What is the difference between SEIS and EIS?

SEIS (Seed Enterprise Investment Scheme) is for very early-stage companies and offers 50% income tax relief on investments up to £200,000 per year. EIS (Enterprise Investment Scheme) is for slightly larger companies and offers 30% income tax relief on investments up to £1 million per year (£2 million if investing in knowledge-intensive companies). Both offer Capital Gains Tax exemption if shares are held for 3+ years.

Is SEIS or EIS better?

SEIS offers more generous tax relief (50% vs 30%) and Capital Gains Tax reinvestment relief, but the companies are higher risk because they are very early stage. EIS offers a lower tax relief rate but lets you invest more and the companies are generally more established. SEIS is better if you want maximum tax relief on smaller amounts; EIS is better for larger investments in slightly more mature businesses.

Can I invest in both SEIS and EIS?

Yes. You can invest in both SEIS and EIS in the same tax year, using your full allowances for each. A company can also receive SEIS investment first and then EIS investment later as it grows, provided it meets the eligibility criteria for each scheme at the time of investment.

What happens if a SEIS or EIS company fails?

If the company fails, you can claim loss relief. The loss (after accounting for any income tax relief already received) can be offset against your income tax or capital gains tax. This means the effective loss is significantly reduced. For a 45% taxpayer investing £10,000 in SEIS, the maximum loss after all tax reliefs is around £13.50 per £100 invested.

SEIS vs EIS — Tax-Efficient Investment Schemes Compared | PocketWise

SEIS and EIS are government schemes designed to encourage investment in small UK businesses by offering significant tax relief. Here is how they compare and whether they suit your situation.

SEIS vs EIS at a Glance

Feature	SEIS	EIS
Income tax relief	50%	30%
Annual investment limit	£200,000	£1,000,000 (£2m for knowledge-intensive)
CGT exemption on gains	Yes (if held 3+ years)	Yes (if held 3+ years)
CGT reinvestment relief	50% of amount invested exempt from CGT on other gains	No (was removed)
Loss relief	Yes	Yes
Carry back to previous tax year	Yes	Yes
IHT relief (Business Property Relief)	After 2 years	After 2 years
Minimum holding period	3 years	3 years
Company size limits	Under 25 employees, under £350,000 gross assets	Under 250 employees, under £15m gross assets
Company age	Under 3 years old	Under 7 years (or 10 for knowledge-intensive)
Maximum company can raise	£250,000 total via SEIS	£12m total via EIS and other state aid

Tax Relief Explained

Income Tax Relief

Scheme	Investment	Income tax relief	Tax saved
SEIS	£10,000	50%	£5,000
SEIS	£50,000	50%	£25,000
SEIS	£200,000 (max)	50%	£100,000
EIS	£10,000	30%	£3,000
EIS	£100,000	30%	£30,000
EIS	£1,000,000 (max)	30%	£300,000

The relief reduces your income tax bill for the year you invest. If you do not have enough income tax liability, you can carry the investment back to the previous tax year.

Capital Gains Tax Exemption

Scenario	CGT treatment
Hold SEIS/EIS shares for 3+ years, company grows	No CGT on the gain — completely tax-free
Sell before 3 years	CGT applies at normal rates, plus income tax relief is clawed back

SEIS CGT Reinvestment Relief

Feature	Details
What it does	50% of the amount invested in SEIS is exempt from CGT on gains from selling other assets
Example	You sell shares with a £40,000 capital gain. You invest £40,000 in SEIS. £20,000 of the gain is exempt from CGT
Timing	Must invest in SEIS in the same tax year as the gain (or carry back)
EIS equivalent	EIS no longer offers CGT deferral for new investments

Loss Relief

If the company fails, your loss is cushioned by the tax reliefs.

Taxpayer rate	SEIS: Effective loss per £100 invested	EIS: Effective loss per £100 invested
Basic rate (20%)	£30	£38.50
Higher rate (40%)	£10	£21
Additional rate (45%)	£2.50	£13.50

SEIS loss example (higher-rate taxpayer):

Step	Amount
Invest	£10,000
Income tax relief (50%)	–£5,000
Company goes bust — shares worth £0	Loss: £10,000
Allowable loss for relief	£10,000 – £5,000 (IT relief) = £5,000
Loss relief at 40%	£5,000 × 40% = £2,000
Total tax benefits	£5,000 + £2,000 = £7,000
Net cost of total loss	£3,000 (30% of investment)

Eligibility — Investor Requirements

Requirement	SEIS	EIS
UK taxpayer	Yes	Yes
Not connected to the company	Must not be an employee or own >30% of shares (or be a paid director from day 1)	Must not be an employee or own >30% of shares
Unpaid director	Allowed for SEIS	Allowed for EIS
Minimum investment	None (but typically £500–£1,000 minimum via funds)	None
Maximum investment	£200,000/year	£1,000,000/year (£2m for knowledge-intensive)

Eligibility — Company Requirements

Requirement	SEIS	EIS
UK permanent establishment	Yes	Yes
Company age	Under 3 years	Under 7 years (10 for knowledge-intensive)
Employees	Fewer than 25 full-time equivalents	Fewer than 250 full-time equivalents
Gross assets	Under £350,000	Under £15m before investment, under £16m after
Total raised via scheme	Up to £250,000	Up to £12m total state aid
Qualifying trade	Must carry on a qualifying trade (not property, financial services, etc.)	Must carry on a qualifying trade
Independent	Must not be controlled by another company	Must not be controlled by another company

Excluded Activities

Neither SEIS nor EIS is available for companies whose trade is:

Excluded trades
Property development
Financial services (banking, insurance, dealing in shares)
Legal and accountancy services
Farming and market gardening
Running hotels, guest houses, or nursing homes
Energy generation (receiving FIT/ROCs — some exceptions)
Shipbuilding

How to Invest

Route	Pros	Cons
Direct investment	You choose the company — potentially higher returns	Very high risk, illiquid, requires due diligence
SEIS/EIS fund	Diversified across 5–20 companies	Fees (typically 2% + annual charges), less control
Angel network	Curated deal flow, other investors alongside	Still high risk, minimum investments typically £5,000–£25,000
Crowdfunding platform (Seedrs, Crowdcube)	Low minimums (£10+), many options	Very high failure rate, limited due diligence

Risks

Risk	Detail
Company failure	Most early-stage companies fail — you could lose your entire investment
Illiquidity	Shares cannot be sold on a stock exchange — no easy exit
Long holding period	Must hold for 3+ years for tax benefits
EIS/SEIS status loss	If the company stops qualifying (changes trade, etc.), tax reliefs can be clawed back
Concentration risk	Investing a large amount in one or two companies is very risky
Overvaluation	Start-up valuations can be optimistic

Who Should Consider SEIS/EIS?

Investor profile	Suitable?
Higher or additional rate taxpayer	Yes — tax relief is most valuable at higher rates
Experienced investor comfortable with high risk	Yes
Basic rate taxpayer with surplus capital	Maybe — 50% SEIS relief is still generous
Investor with a CGT liability to shelter	Yes — SEIS reinvestment relief helps
ISA/pension not yet maximised	No — fill tax-advantaged wrappers first
Investor who needs liquidity	No — SEIS/EIS investments are illiquid
Investor who cannot afford to lose the money	No

Related guides: