Seed Enterprise Investment Scheme (SEIS): A brief introduction to the scheme

December, 2025
Estimated Reading Time: 4 minutes

What is SEIS?

The Seed Enterprise Investment Scheme (“SEIS”) is one of the most generous (and widely used) tax incentive schemes for investors in startups in the world. Every entrepreneur needs to know about it and (where possible) take advantage of it.

Why SEIS?

SEIS tax benefits offered to investors include:

  • Income Tax Relief: an investor is entitled to 50% income tax relief on the amount invested in shares in a qualifying company up to an annual limit of £200,000.
  • Loss relief: in the event an investor sells their SEIS shares at a loss, they can offset the loss against their income tax or capital gains tax bill.
  • Capital Gains Tax exemption: a qualifying shareholder can be entitled to up to 100% exemption from capital gains tax on a disposal of the SEIS qualifying shares if a claim for income tax relief has been made on the shares and they have been held for at least three years.
  • Reinvestment relief: in the event an investor invests the gains made from a non-SEIS investment into an SEIS-eligible company, they may benefit from 50% capital gains tax relief on the original gains.
  • Inheritance Tax: no inheritance tax is payable on SEIS shares following the death of an investor (subject to such shares being held by the investor for at least 2 years).

Qualifying Investors

Requirement

(click on the titles for further information)
 Explanation
The investor must subscribe for new, full risk, ordinary shares. There must be no arrangement in place to protect the investor from any normal risks associated with an investment into a company. The shares cannot have any preferential rights and must be non-redeemable.

Neither the investor nor any associates may be employees of the company or any Qualifying Subsidiary in Period B unless they are also a director (which for SEIS purposes is not counted as being an employee of the company).

A Qualifying Subsidiary is defined as a company that is a 51% subsidiary of the company being invested in.

Period B is the period commencing on the date of issue of the shares until the third anniversary for the date of the issue of shares.

An investor must not have a substantial interest in the company at any time from incorporation to the third anniversary of the date of share issue (Period A).

A substantial interest is when an investor directly or indirectly holds, or in any way is entitled to acquire, more than a 30% stake in the company.
An investor won’t qualify for SEIS if they have subscribed for shares as part of an arrangement which involves somebody else subscribing for shares in a company in which the other person has a substantial interest.
There must be no loans to the investor or their associates (spouses, civil partners, business partners, grandparents, children and grandchildren but not brothers and sisters or step-parents) which are linked to their subscription for shares in Period A.
The investor’s subscription must be made for genuine commercial reasons and must be part of a scheme or arrangement where the main purposes, or one of the main purposes, is the avoidance of tax.

Qualifying Companies

Requirement

(click on the titles for further information)
 Explanation
An SEIS company must have been trading for less than 3 years.

The business activities of the company must not fall under one of the excluded activities (e.g. dealing with land).

A full list excluded activities can be found here.

The company must employ fewer than 25 people.
The company gross assets, meaning the value of everything that company owns , must be less than £350,000.00.
The maximum of SEIS investment raise must not exceed £250,000.00.
The company must have a permanent establishment in the UK during Period B. In essence you must show that your company has a fixed place of business in the UK or a UK-based agent who carries out work for you.

An SEIS eligible investment must meet the risk to capital condition, which is split into two parts:

  • the company in which the investment is made must have the objective to grow and develop over the long term; and
  • the investment must carry significant risk that the investor will lose more capital than they gain.

Procedure

Prior to the investment, a company can apply for advance assurance from HMRC to see whether it meets all the requirements to qualify for investment under SEIS.

Once the share issue has been made, and 70% of the investment monies have been spent, or the company has traded for a minimum of 4 months, the company can apply to HMRC for a compliance certificate in respect of the share issue.

Once HMRC has issued a compliance certificate, HMRC will also issue a Unique Investment Reference Number (“UIR”) to the company through the form SEIS2. The company can then issue the SEIS investor with a claim form SEIS3, which should include the UIR, so that he/she can claim his relief.

The investor claims relief by completing a Self-Assessment tax return for the tax year in which the shares were issued. If an investor holds a form SEIS3 but has yet to be issued with a tax return, the investor can request a change to his PAYE tax code or any self-assessment payment due. An investor can also claim retrospectively for any relief where it is too late to amend a Self-Assessment tax return or where he/she is claiming capital gains tax reinvestment relief. Relief can be claimed up to 5 years from the 31st January following the tax year in which the SEIS investment was made.

Next Steps
Ready to take the next steps? Get in touch with our experts by reaching out to us at [email protected] or 020 7952 1723.

Back to Insights