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What is the Seed Enterprise Investment Scheme (SEIS)?
The Seed Enterprise Investment Scheme (SEIS) is one of the UK’s most founder-friendly funding initiatives, specifically designed to help very early-stage businesses raise capital. Introduced by the UK government in 2012, it aims to encourage private investors to back high-risk, high-potential startups by offering generous tax reliefs.
Under SEIS, individual investors can claim 50% income tax relief on investments of up to £250,000 per tax year in eligible companies. This relief significantly reduces the financial risk of investing in startups that are often pre-revenue and still proving their business model.
For founders, SEIS opens the door to a wider pool of investors - particularly angels - who might otherwise hesitate to commit funds to such early-stage ventures. By lowering the perceived risk, SEIS can accelerate the fundraising process, allowing founders to focus more on building the business.
In this article, we’ll explore how SEIS works, who qualifies, why it’s such a powerful tool, and the practical steps to making it work for you.
How does SEIS work in practice?
At its core, SEIS is a partnership between the government, startups, and investors. The government offers tax incentives to investors, which in turn encourages them to provide capital to young businesses.
Here’s the process step-by-step:
1. Advance Assurance
Before raising under SEIS, most startups apply to HMRC for “advance assurance”. This is an official confirmation that the company appears to meet the scheme’s eligibility criteria. While not legally required, it’s a huge confidence booster for potential investors - they know their investment should qualify for the relief.
2. Investment and Share Issue
Once investors commit, the company issues new shares in exchange for their investment. The total raised under SEIS cannot exceed £250,000 in the company’s lifetime.
3. Claiming the Relief
Investors can claim 50% of their investment back as income tax relief in the year they invest (or carry it back to the previous year if they choose). So, an investor putting in £50,000 would get £25,000 back via their tax return.
4. Additional Loss Relief
If the company fails, investors may claim “loss relief” against their income tax or capital gains tax, further reducing their downside risk.
5. Capital Gains Exemptions
Any gains on the shares after three years are exempt from Capital Gains Tax, provided the company remains SEIS-eligible and the shares are held for the qualifying period.
This combination of upfront and potential downstream benefits means investors could effectively reduce their risk exposure to less than 30% of the original investment amount.
Why is SEIS such a powerful tool for UK startups?
SEIS offers a unique mix of psychological and financial leverage.
For founders, the main advantages are:
- Investor attraction – High tax relief means more investors are open to hearing your pitch, even if you’re pre-revenue.
- Faster fundraising cycles – In the #Value podcast interview, David Walton revealed that he closed 60% of his round within two emails to his network, largely because SEIS made the offer hard to ignore.
- Credibility boost – Advance assurance signals to investors that HMRC has reviewed your case and found it eligible.
- Cash runway – Raising £250k can provide 12 months or more of operational funding for lean startups.
From an investor’s standpoint, SEIS is almost unrivalled. Where else can you invest in an innovative business with:
- 50% immediate tax relief on up to £250k invested
- Additional downside protection through loss relief
- Potentially tax-free gains after three years
This structure aligns both parties - founders get capital, investors get reduced risk and strong upside potential.
Who is eligible to use SEIS?
To take advantage of SEIS, your company must meet HMRC’s eligibility rules at the time of the investment.
Key requirements include:
- Company age – Must have been trading for less than three years.
- Size – Fewer than 25 full-time employees.
- Gross assets – Must be worth less than £350,000 at the time of share issue.
- Location – Must have a permanent establishment in the UK.
- Business activities – Certain trades are excluded, including banking, farming, property development, and legal or accountancy services.
- Independence – The company must not be controlled by another company.
These rules ensure the scheme targets genuinely small, early-stage, high-growth potential businesses. If you breach any of these conditions, the investment could be disqualified, and investors may lose their tax relief - a risk that can damage credibility.
How should founders prepare before raising under SEIS?
Preparation is everything when it comes to maximising SEIS success. From our first-hand experience helping hundreds of UK startups raise capital, here’s what works:
1. Apply for Advance Assurance Early
Submit to HMRC with a clear business plan, pitch deck, and evidence of trade. This should be done before you actively start pitching to investors.
2. Build a Robust Data Room:
- Pitch deck with market opportunity, solution, traction, and team
- Financial forecasts (12–36 months)
- Cap table showing equity structure
- Market research and competitor analysis
- FAQ document answering likely investor queries
3. Leverage Your Existing Network
Don’t underestimate friends, family, and past customers. David Walton, from LumAI, raised his first £150k from people who already knew and trusted him.
