The Enterprise Investment Scheme (EIS) and Seed Enterprise Investment Scheme (SEIS) offer some of the most generous tax reliefs in the UK — up to 50% income tax relief plus CGT exemptions.
EIS and SEIS are government schemes designed to encourage investment in small, early-stage UK companies. In return for the risk of investing in startups, HMRC offers substantial tax incentives to investors.
SEIS targets the earliest-stage companies (under 2 years old, fewer than 25 employees, under £350,000 in assets). EIS covers slightly larger companies (under 7 years old for most sectors, fewer than 250 employees, under £15m in assets).
SEIS: 50% income tax relief on investments up to £200,000 per tax year. Invest £100,000 and get £50,000 off your income tax bill.
EIS: 30% income tax relief on investments up to £1,000,000 per tax year (£2,000,000 if investing in knowledge-intensive companies). Invest £100,000 and get £30,000 off your income tax bill.
The relief is claimed through your self-assessment return. You will receive an EIS3 or SEIS3 certificate from the company after the shares are issued — you need this certificate to claim.
Worked example: You earn £130,000 and invest £30,000 into a SEIS-qualifying company. You claim 50% relief = £15,000 off your tax bill. Your £30,000 investment effectively cost you only £15,000. If the company succeeds, any gains are also CGT-free.
If you hold EIS or SEIS shares for at least 3 years, any gain on disposal is completely exempt from capital gains tax. This is on top of the income tax relief you already received.
For SEIS, there is an additional benefit: you can also claim 50% CGT reinvestment relief on gains from selling other assets, provided you reinvest the gain into SEIS-qualifying shares in the same tax year.
If the company fails (which is common with startups), you can claim loss relief. The loss (after subtracting the income tax relief you received) can be offset against your income tax or capital gains tax.
For a higher-rate taxpayer who invested £10,000 in EIS: the £3,000 income tax relief reduces your effective investment to £7,000. If the company is worthless, you can claim loss relief on £7,000 at your marginal rate (40%), recovering another £2,800. Your total loss on a £10,000 investment is just £4,200.
EIS worst case (total loss, 40% taxpayer): Invest £10,000 → £3,000 income tax relief → £2,800 loss relief = net loss of £4,200 (58% downside protection).
SEIS worst case (total loss, 40% taxpayer): Invest £10,000 → £5,000 income tax relief → £2,000 loss relief = net loss of £3,000 (70% downside protection).
If you have made a capital gain from selling any asset, you can defer the CGT by reinvesting the gain into EIS-qualifying shares. The tax is deferred until you sell the EIS shares (or they become worthless).
This is separate from the CGT exemption: deferral relief applies to gains from other assets, while the exemption applies to gains on the EIS shares themselves.
To keep your income tax relief and qualify for CGT exemption, you must hold the shares for at least 3 years from the date of share issue (or the date the company starts trading, if later).
If you sell before 3 years, the income tax relief is clawed back by HMRC. The CGT exemption also does not apply.
High failure rate: Most startups fail. SEIS/EIS investments are high-risk. The tax reliefs exist specifically because of this risk — they are compensation, not free money.
Illiquid: There is usually no secondary market for shares in small private companies. Your money may be locked up for years beyond the 3-year minimum.
Complexity: Finding qualifying companies, obtaining compliance certificates, and claiming reliefs requires effort. Many investors use EIS/SEIS funds that spread risk across multiple companies.
Not suitable for everyone: Only invest money you can afford to lose entirely. The tax reliefs soften the blow but do not eliminate risk.