercial labels such as “ordinary” or “SEIS class” do not prove compliance. See s.257CA.
The risk-to-capital condition also requires a genuine growth and development objective and significant risk of capital loss. Guaranteed exits or arrangements protecting the investor's capital can undermine qualification. Normal commercial contracts should be assessed in context. See our risk-to-capital guide.
How much income tax relief can an investor receive?
For a qualifying £20,000 subscription, the headline reduction is £10,000. If the investor has sufficient income tax liability and all conditions are met, that reduction can be claimed. If only £6,000 of liability is available, the relief cannot by itself create a further £4,000 repayment.
Some or all of a subscription can be treated as made in the immediately preceding tax year, subject to that year's capacity and conditions. Unused relief cannot simply be carried forward. Read our SEIS income tax claim and carry-back guide.
What about capital gains and investment losses?
- Disposal exemption: a qualifying gain on the SEIS shares may be exempt after the required holding period, with income tax relief attributable and retained.
- Reinvestment relief: a separate relief may exempt part of another chargeable gain where the qualifying subscription and income tax claim meet the timing rules.
- Loss relief: an allowable loss, reduced by income tax relief retained, may qualify for a claim against income under the separate share-loss rules.
These are different claims with different conditions. Read the worked examples in our SEIS capital gains guide and SEIS loss relief guide. SEIS status does not provide an unconditional inheritance-tax exemption.
How do advance assurance and SEIS3 fit together?
Advance assurance is an optional pre-investment view from HMRC on specified company and share-issue conditions, based on the facts disclosed. It does not approve each investor or guarantee their return. After issuing shares, the company still needs to meet the SEIS1 filing conditions, obtain HMRC authorisation and issue SEIS3 certificates before investors can claim.
Keep a record of the issue date, terms, use of money and continuing conditions. A later round or change in arrangements may require fresh analysis. Start with the application guide, then follow the post-investment compliance steps.
Need help with SEIS?
IP Tax Solutions advises founders, investors and their professional advisers on SEIS eligibility, investment terms, compliance and claims. See our SEIS and EIS advisory service or contact Steve with the facts and relevant dates.