How SEIS and EIS Make Your Startup More Attractive to Investors

What Are SEIS and EIS?

Seed Enterprise Investment Scheme (SEIS) and Enterprise Investment Scheme (EIS) are UK venture capital schemes that incentivise private investment into qualifying startups via tax reliefs for individual investors. In short, the government shares part of the risk so angels can back earlier and more often. That is the essence of SEIS EIS UK investment schemes.

• SEIS: for very early-stage companies; 50% Income Tax relief; investor annual limit £200,000; company can raise up to £250,000; company age limit typically <3 years; gross assets <£350,000; staff <25. ‍
• EIS: for growth-stage companies; 30% Income Tax relief; investors can claim up to £1m per year (or £2m if at least £1m is invested into knowledge-intensive companies). The company can raise up to £5m per 12 months, £12m lifetime (or £20m lifetime and £10m per year if knowledge-intensive). Usual age limit <7 years since first commercial sale (or 10 if knowledge-intensive).

Why it matters: the difference between SEIS and EIS isn’t only technical. It maps neatly to the natural fundraising journey: prove the thesis with SEIS; scale with EIS. And since the government extended EIS/VCT reliefs to 2035, angels and funds have long-term confidence in the policy framework, which is great for your planning horizon.

Why SEIS and EIS Matter for Investors

Investors back people and prospects, but they still model downside. SEIS/EIS tax relief for investors does three things that speak their language:

1. Reduces the immediate tax payable. SEIS allows a 50% reduction of an investor’s Income Tax liability up to their annual cap; EIS allows 30% (with higher limits for KIC exposure). That relief is claimable via the SEIS3/EIS3 certificate after the company files its compliance statement.
2. Protects outcomes if things go wrong. If the shares are sold at a loss or become of negligible value, investors may claim loss relief, setting the loss (net of any Income Tax relief given) against income or CGT. That lowers the effective break-even.
3. Improves risk-adjusted returns. Both schemes provide no CGT on qualifying disposals after three years. SEIS also has 50% CGT reinvestment relief; EIS allows CGT deferral on gains subscribed into EIS shares. These are strong, time-tested incentives that underpin SEIS/EIS investor confidence.
   

Result: why investors like SEIS and EIS is straightforward, the tax code explicitly tilts the odds in favour of backing innovation early, and that mechanical de-risking shows up in their IRR models.

Benefits of SEIS and EIS for Startups

For founders, the schemes translate into real-world advantages:

• Lower cost of capital. Because investors receive relief, many accept risk at valuations you can live with, one of the overlooked SEIS and EIS benefits for startups.
• Wider angel universe. A larger pool of angel investors in the UK is willing to write cheques when the downside is cushioned.
• Faster closes. SEIS/EIS fundraising benefits include shorter diligence loops when you’ve already secured Advance Assurance and can reference the rules fluently.

As a founder, your job is to connect the reliefs to your growth story: “Here’s how your SEIS EIS investment fuels product, hiring, and GTM, and here’s exactly how you claim.” That clarity alone can nudge a wavering investor across the line.

How SEIS and EIS Reduce Investor Risk

Let’s make the risk mechanics tangible:

• Income Tax relief: SEIS (50%) and EIS (30%) reduce tax due for the year of subscription (with limited carry-back). Caps apply: SEIS £200k; EIS £1m (or £2m if at least £1m is into KICs).
• CGT reliefs:
  
  • SEIS: 50% CGT reinvestment relief; and no CGT on disposal after 3 years if conditions hold.
  • EIS: CGT deferral on reinvested gains; and no CGT on disposal after 3 years if EIS relief was obtained and not withdrawn.
    
• Loss relief: If the company fails, investors may set losses against income (or CGT), reducing the net loss after tax. HMRC’s HS286 and the Venture Capital Schemes Manual outline how to claim.

These features, combined with the policy extension of EIS to 2035, are why how SEIS and EIS reduce risk for investors is a credible slide in any UK deck.

SEIS vs EIS: Key Differences Every Startup Should Know

1) Limits, Age and Eligibility

• SEIS: raise up to £250k total; company typically <3 years old; gross assets <£350k; staff <25.
• EIS: raise up to £5m in any 12 months (£12m lifetime), or £10m/£20m if knowledge-intensive; usually <7 years since first commercial sale (or 10 if knowledge-intensive).

2) Knowledge-Intensive Companies (KICs)

Higher company and investor limits (and relaxed age rules) apply to KICs, defined by R&D intensity and skilled employees thresholds. For KICs: 500 staff cap, £10m per year and £20m lifetime limits; investors can claim up to £2m if £1m+ is into KICs.

