UK SEIS & EIS Investor Deep-Dive (2026/27): Tax Reliefs Worked

Q What is SEIS and what does it offer?

The Seed Enterprise Investment Scheme (ITA 2007 Part 5A) is for very early-stage companies. Income Tax relief: 50% of the amount invested, on up to £200,000 a tax year, set against your Income Tax bill. Holding period: at least 3 years, or the relief is withdrawn. CGT on sale: no CGT on a gain if you received Income Tax relief that has not been withdrawn and held the shares for the minimum period. Reinvestment relief: if you make a gain in a tax year and get SEIS Income Tax relief for that year, you can claim to set 50% of the SEIS investment against the gain, and that much of the gain is not chargeable (TCGA 1992 Sch 5BB para 1(5)-(6)). On the £200,000 maximum that exempts up to £100,000 of gains. It is an exemption of half the amount invested, not a 50% CGT rate: at the 2026/27 CGT rates of 18% and 24% it saves 9% or 12% of the amount invested, so at most £24,000 of CGT on a £200,000 investment. Loss relief: a loss, less the Income Tax relief given, can be set against income. Company conditions include gross assets of no more than £350,000 when the shares are issued, fewer than 25 full-time equivalent employees, a qualifying trade carried on for no more than 3 years, and a lifetime SEIS limit of £250,000 (gov.uk).

Q What is EIS and how does it differ from SEIS?

The Enterprise Investment Scheme (ITA 2007 Part 5) is for larger early-stage companies. Income Tax relief: 30% on up to £1,000,000 a year, or £2,000,000 if at least £1 million of it goes into knowledge-intensive companies. Holding period: at least 3 years. CGT on sale: exempt on the same conditions as SEIS. Deferral relief: a gain on any asset can be deferred by investing in EIS shares between one year before and three years after the disposal; the deferred gain comes back into charge when you dispose of the EIS shares or certain other events happen (TCGA 1992 Sch 5B). Deferral is available even if you are connected with the company and cannot get Income Tax relief. Company limits from 6 April 2026 (gov.uk): fewer than 250 full-time equivalent employees (500 for knowledge-intensive companies), gross assets no more than £30 million before the share issue and £35 million after, £10 million a year and £24 million lifetime from venture capital schemes (£20 million and £40 million for knowledge-intensive companies), and normally within 7 years of the first commercial sale (10 for knowledge-intensive companies). Specified Northern Ireland companies have lower limits.

Q What is a Knowledge Intensive Company (KIC)?

A company carrying out research, development or innovation that meets the conditions in ITA 2007 s.252A. Per gov.uk, it must have fewer than 500 full-time equivalent employees and either be creating intellectual property and expect most of its business to come from it within 10 years, or have at least 20% of employees in research roles requiring a relevant Masters or higher degree for at least 3 years from the investment. It must also meet an operating costs condition: at least 10% of operating costs spent on research, development or innovation in each of 3 years, or 15% in one of those 3 years. What it changes: investors can claim on up to £2 million a year if at least £1 million is in KICs; the company can raise £20 million a year and £40 million in its lifetime; and the age limit is 10 years from the first commercial sale or turnover first exceeding £200,000.

Q How does carry-back to the previous tax year work?

You can treat some or all of an SEIS or EIS investment as made in the previous tax year and claim the relief there (gov.uk). The relief is a fixed percentage of the amount invested (50% SEIS, 30% EIS) taken off your Income Tax bill, not relief at your marginal rate, so carry-back helps mainly when the earlier year has more Income Tax to absorb it or the current year's investment limit is already used. Relief cannot exceed the Income Tax you owe for the year, the annual investment limit applies to the year the relief is claimed in, and unused relief cannot be carried forward. You need the SEIS3 or EIS3 certificate from the company before claiming.

Q What is the 30% connection rule?

You cannot get Income Tax relief if you or your associates are connected with the company. For EIS, that includes being an employee of the company (subject to limited exceptions for directors) or holding more than 30% of its shares, voting rights or rights to assets on a winding-up (ITA 2007 s.170); SEIS has a similar substantial-interest test (s.257BF). Associates are parents, grandparents and great-grandparents; children, grandchildren and great-grandchildren; spouses and civil partners; business partners; and trustees of settlements where you are the settlor or a beneficiary (gov.uk; s.253). Brothers and sisters are not associates. Directors: SEIS relief is available to directors; for EIS, a paid director cannot claim on shares issued while paid, apart from permitted payments, though there are rules for business angels who become paid directors. The EIS conditions apply for 2 years before the investment and for at least 3 years after.

Q What is the loss relief mechanism?

