Ask a UK angel investor why they write cheques into companies that are barely six months old and you will often hear the same three letters: SEIS. The Seed Enterprise Investment Scheme exists because the government knows that backing a brand-new company is risky, and it compensates investors for that risk through the tax system rather than through grants.

For founders, that matters enormously. SEIS does not put money in your bank account by itself — but it makes your company far easier to say yes to. Understanding the rules is close to mandatory if you plan to raise angel money.

What investors actually get

An investor who buys new shares in a qualifying company can claim income tax relief at 50 per cent of the amount invested, up to an annual investor limit of £200,000. On top of that, gains on SEIS shares held for at least three years are generally free of capital gains tax, and if the company fails, loss relief can soften the blow further. Stacked together, the reliefs meaningfully change the risk maths of an early-stage investment.

The practical consequence: an investor choosing between a SEIS-eligible start-up and a non-eligible one is not comparing like for like. The eligible company is, in effect, offering the same equity at a substantial tax-subsidised discount.

The rules on the company side

At the time of writing, a company raising under SEIS can take in no more than £250,000 in total under the scheme. It must have gross assets of no more than £350,000 immediately before the shares are issued, fewer than 25 full-time equivalent employees, and it must have been trading for less than three years. It must carry on a qualifying trade — most normal commercial activity qualifies, but activities such as property development, financial services and legal or accountancy services are among the exclusions.

The rules live, and change, in HMRC guidance and in the legislation itself — check the SEIS pages on gov.uk before you rely on any number quoted anywhere, including here.

Advance assurance: the step that closes rounds

You do not have to ask HMRC whether your company qualifies before you raise — but most investors will expect it. Advance assurance is a free, non-binding confirmation from HMRC that, on the facts you have presented, the company is likely to qualify. It is not a guarantee, but it answers the question investors most want resolved before they commit.

The application asks for your business plan, accounts or forecasts, details of the trade, and how you intend to spend the money. Allow several weeks for a reply, and answer every question the first time — incomplete applications are the main cause of delay.

“SEIS does not raise money for you. It makes it much easier for investors to say yes.”
— BusyBusiness

Mistakes that cost founders

  • Issuing shares before HMRC approval of your SEIS1 compliance statement — investors cannot claim relief until the paperwork sequence is complete.
  • Spending the money on non-qualifying uses — the funds must go on the qualifying trade or on preparing to carry it on.
  • Taking connected-party investment — founders and their associates generally cannot claim SEIS relief on their own company, and shares held by certain connected individuals can complicate the round.
  • Letting the three-year trading window lapse before finishing the round — the clock runs from when you started trading, not when you incorporated.

After the money arrives

Once you have issued the shares, you submit a compliance statement to HMRC for each share issue. Only when HMRC accepts it can you hand investors the certificates they need to claim relief. Keep clean records of how the money is spent — if the company breaches the conditions within three years, investors can have the relief clawed back, and nobody will thank you for it.

Can a founder claim SEIS relief on their own company?

Generally no. Founders and people connected to the company cannot claim SEIS relief on their own shares. SEIS is designed for outside investors, though a founder can in some circumstances be a director and still invest — the rules are fiddly, so check HMRC guidance or take advice.

Is SEIS the same as EIS?

No. SEIS is aimed at the very earliest stage: smaller raise cap (£250,000), smaller company limits, but a more generous 50 per cent income tax relief. EIS comes later — bigger companies, a £5 million annual raise cap, and 30 per cent relief. Many startups use SEIS first, then EIS for the next round.

Do I need advance assurance before raising?

It is not legally required, but most angels will not invest without it. It is free, it de-risks the round for the investor, and it surfaces eligibility problems while you can still fix them.