3) Sequencing Rules (SEIS vs EIS for Startups)

SEIS shares must be issued before any EIS shares, and not on the same day; EIS shares have to be at least one day later. This is essential if you’re running a blended round.

4) Qualifying Trades and Excluded Activities

Both schemes require a qualifying trade and prohibit substantial involvement in excluded activities (e.g., dealing in land or financial instruments). Ensure these are addressed in your deck and the Advance Assurance pack.

Quick comparison: the difference between SEIS and EIS

• Who it’s for: SEIS = pre-seed; EIS = seed/Series A.
• Tax headline: 50% vs 30% Income Tax relief.
• Raise size: £250k cap vs £5m per 12 months.
• Investor cap: £200k vs £1m/£2m (KIC).
• Age clock: 3 years vs 7 (or 10 for KIC).

These distinctions are the practical difference between SEIS and EIS, which you’ll discuss with angels and their advisers.

Using SEIS and EIS in Your Fundraising Pitch

Sophisticated angels hear “SEIS/EIS” every week. What they don’t always hear is specificity. To unlock how SEIS and EIS attract investors, bake the following into your materials:

• One clean “SEIS/EIS” slide. Headline the SEIS/EIS advantages and exactly how reliefs flow to the investor (“50% Income Tax relief up to £200k via SEIS3; CGT reinvestment relief; potential loss relief per HMRC HS286; EIS 30% and CGT deferral on reinvested gains”). Include timing and assumptions.
• Advance Assurance status. State whether you’ve applied and when you expect a response. If approved, include the letter in your data room; this is an immediate SEIS EIS fundraising benefit that improves investor confidence.
• Sequencing and use of funds. Spell out that you will issue SEIS first, EIS at least one day later, and that proceeds will be spent on qualifying activities (e.g., product hiring, GTM), aligning with HMRC rules.

Risk-to-capital narrative. HMRC requires evidence that the investment is genuinely at risk and funding growth, not a capital-preservation scheme. Show your growth plan, milestones, and commercial risk factors.

How SEIS and EIS Reduce Investor Risk (By the Numbers)

For angels who like arithmetic, here’s a simplified illustration for SEIS and EIS for investors:

• SEIS example (investor at 45% marginal rate): invest £20,000 → £10,000 immediate Income Tax relief; if things go south and net loss is £10,000, potential additional relief against income at 45% = £4,500. Investor’s effective loss could be £5,500 versus £20,000 cash outlay. (Mechanics per HS286/VCM share loss relief.)
• EIS example (investor at 45% marginal rate): invest £20,000 → £6,000 Income Tax relief; similar loss-relief mechanics apply; if investment succeeds, no CGT on qualifying disposal after 3 years; CGT due may be deferred if reinvesting gains.

That’s how SEIS and EIS reduce risk for investors in practical terms, and why they can write cheques earlier than they otherwise would.

How to Get Started with SEIS/EIS

Undo Capital: Automation that Speeds Up “Yes”

Founders don’t raise capital to become form-fillers. Undo Capital SEIS/EIS support removes friction and the risk of unforced errors:

• Eligibility Checker (free): fast pre-flight on SEIS eligibility and EIS eligibility, including red-flag detection for excluded activities and age/size tests.
• Advance Assurance in minutes: auto-fills the HMRC AA application from your deck and financials; expert review before submission.
• One-click share issue & filings: generate SH01, board minutes, share certificates; ready for Companies House and investor packs.
• Compliance automation: prepare and file SEIS1/EIS1 and track SEIS/EIS tax relief for investor status; issue SEIS3/EIS3 cleanly.
• Cap table sanity: keep everything aligned with early-stage investment incentives and diligence expectations.

If you’re planning SEIS vs EIS for startups, Undo helps you structure the round (SEIS first, EIS the next day), keep documents compliant, and get back to building.

Well-Structured SEIS and EIS for Investors

Well-structured SEIS and EIS for investors does more than decorate a term sheet; it reduces risk, improves after-tax returns, and broadcasts that you’re building within the rules. The difference between SEIS and EIS mirrors the arc of company building: smaller, riskier dollars first; larger, scaling dollars next. Use the incentives wisely, show your work in the deck, and let the policy do what it was designed to do: crowd in private capital to UK innovation.

If you want to operationalise this with less friction, Undo Capital gives you a single, automated workflow for SEIS/EIS investment, from Advance Assurance to share issue to SEIS/EIS compliance, so angels can glide from interest to signature.