If you dispose of the shares at a loss, or claim that they have become of negligible value (TCGA 1992 s.24(2)), the loss less the Income Tax relief already given can be set against your income for the tax year of the loss or the year before (ITA 2007 s.131; gov.uk). If not used against income, it remains a capital loss. SEIS example: £100,000 invested, £50,000 Income Tax relief; the company fails, so the loss for relief is £50,000. At the additional rate, relief is £22,500, so 73% of the investment is covered by tax relief. EIS example: £100,000 invested, £30,000 relief, loss for relief £70,000, relief at the additional rate £31,500, 62% covered.

Q Inheritance Tax Business Relief - is it changing?

Unquoted shares in a trading company, including most SEIS and EIS shares, can qualify for Business Property Relief once owned for 2 years (IHTA 1984 s.106). From 6 April 2026, 100% relief across business and agricultural property is limited to a £2,500,000 allowance per individual, with 50% relief above it, and unused allowance can be transferred to a surviving spouse or civil partner on a claim. The allowance is reduced by 100% relief used on lifetime transfers in the previous 7 years. Shares designated as not listed on a recognised stock exchange, such as AIM shares, get 50% relief and do not use the allowance. Example: £4,000,000 of qualifying EIS shares on death: £2,500,000 at 100% and £1,500,000 at 50%, leaving £750,000 chargeable - £300,000 at 40% before nil-rate bands. See our BPR and APR April 2026 changes guide.

Q How does the 3-year holding period work?

If you dispose of EIS shares before the end of the holding period, the relief is withdrawn. On an arm's-length sale, the relief is reduced by the sale proceeds multiplied by the original relief rate (or withdrawn entirely if that is more than the relief); on any other disposal it is withdrawn in full (ITA 2007 s.209). A transfer to a spouse or civil partner you live with does not trigger withdrawal, and nor does death. SEIS has equivalent rules in ITA 2007 Part 5A. You must tell HMRC within 60 days if something happens that withdraws relief (gov.uk). If the CGT exemption is lost, a gain is taxed at the normal rates: 18% or 24% in 2026/27. The EIS3 or SEIS3 certificate tells you how long you need to hold the shares.

Q SEIS / EIS vs VCT - which is better?

Venture Capital Trusts are listed companies that invest in a portfolio of smaller companies. VCT reliefs: 20% Income Tax relief on up to £200,000 a year of newly issued shares (reduced from 30% with effect from 6 April 2026 by Finance Act 2026 s.15; ITA 2007 s.263), dividends free of Income Tax, no CGT on a sale, and a 5-year holding period. VCTs have no CGT deferral and no share loss relief against income (gov.uk). Differences: a VCT spreads risk across many companies and its shares are listed, though often thinly traded; SEIS and EIS are usually single-company investments that are hard to sell before an exit. Both are high-risk; take regulated financial advice before investing.

Q How do I claim SEIS / EIS relief on my tax return?

The company sends HMRC a compliance statement (form SEIS1 or EIS1) after issuing the shares; once HMRC authorises it, the company issues you a compliance certificate (SEIS3 or EIS3). You must have the certificate before claiming (gov.uk). Current year: you can ask HMRC to change your PAYE tax code or reduce a Self Assessment payment on account. Previous year (carry-back): claim on your Self Assessment return. If the shares were issued in a different tax year, or you are claiming CGT deferral, complete the claim part of the certificate. Time limit: up to 5 years after the 31 January following the tax year of the investment.

Q What happens if the EIS / SEIS company goes through follow-on rounds?

Relief on your existing shares is not affected by later rounds as long as the conditions continue to be met for the holding period. Points to watch: (a) a later round can only qualify if the company is still within the age and funding limits; (b) for EIS, you cannot get relief on new shares if you already hold other shares in the company, unless those were issued when the company was formed or have had a compliance statement submitted for them (gov.uk); (c) your percentage holding changes with each round, which matters for the 30% connection test; (d) a company can use SEIS first and then EIS, and an investor can claim under each scheme on separate share issues.

Q What investments don't qualify for SEIS / EIS?

The company must carry on a qualifying trade. Excluded activities (ITA 2007 s.192, applied to SEIS too) include dealing in land, commodities, futures, shares or other financial instruments; banking, insurance, money-lending and other financial activities; leasing; receiving royalties or licence fees (with exceptions); legal or accountancy services; property development; farming or market gardening; forestry and timber production; shipbuilding, coal and steel production; hotels; nursing and residential care homes; and generating electricity, heat or other energy, or producing gas or fuel. Investor arrangements: there must be no arrangement to protect your investment or to sell the shares, and no reciprocal arrangement where the company's owner invests back in your company for relief (gov.uk). Advance assurance: a company can ask HMRC whether a proposed share issue is likely to qualify before raising money.