Difference Between EIS and SEIS: A Complete Guide for UK Startups (2025)

Why SEIS and EIS Matter in 2025

For many founders, the choice between SEIS vs EIS will determine whether a round succeeds. After the government increased the SEIS company cap from £150k to £250k and doubled the investor cap to £200k in April 2023, the number of companies using SEIS jumped by more than half. At the same time, the EIS continued to funnel over £1.5 billion into nearly 4,000 companies. These figures underscore the scale of both EIS and SEIS schemes. Startups operate in a climate of cautious investors and tightening valuations; getting the structure right can be the difference between closing a deal and missing out.

The programmes also reflect a philosophy: risk‑taking should be rewarded. Under SEIS, an investor can claim 50% income tax relief on up to £200k per year, plus reinvestment relief and loss relief. Under EIS, the income tax relief is 30%, but the investment limits are much larger, and investors can defer capital gains. Because both schemes de‑risk investment, they attract a wider pool of angels and family offices. For founders, this means a greater chance of securing funding on favourable terms. Being able to explain SEIS vs EIS succinctly will inspire confidence and show you know your business.

What Are the EIS and SEIS Schemes?

Both schemes fall under HMRC’s umbrella of venture capital reliefs. They encourage individuals to subscribe for new shares in unquoted companies by offering tax incentives. While similar in spirit, the two programmes serve different stages of the startup lifecycle. Below, we provide a high‑level SEIS and EIS comparison as it applies in 2025. Use it to decide which of the EIS and SEIS schemes is right for your next round.

SEIS at a Glance

The SEIS scheme 2025 is designed for very early-stage UK ventures. To qualify, your company must meet the core SEIS criteria:

• Incorporated and carrying on, or preparing to carry on, a qualifying trade in the UK
• Trading for less than three years
• Gross assets of no more than £350,000
• Fewer than 25 full-time equivalent employees
• Independent (not controlled by another company) and not having previously raised funds under EIS

These thresholds form the official seed enterprise investment scheme limits.

Under SEIS, the SEIS investment limit for the company is £250,000 in total, with a £200,000 per-investor cap per tax year. Investors can subscribe up to that level and claim a SEIS tax relief of 50% on their income tax bill. They may also benefit from reinvestment relief (on 50% of gains rolled over) and loss relief if the company fails.

To keep the reliefs, investors must:

• Be UK taxpayers
• Hold their SEIS shares for at least three years
• Does not own more than 30% of the company’s voting rights

Because the relief rate is high but the cap is modest, SEIS is the perfect entry point for first-time angels and micro-funds. When you pitch your round, highlight explicitly that it qualifies under SEIS; this simple statement often attracts investors who specialise in seed-stage deals.

EIS at a Glance

The Enterprise Investment Scheme (EIS) supports companies that are further along than SEIS startups but still early in their growth journey. To qualify, firms must meet clear EIS criteria:

• Be UK-established and unquoted at the time of the raise
• Trading for no more than seven years (or ten years for a knowledge-intensive company)
• Gross assets of no more than £15 million before and £16 million after the investment
• Fewer than 250 full-time employees (or up to 500 for a KIC)
• Carrying on a qualifying trade that does not substantially consist of HMRC-listed excluded activities

If you are raising through a holding company, the group must also meet the SEIS/EIS size and independence tests and must not be controlled by another company. Where funds are deployed in a subsidiary, that entity typically needs to be a qualifying 90% subsidiary, and the group’s activities must chiefly be qualifying trades.

The EIS scheme limits,  part of the wider enterprise investment scheme limits, are £5 million per 12 months and £12 million lifetime. For KICs, the thresholds rise to £10 million per 12 months and £20 million lifetime, reflecting the longer research cycles in deep-tech and life sciences.

On the investor side, individuals can subscribe up to £1 million per tax year and claim EIS tax relief of 30% on that amount. This rises to £2 million if at least £1 million is directed towards a KIC. Investors may also defer capital gains tax by reinvesting gains into EIS shares and claim loss relief if the company fails.

Taken together, these tests define EIS-eligible companies, and in practice, HMRC treats them as the pool of EIS-qualifying companies for the scheme.

