What are SEIS and EIS for my startup?

💸 Fundraising
Oct 27, 2021
What are SEIS and EIS for my startup?

What are SEIS and EIS?

SEIS and EIS schemes logos. Image from https://www.jonathanlea.net

When searching for funding for your startup or early-stage business, you may have come across the venture capital schemes - Seed Enterprise Investment Scheme (SEIS) and Enterprise Investment Scheme (EIS). They are marketed as win-win situations for both startup founders and funding investors when making investment decisions.


SEIS and EIS are government initiatives that offer a range of tax reliefs to potential investors. In exchange, these venture capital schemes help startup founders in their fundraising efforts by investing capital, which in turn helps decrease financial barriers for SMEs (small and medium sized enterprises) in their early and mid-years.

Funding helps your business to grow. Image from https://cdn2.hubspot.net 

SEIS and EIS funds may be recommended to you by your startup advisor or startup fundraising consultant. This is because fundraising is a key problem when developing and growing startup companies. In fact, financial problems account for 16% of all startup failures (via www.failory.com). This means that taking advantage of the SEIS and EIS funds could help prevent the financial downfall of your startup. Here's a breakdown of how they work:

  1. Eligible businesses apply for funding from investors
  2. Those investors receive benefits such as tax breaks in return


Scale up your startup with funding help. Image from https://img-cdn.inc.com 

As a result, by incentivising investment opportunities with tax breaks to investors, the UK startup industry is kept healthy and thriving. This also makes UK businesses more attractive to potential investors.

And the schemes have clearly worked, too. As of 2021, the UK is home to 5,377 startups, making it the third country in the world with the highest startup efforts (via www.firstsiteguide.com)! 

Interested in finding out if you're eligible for SEIS or EIS funding? Read our guide below for more information.

SEIS (Seed Enterprise Investment Scheme)

First implemented in the UK in 2012, SEIS is relatively new in the investment world. This seed investment scheme focuses on earlier stage companies by investing money for growth and expansion.

The funding limit for SEIS is £150,000, and companies must follow the 4 month/70% rule attached to it. This means that before companies can apply for full SEIS, they must have traded for a minimum of 4 months or have spent 70% of the SEIS investment.

SEIS funding requirements. Image from www.angelsden.com

Is my startup eligible for SEIS funding?

As with all schemes, there are certain stipulations regarding which startups are eligible for SEIS funding. For example:

  • Your company must have been trading for a maximum of 2 years
  • Your company must have no more than 25 employees
  • Your company must have no more than £200,000 gross assets
  • Your company must have had no investment funding from a Venture Capital Trust or the EIS


SEIS benefits. Image from www.angelsden.com

What’s in it for a startup investor?

To sweeten the deal, seed investors are offered an array of benefits to attract investment. These include: 

  • Income Tax relief to investors of 50% against the amount invested, up to £100,000 each tax year
  • An exemption from Capital Gains Tax (CGT) on any gain from the sale of your shares if the shares have been held for over 3 years
  • CGT write-off of 50% of the investment amount in the same tax year
  • Shares are generally Inheritance Tax (IHT) free, providing they have been held for over 2 years
  • Loss relief meaning that investors can offset any shares sold at a loss against CGT or Income Tax
  • Investors can carry back part or all of the investment in the year prior to investment

EIS (Enterprise Investment Scheme)

The Enterprise Investment Scheme, or the EIS Investment Scheme as it is sometimes called, is designed for small and medium-sized businesses. It is better suited to more mature companies or a larger business. The scheme was created in 1994 and is therefore much more established and well-known in the UK than SEIS.

An eligible investor can invest up to £1mil per tax year under the EIS. The return on this has the potential to be much higher than those made under SEIS.

EIS funding requirements. Image from: www.angelsden.com

Is my startup eligible for EIS funding?

If you're a startup founder, your company must meet the following criteria in order to qualify for EIS funding:

  • Your company must have been trading for less than 7 years (or 10 years for Knowledge Intensive companies)
  • Your company must have less than 250 employees (or 500 employees for Knowledge Intensive companies)
  • Your company must have no more than £15mil gross assets to be eligible for the EIS Fund

EIS benefits. Image from www.angelsden.com

What’s in it for the investor?

As with the SEIS, there are perks and incentives involved in taking advantage of the EIS. For example:

  • Investors will be exempt from CGT gain made from the sale of their shares if they have been held for more than 3 years
  • They can defer up to 100% of their investment total against any CGT incurred up to 1 year before or 3 years after disposal
  • Shares are generally IHT free, as long as they have been held for at least 2 years
  • Investors can offset any shares sold at a loss against CGT or Income Tax
  • Investors can carry back part or all of the investment in the year prior to investment

SEIS and EIS: Other points to consider

There are also some points to consider before applying for SEIS and EIS funding, such as:

  • Investors' equity stake must be 30% or lower in order to be eligible for EIS or SEIS tax relief.
  • Both SEIS and EIS may be raised at the same time but shares under both schemes must not be issued on the same day.
  • There are limits on money raised by these schemes. The maximum amount of funds that can be raised under SEIS, EIS, and Venture Capital Trusts is £12mil (or £20mil for ‘Knowledge Intensive’ companies).

Summary of SEIS and EIS

SEIS and EIS are part of a UK strategy to encourage direct investments in SMEs by offering tax breaks, such as income tax relief, to individual investors. The core differences between SEIS and EIS are that they are suitable for different types of startups and that they offer varying tax benefits to investors. SEIS funds are better suited to early-stage companies, whereas EIS are aimed at more mature companies.

If you’d like personal advice on fundraising for your startup, contact 7startup today.

Amit Khanna, 7startup founder

Amit has 18 years of experience in the industry and an MBA. He supports entrepreneurs with every aspect of their business including concept and product development, investor presentations, and fundraising.

Tags: Startup funding, venture capital, scaleups, fundraising, why do startups fail, equity research, SEIS, EIS, government funding