4. Offer Flexible Ticket Sizes
Smaller investment slots (e.g., £3k–£10k) can bring in a wider range of backers, while larger tickets accelerate your total.
5. Justify Your Valuation
Investors will want to know why your pre-money valuation makes sense. Use a mix of:
- Revenue projections with industry-appropriate multiples
- Market comparables
- Value of your team’s expertise and track record
How do you attract investors to an SEIS round?
Even with SEIS benefits, your pitch still needs to land. Practical tips include:
- Lead with the opportunity, not the tax relief – The relief is an enhancer, not the core story.
- Highlight your unfair advantage – what is it that gives you an edge over legacy competitors.
- Create urgency – Limited SEIS capacity and time-sensitive market opportunities can nudge investors to act.
- Provide social proof – Share early commitments from other investors to create momentum.
- Demonstrate execution capability – Investors need to believe your team can deliver.
What are common mistakes to avoid with SEIS?
Many founders trip up on avoidable errors:
- Delaying the application – Waiting too long can mean you age out of eligibility.
- Over-promising growth – Unrealistic projections erode trust quickly.
- Ignoring compliance details – Non-qualifying activities or corporate structures can void the relief.
- Neglecting investor relationships – SEIS helps you open doors, but relationships close deals.
How can SEIS set you up for future fundraising?
A successful SEIS round isn’t just about the capital - it’s about what you do with it:
- Build traction – Use the funds to get to first revenue, expand your customer base, and prove retention.
- Refine your product – Gather feedback from early adopters to improve before scaling.
- Prepare for Series A – Document your growth playbook so VCs see predictable, scalable acquisition.
Conclusion
The Seed Enterprise Investment Scheme is arguably the most attractive early-stage funding tool available to UK founders. It de-risks investments for angels, speeds up capital raising, and can transform a young company’s prospects.
Combining SEIS with a well-prepared pitch, a clear valuation strategy, and an engaged network can turn what might otherwise be a slow and uncertain fundraising journey into a fast, momentum-driven campaign.
For founders serious about growth, SEIS isn’t just about raising your first £250k - it’s about laying the foundation for long-term success.
FAQs on the Seed Enterprise Investment Scheme (SEIS)
Q1: How much can I raise through SEIS?
Under SEIS, you can raise up to £250,000 in total over the lifetime of your company. This limit applies across all SEIS funding rounds combined, not per year. Once you have reached the cap, you cannot issue further SEIS-eligible shares, but you may still be able to raise under the Enterprise Investment Scheme (EIS).
Q2: Can I combine SEIS and EIS funding?
Yes, many companies follow a sequence where they first raise under SEIS and then use EIS for larger, later-stage rounds. SEIS is designed for very early-stage companies, while EIS supports slightly more established businesses. You must ensure that the SEIS shares are issued first, and that you comply with the timing and eligibility rules for each scheme.
Q3: How long does it take to get advance assurance?
HMRC’s typical turnaround time for SEIS advance assurance is four to six weeks, but well-prepared applications can sometimes be processed faster. The timeline may vary depending on the completeness of your documentation and HMRC’s workload. Submitting a clear business plan, financial forecasts, and details of your intended investors can help speed things up.
Q4: Can overseas investors use SEIS?
Yes, overseas investors can benefit from SEIS if they pay UK income tax. This means they either need to be UK residents or have sufficient UK taxable income to claim the relief. If they do not have a UK tax liability, they can still invest, but they will not receive the SEIS tax advantages.
Q5: What happens if my business fails?
If your company fails, investors can claim loss relief on the amount they invested, after deducting the initial 50% income tax relief. This means their actual financial loss can be significantly reduced, sometimes to less than a third of their original investment. This added safety net is one reason SEIS is so attractive to early-stage investors.
Q6: Do I need a minimum investment amount for SEIS?
There is no legal minimum investment under SEIS, which makes it accessible for a wide range of investors. Founders often use this flexibility to allow friends, family, or smaller angel investors to participate at ticket sizes that suit them. This approach can help build momentum in the round while creating a network of supportive shareholders.
Think you're ready to raise? Grab our free Investor Readiness Checklist to find out — or book a free call with a fractional CFO to stress-test your numbers and sharpen your pitch.