Key Differences Between SEIS and EIS

When examining SEIS vs EIS, the contrasts become clear. SEIS is intentionally narrow: it supports startups within their first three years, restricts assets to £350k and caps funding at £250k. EIS, by contrast, supports companies up to seven years old (ten for KICs), allows assets up to £15/16 million and raises up to £5 million a year. EIS investor limits differ too: £200k under SEIS with 50% relief versus £1–2 million under EIS with 30% relief. The schemes also handle capital gains differently: SEIS offers reinvestment relief on half of a reinvested gain and exempts the entire gain on SEIS shares; EIS allows deferral of an existing gain but not exemption. Finally, the risk profile of the underlying businesses tends to be higher under SEIS than under EIS.

For a quick visual SEIS vs EIS reference, consult the table below. It distils the core differences into a single glance and complements this narrative SEIS and EIS comparison.

SEIS vs EIS 2025: Key Differences Explained

How Undo Capital Supports SEIS/EIS Rounds

• Eligibility triage: quick review of age, assets, employees, trade, and use-of-funds against SEIS scheme 2025 and EIS scheme 2025 rules.
• Round architecture: sequencing (SEIS vs EIS) and allocation planning; investor comms that explain SEIS vs EIS clearly.
• SEIS Advance Assurance: preparing the pack that founders need investors to see first.
• Execution & compliance: share issue sequencing (SEIS before EIS), SEIS1/EIS1 filings, and investor SEIS3/EIS3 certificates.

Practical Considerations

Choosing between SEIS vs EIS is only the first step. Once you decide which programme fits your stage, you must administer the scheme correctly and communicate it clearly to investors. Most angel investors want reassurance that you understand the meaning of SEIS and the meaning of EIS, and that you will follow the rules.

What Can Funds Be Used For?

Under SEIS, money must be spent within 3 years on a qualifying business activity: (a) carrying on a qualifying trade, (b) preparing to carry on a qualifying trade, or (c) R&D expected to lead to one. You cannot use SEIS to buy shares unless it’s a qualifying 90% subsidiary that itself uses the funds for a qualifying activity. Risk-to-capital must be met.

Under EIS, money must be spent within 2 years of the investment (or the date trade starts, if later) on qualifying trade/R&D. Follow the SEIS investment rules on qualifying activity, spend within three years, and risk-to-capital to preserve investor relief.

What is Advance Assurance (AA) for SEIS/EIS?

Advance Assurance is HMRC’s non-binding view that a proposed share issue would likely qualify under SEIS/EIS if facts don’t change. It isn’t compulsory, but most investors expect it. You apply with a business plan, forecasts, company/ownership details, intended use of funds, and any prospective investors HMRC requests. Apply here: HMRC -  Apply for advance assurance on a venture capital scheme.

Tip: AA speeds diligence and reduces investor friction; if your facts change after AA, refresh HMRC before completion.

How Can I Follow Up with HMRC on my Advance Assurance (AA) Application?

Where to write: email the Venture Capital Reliefs Team at enterprise.centre@hmrc.gov.uk. That is the official mailbox HMRC gives for AA queries.

What to include (so they can find your case fast):

• Company name and CRN (Companies House number)
• UTR (unique taxpayer reference)
• Scheme(s) you applied for (SEIS, EIS, or both)
• Date you submitted the AA and via which route (online form/email)
• Amount you plan to raise and where funds will be used (parent vs subsidiary)
• A one-line status question (e.g., “Please confirm receipt and whether any further documents are required.”)

If anything has changed since you applied (round size, use of funds, cap table, investor names), flag it in your email now and again in your later compliance statement. HMRC explicitly says AA stops applying if facts change and you don’t tell them.

What Is a Knowledge-Intensive Company (KIC)?

For research-heavy businesses (deep tech, life sciences), Knowledge-Intensive Company (KIC) status can make EIS the main act, even if you still open with SEIS. Two reasons:

1. Bigger investor allowance - an individual can invest up to £2 million per tax year if at least £1 million goes into KICs. That’s a different ceiling to standard EIS, which caps at £1 million per investor. This is straight from HMRC’s investor guidance.
2. KIC criteria favour R&D-led teams -  HMRC’s KIC tests include the operating-cost condition: spend ≥15% on R&D/innovation in any one of the relevant three years, or ≥10% in each of those three years (variants apply for very young companies). There are additional tests (innovation or skilled-employee conditions).

