SEIS and EIS Explained: What They Are, Why They Exist and How the Process Works for UK Startups

If you are a UK startup founder preparing to raise investment, understanding SEIS and EIS is essential. These government-backed schemes make it easier for companies to raise money and give investors powerful tax reliefs that reduce their risk.

In almost every early fundraising conversation, investors will ask:
“Do you have SEIS or EIS advance assurance?”

This guide explains what SEIS and EIS actually are, why the government created them and how the process works from a company point of view. It also highlights the steps you need to take to qualify and common mistakes founders should avoid.

If you want to raise capital confidently, this is everything you need to know.

What Are SEIS and EIS?

SEIS: Seed Enterprise Investment Scheme

SEIS is designed for very early stage companies. It gives investors:

50 percent income tax relief
No capital gains tax after 3 years
Loss relief if the company fails
Inheritance tax relief after 2 years

A company can raise up to £250,000 under SEIS.

EIS: Enterprise Investment Scheme

EIS is the next step once your business grows. It offers:

30 percent income tax relief
No capital gains tax after 3 years
Loss relief
Inheritance tax relief

Companies can raise up to £12 million under EIS.

These schemes are two of the most effective tools for UK startup fundraising, and many founders rely on both as they grow from seed to scale.

Why the UK Government Created SEIS and EIS

SEIS and EIS were introduced to solve one core problem.
Early stage companies are risky to invest in, and investors were reluctant to back them.

The government created SEIS/EIS tax reliefs to reduce investor risk and encourage more early stage investment. When investors have tax protection, they are far more willing to support startups.

These schemes stimulate innovation, create jobs and help founders secure the capital they need to grow.

Who Qualifies for SEIS and EIS?

Understanding the qualification rules is crucial before submitting your SEIS or EIS advance assurance application.

SEIS qualification checklist

Your company must:

Be less than 3 years old
Have under £350,000 in gross assets
Have fewer than 25 employees
Not have raised more than £250,000 under SEIS before
Carry on a qualifying trade
Be permanently established in the UK

EIS qualification checklist

Your company must:

Be less than 7 years old (for first EIS raise)
Have under £15 million in gross assets
Have fewer than 250 employees
Carry on a qualifying trade
Be based in the UK

Most technology, digital, software and product-based businesses qualify easily under both schemes.

How SEIS/EIS Works From a Company Point of View

Here is the full process from start to finish, whether you are applying for SEIS advance assurance or EIS advance assurance.

1. Get your structure SEIS/EIS-ready

Before you apply to HMRC, you must make sure:

You are raising investment in the correct company
The shares being issued are ordinary shares
There are no preference shares or restrictions
The group structure complies with the rules
Any subsidiaries are 90 percent owned (if raising in a parent company)

Incorrect structure is one of the main reasons HMRC rejects applications.

2. Prepare the SEIS/EIS documentation

You will need:

A business plan
A pitch deck
Financial forecasts
A detailed use of funds
A list of prospective investors
A cap table
Information about the company structure

HMRC uses these documents to assess whether your company is genuinely seeking to grow and carries a real risk to investor capital.

3. Apply for SEIS or EIS advance assurance

Advance assurance is a written confirmation from HMRC that your company should qualify. Investors rely on this document because it gives them confidence that their tax relief will be accepted later.

You apply through the HMRC portal and attach your documents.
Approval usually takes a few weeks.

This step alone can make the difference between a smooth raise and a stalled one.

4. Raise the investment and issue the shares

Once advance assurance is granted, you can raise investment.
You must issue:

ordinary shares
with full rights
and no preferences

This is vital for SEIS and EIS eligibility.

5. Submit SEIS1 or EIS1 to HMRC

After the investment is completed and shares are issued, you submit the appropriate compliance form:

SEIS1 for Seed Enterprise Investment Scheme
EIS1 for Enterprise Investment Scheme

When HMRC approves it, they send SEIS3 or EIS3 certificates for your investors.

These certificates allow them to claim their tax reliefs.

Why SEIS/EIS Are Critical for Raising Investment

Most angel investors, family offices and early stage funds prefer (or insist) that companies have SEIS or EIS in place. It reduces their risk significantly and gives them confidence that the company is structured correctly.

Companies that prepare early:

raise faster
experience fewer delays
avoid last minute legal issues
gain more investor trust

Companies that leave it late often run into problems.
Sometimes the investment falls through completely.

Common SEIS/EIS Mistakes Founders Make

Here are the most frequent issues I see when working with founders:

Applying for SEIS in the wrong company
Using preference shares instead of ordinary shares
Having subsidiaries without meeting the 90 percent rule
Not preparing forecasts or a proper business plan
Applying before checking if the company qualifies
Leaving the process until an investor demands it

These mistakes can be avoided with proper planning and early support.

Final Thoughts

SEIS and EIS are two of the most founder friendly schemes in the UK. They make raising early investment far easier and give investors confidence to support your growth.

If you are planning a raise, sort your SEIS and EIS structure early.
It will save you time, reduce stress and create a smoother path to securing investment.

If you need help preparing your SEIS/EIS application, assessing your structure or getting advance assurance, feel free to reach out. Getting it right early makes the entire fundraising journey easier.