Talk to almost any UK angel investor about putting money into an early-stage business, and one of their first questions won't be about your revenue or your team — it'll be about whether the investment qualifies for EIS or SEIS relief. For a founder who's never raised money before, this can feel like a strange thing to lead with. It isn't. For many angel investors, these schemes are a genuine factor in whether an investment happens at all, and understanding roughly how they work will change how you have that conversation.
What the schemes actually are
The Seed Enterprise Investment Scheme (SEIS) and Enterprise Investment Scheme (EIS) are government tax-relief schemes designed to encourage individuals to invest in small, higher-risk UK companies by softening the downside. An investor who buys qualifying shares can claim significant income tax relief on the amount invested, pay no capital gains tax on the growth if the shares are held long enough, and offset some of the loss against their income tax if the investment fails. SEIS is aimed at the very earliest stage companies and offers the more generous relief; EIS applies to slightly larger, more established early-stage businesses with somewhat less generous but still substantial relief.
Why it matters so much to the investor, not you
None of this changes what you're building or how much cash lands in your account — the relief belongs entirely to the investor, not the company. What it changes is the investor's risk calculation. If a chunk of their investment comes back as tax relief regardless of outcome, and losses are partly offset if the business fails, the effective risk of backing an unproven early-stage company drops substantially. For many angel investors, that difference is what makes investing in very early, unproven businesses viable at all — without it, the risk-adjusted maths on a typical start-up simply doesn't work for an individual investor the way it does for a venture fund spreading risk across a large portfolio.
An investor asking 'is this EIS-eligible?' isn't being difficult. They're asking whether the maths of backing an unproven business at this stage works for them at all — and for many angels, the honest answer without it is no.
What it means for you as the founder
Practically, it means checking your eligibility before you start raising, not after a term sheet is on the table. Not every business qualifies — there are rules around company size, age, sector (some trades are excluded), and how the money is used — and getting advance assurance from HMRC before you approach investors is standard practice precisely because it removes the uncertainty for them. Skipping this step and finding out mid-negotiation that you don't qualify, or that the paperwork isn't ready, can stall or kill a round that was otherwise agreed in principle.
The paperwork is real, but it's routine
Getting SEIS or EIS advance assurance and then issuing the compliance certificates investors need to actually claim their relief is genuine admin — it typically involves an accountant or specialist adviser, and it isn't instant. But it's also thoroughly well-trodden ground for anyone who's raised angel money before, and most experienced investors will expect you to have it in hand, or clearly in progress, before they commit. Treat it as a standard part of preparing to raise, in the same category as having your numbers and your pitch ready — not an obscure extra step.
A worked example: what the relief does to an investor's downside
The clearest way to see why an angel asks about this before they ask about your product is to run the same £20,000 twice — once with SEIS relief and once without. The figures below are illustrative, and they assume the investor has enough income tax liability to absorb the relief, which not every investor does.
With SEIS, the investor claims 50% income tax relief on the £20,000, taking £10,000 off their income tax bill. Their real money at risk is £10,000, not £20,000, from the moment the shares are issued. If the company then fails completely, they can claim share loss relief on that net £10,000 and set it against income at their marginal rate — 45% for an additional-rate taxpayer, returning another £4,500. Total out of pocket on a complete wipeout: £5,500 of an apparent £20,000. Without the scheme, a wipeout costs them the full £20,000.
The upside is treated just as generously. Hold qualifying SEIS or EIS shares for at least three years and the growth is free of capital gains tax. If that £20,000 stake were worth £100,000 on an exit, the £80,000 gain would ordinarily be taxed at 24% for a higher-rate taxpayer — £19,200 — against an annual exempt amount of just £3,000. Under the scheme it is nil.
Put the two ends together and the shape of the investor's decision is obvious. The scheme roughly quarters their worst case and removes the tax from their best case. That isn't a small nudge, and it's why a single unproven company can be a rational thing for an individual to back at all. None of it changes what lands in your bank account — £20,000 is £20,000 — but it changes whether the cheque gets written.
The limits are what drive the sequencing. A company can raise £250,000 in total under SEIS across its entire lifetime, and only while it's within three years of its first commercial sale, has gross assets under £350,000 and fewer than 25 full-time employees. An individual can put up to £200,000 a tax year into SEIS shares. EIS picks up from there at 30% relief, with an individual limit of £1 million a year, or £2 million where at least £1 million goes into knowledge-intensive companies. For shares issued on or after 6 April 2026 a company can raise £10 million a year under EIS and £24 million over its lifetime, doubled to £20 million and £40 million for knowledge-intensive companies.