If you meet KIC, your EIS story gets stronger, larger cheques and investor headroom, while you still use SEIS for the first slice. That’s the real difference between EIS and SEIS in practice: same SEIS and EIS schemes, different allocation logic.

Raising for Holding Companies and Subsidiaries

You can raise at a UK parent (HoldCo) if the whole group meets SEIS/EIS size and independence tests. The parent must be independent (not controlled by another company), and the group’s activities must not consist to a substantial extent of excluded trades. If SEIS/EIS funds will be spent in a subsidiary, that entity must be a qualifying 90% subsidiary (≥90% ordinary share capital, voting power, distributable profits and assets on a winding-up). A simple >50% subsidiary is not enough when deploying the money in that company. Document where the funds will be applied (parent vs. subsidiary) in your Advance Assurance and in the compliance statement.

Raising SEIS and EIS Funding at the Same Time

You can run a blended round, a SEIS/EIS investment structure,  with SEIS for the first £250k, then EIS for the rest, but sequencing rules apply. HMRC requires that SEIS shares are issued before EIS shares and that EIS investments in the UK are made at least one day later. You cannot flip back and forth, nor issue both on the same day; follow the order precisely to preserve both reliefs.

How Do I Apply for and Claim SEIS or EIS?

After you issue shares, you must submit a compliance statement. For the SEIS file SEIS1, after four months of trade or once you have spent 70% of the money, HMRC will then issue SEIS3 certificates. HMRC will only authorise EIS2/EIS3 for ЕIS qualifying companies that submit a complete EIS1 after the required period of activity.

What Happens After You Close Your Funding Round?

After closing the round, you must spend SEIS money within three years and EIS money within two, exclusively on qualifying activities. You must also maintain scheme conditions for three years and tell HMRC within 60 days if anything changes, such as a sale or cessation of trading.

Investor Perspective

Investors gain considerable downside protection: SEIS offers 50% income tax relief, reinvestment relief and loss relief, while EIS provides 30% relief along with capital gains deferral and inheritance tax benefits. Articulating these benefits in your pitch can help convert interest into commitments.

Choosing Between SEIS and EIS

Choosing between the schemes means matching them to your company’s maturity and funding needs. Treat SEIS vs EIS as allocation and sequencing, not a binary label. If you’re at concept or prototype, under 25 FTE and validating the product, SEIS’s 50% relief is the most efficient way to move early angels. If you’re further along and scaling, EIS brings larger cheques and a broader investor base.

As a rule: raise the first £250,000 under SEIS, then raise the remainder under EIS. Issue SEIS shares first and EIS shares at least one day later (not the same day). State this split in your deck/term sheet and in Advance Assurance, then follow the same order in compliance (SEIS1 → SEIS3, then EIS1 → EIS3). This sequencing maximises reliefs and widens the pool of potential investors.

Next Steps and Conclusion

The final step is execution. Begin by checking whether your company meets the age, asset and employee thresholds and whether your trade is qualifying. Apply for Advance Assurance early and plan your round so you know how much will fall under SEIS and how much under EIS. Keep investors informed about the status of your application and be prepared to explain the difference between EIS and SEIS when pitching. Above all, maintain records and spend funds on qualifying activities; compliance missteps can jeopardise reliefs for your backers.

In 2025, the question of SEIS vs EIS – or EIS vs SEIS – is not an academic one; it is a key part of fundraising strategy. The rules may seem complex, but by understanding the EIS and SEIS schemes, planning your SEIS and EIS comparison carefully and working with informed advisors, you can harness these programmes to drive your startup forward. Whether you raise under SEIS, EIS or both, taking the time to learn the difference between EIS and SEIS will pay dividends.

If you want a second set of eyes on eligibility, sequencing (SEIS before EIS), or the path from Advance Assurance to SEIS3/EIS3, Undo Capital can walk it with you. Book a quick chat and we’ll map your next round, clean, compliant, investor-ready.