Where founders get the sequencing wrong
The most common mistake isn't misunderstanding the schemes — it's leaving the eligibility check until an investor asks, rather than establishing it before you start pitching. Some structural things can quietly disqualify a company, and if you find out about them mid-raise, they can be genuinely awkward or slow to fix: too much cash already raised, certain share classes already issued, or the business being in a category the schemes don't cover. Getting advance assurance early means you can pitch with a document in hand that says HMRC has provisionally agreed the investment would qualify, which for many angels turns a vague reassurance into something they can actually rely on when deciding.
SEIS first, then EIS, not either-or
For a genuinely early-stage company, it's also worth knowing the two schemes aren't simply alternatives — there's an order to them. SEIS is capped at a relatively modest amount of total investment a company can raise under the scheme, aimed squarely at the earliest, smallest raises. Many companies use their SEIS allowance first, for the initial friends-and-angels round, then move to EIS for a larger raise once the business has grown past what SEIS was designed to cover. Structuring a raise with that sequence in mind, rather than defaulting straight to EIS because it sounds more substantial, is often exactly what a sharp early investor will expect to see you've already thought about.
The honest takeaway
You don't need to become a tax expert to raise money well, but you do need to know whether your business is SEIS or EIS eligible before you're in the room with an investor, because for a meaningful slice of the UK angel market, it's the difference between a yes and a polite no. What investors actually look for before they write a cheque is mostly about the business — but the tax treatment of their own money is quietly one of the first filters many of them apply, long before they get to judging your pitch.
Common questions
Is advance assurance compulsory, or can I just issue the shares?
It isn't compulsory. Advance assurance is HMRC's non-binding opinion that a proposed investment would qualify, not a legal requirement, and having it doesn't remove any of the steps that follow. What is required is the compliance process after the raise: the company files an SEIS1 or EIS1 compliance statement — available once it has been trading for four months, or for SEIS once it has spent 70% of the money — HMRC responds with an SEIS2 or EIS2 authorisation, and you then issue SEIS3 or EIS3 certificates to each investor, which is what they actually claim on. Most angels will still ask for advance assurance, because without it they're relying on your word that the company qualifies.
What can disqualify my company?
Sector, size, age and share structure, roughly in that order of how often it bites. Some trades are excluded outright: dealing in land, commodities or shares, banking, insurance and money-lending, leasing, receiving royalties or licence fees, providing legal or accountancy services, property development, farming and market gardening, and forestry among them. For SEIS the company must be within three years of its first commercial sale, with gross assets under £350,000 and fewer than 25 full-time employees. EIS generally runs to seven years from first commercial sale, and for shares issued on or after 6 April 2026 allows gross assets up to £30 million and 500 employees. The shares themselves must be new, full-risk ordinary shares with no preferential rights.
Does my investor lose their relief if the company fails?
No — failure is the scenario the schemes are built around. Provided the investor held the shares for the required three years and the company met the conditions throughout, the income tax relief already claimed stands, and they can additionally claim share loss relief on what they genuinely risked. On a £20,000 SEIS investment where £10,000 came back as income tax relief, the allowable loss is the net £10,000, set against income at their marginal rate. What does claw relief back is a disqualifying event inside the three years: the investor selling early, the company ceasing to meet the conditions, or the investor receiving value from the company. That is why the ongoing conditions matter as much as the ones at the point of issue.
Can I claim the relief myself as a founder or director?
Generally not as a founder, because you'll be 'connected' to the company. You are connected if you, together with your associates, hold more than 30% of the ordinary share capital, the voting power, or the assets on a winding up — which rules out a typical founder immediately. Associates include your spouse or civil partner, parents, grandparents, children and grandchildren, but notably not brothers and sisters, which is the detail that surprises people. Being a paid director is not automatically fatal under SEIS: a director can subscribe and claim provided the 30% test is met. EIS is stricter, and an existing paid director generally can't claim, though someone who invests first and becomes a paid director afterwards may qualify.
How much can I raise, and does the order matter?
The order matters enormously — SEIS first, then EIS, and you cannot go back. A company can raise £250,000 in total under SEIS across its whole lifetime, and each individual can put in up to £200,000 a tax year for 50% income tax relief. EIS gives 30% relief, with an individual limit of £1 million a year, or £2 million where at least £1 million goes into knowledge-intensive companies. For shares issued on or after 6 April 2026 a company can raise £10 million a year under EIS and £24 million over its lifetime, doubled to £20 million and £40 million for knowledge-intensive companies; before that date the limits were £5 million and £12 million. Issue EIS shares first and the SEIS allowance is gone.
