SEIS Explained: How Start-Ups Raise Their First £250,000

Raising money for a company that’s barely off the ground is one of the hardest things a founder does. 

You may be just starting out, revenue is beginning to trickle in, and you’re asking people to invest real money in what is of course a risky proposition.

So, naturally, why would anyone say yes?

For a lot of UK start-ups, the answer is SEIS – the Seed Enterprise Investment Scheme. It’s a government scheme built to make investing in early-stage companies worthwhile, and it does that by offering your investors some of the most generous tax reliefs in the system. 

Those reliefs are why SEIS has become the usual way for a young company to raise its first proper round of funding, up to £250,000.

Read on to learn about SEIS and how you may be able to benefit. 

What is SEIS? And How Does SEIS Work?

SEIS is one of a small group of government schemes designed to encourage private investment in small, high-risk companies – the kind banks won’t lend to and most investors won’t consider. 

The key point is that it rewards the investor, not the company. So to see why SEIS matters to you as a founder, you need to understand what it offers the people you’re asking to invest.

An investor who backs a SEIS-qualifying company gets a set of reliefs about as good as anything in UK tax:

• 50% income tax relief: An investor can reduce their income tax bill by 50% of what they invest – up to the £200,000 annual limit, and as far as they have income tax to set it against. On a £20,000 investment, that’s £10,000 off their bill.
• Tax-free growth: Hold the shares for at least three years, and if the company does well, any profit on selling them is free of Capital Gains Tax.
• Reinvestment relief: An investor who funds the shares from another taxable gain can exempt half of the amount they reinvest from Capital Gains Tax – so reinvesting £20,000 of a £50,000 gain exempts £10,000, not half the whole gain – subject to the scheme’s limits.
• Loss relief: If the company fails, the investor can set the loss against their income or other gains, which softens a failure considerably.

Add it all together, and the effect is striking. Whichever way the company goes, an investor has far less of their own money genuinely at risk than the amount they put in, because relief covers so much of it. That’s what makes people willing to back companies they’d normally avoid entirely.

SEIS Has Limits

SEIS has firm limits, because it’s built for the very first stage of a company’s life:

• £250,000 for the company: You can raise up to £250,000 through SEIS over the company’s whole lifetime – the “first £250,000” the scheme is designed to provide. Some state aid you’ve had in the previous three years counts towards this figure, so if you’ve taken grants, check how much room you actually have.
• £200,000 for each investor, each year: An individual can invest up to £200,000 across SEIS companies in a tax year and claim the relief.

The £250,000 is a lifetime limit for the company, not a yearly one. Most founders use it once, for the first round, then move on to the Enterprise Investment Scheme (EIS) – SEIS’s bigger sibling – as the business grows. 

The order is fixed, though. SEIS comes first, because once a company has taken EIS money, the company can no longer use SEIS.

Who Qualifies For SEIS?

SEIS is only for genuine early-stage companies, so yours has to meet a set of conditions when it issues the shares:

• Trading for less than three years. The company’s qualifying trade must have been carried on for no more than three years – the company itself can be older.
• No more than £350,000 in gross assets just before the investment.
• Fewer than 25 employees.
• A qualifying trade. Most trades count, but a few are excluded – among them dealing in land, financial activities and property development.
• No previous EIS or VCT money. The company mustn’t already have raised money under EIS or a Venture Capital Trust.
• UK-based and independent. It needs a permanent establishment in the UK, and mustn’t be controlled by another company.

The shares matter too. They have to be new, full-risk ordinary shares – so no right for your investors to get their money back ahead of other shareholders, and only limited rights to dividends. 

Your investors take the same risk as everyone else on the share register. And you have to spend the money you raise, within three years, on a qualifying business activity – the trade the relief was given for.

What Do Investors Get Out Of SEIS?

Say an investor backs your company with £20,000, and pays tax at the higher rate.

Straight away, they claim 50% income tax relief, cutting their income tax bill by £10,000 – as long as they’ve got at least that much tax to set it against. So their £20,000 has really cost them £10,000. If the company does well and they sell at a profit after three years, that whole profit is theirs, free of Capital Gains Tax.

Now imagine it goes the other way. The company fails, and the shares are worth nothing. They’ve already reduced their tax bill by £10,000 through income tax relief. On the £10,000 they’ve actually lost, they can claim loss relief against their income – at 40%, another £4,000. 

So even a complete write-off has cost them £6,000 on a £20,000 investment. A small, capped loss on the downside against an unlimited gain on the upside – that’s why SEIS investors are willing to take the bet.

Visualising How SEIS Works

Here’s the whole typical SEIS process, from advance assurance to your investors claiming their relief:

What Comes After SEIS: EIS

For many companies, the Enterprise Investment Scheme (EIS) is the natural next step after SEIS. It’s designed for larger, slightly later-stage businesses that are still raising growth capital but have moved beyond SEIS.

The investor relief is lower than under SEIS – 30% rather than 50% – but the funding limits are much higher. From 6 April 2026, most qualifying companies can raise up to £10 million a year under EIS and £24 million over their lifetime.

Knowledge-intensive companies can raise more. Investors can normally claim EIS Income Tax relief on up to £1 million of investment a year, rising to £2 million where the excess is invested in knowledge-intensive companies.

If you plan to use both schemes, the order matters. SEIS has to come first, because a company can’t use SEIS once it has already received EIS or VCT investment. SEIS funding also counts towards the wider venture capital scheme funding limits, so it’s worth thinking about the sequence of your fundraising before you start taking investment.

Getting Set Up With SEIS

For a founder, the single most useful step is advance assurance. This is HMRC confirming, before you raise anything, that an investment in your company is likely to qualify for SEIS. 

It isn’t compulsory, but in practice it’s close to essential, because investors almost always want to see it before they commit – it’s their reassurance that the reliefs they’re counting on will really be there. 

HMRC won’t consider a purely speculative request, so you’ll usually need to show genuine investor interest, with names and rough amounts, before it will assure anything.

Once the investment is complete, there are three key steps:

• You ask HMRC for permission to certify: The company submits form SEIS1. You can’t do this the moment the cash arrives – you have to have either traded for four months, or spent at least 70% of that share issue, first.
• HMRC authorises the company: If all conditions are met, HMRC gives the company authority to issue certificates.
• You issue the certificates: The company fills in a SEIS3 form for each investor, and they use it to claim relief on their own tax return.

Getting the groundwork right before you apply makes this easier: a properly structured company, clean accounts, and a clear plan for the money.

Our founder’s guide to raising funding covers the wider job of getting investment-ready.

Get SEIS-Ready

SEIS can turn a maybe into a yes – but only if your company qualifies and the paperwork is right, and a mistake at the setup stage can cost your investors the very reliefs that attracted them.

That’s where we help. At Double Point, we get founders SEIS-ready from the start: checking your company meets every condition, structuring it correctly, preparing and submitting your advance assurance application, and running the compliance so your investors get their certificates without a problem. 

Done properly, SEIS becomes one of the most powerful tools you have for raising that first £250,000.

If you’ve got a raise coming up, book a free consultation, and we’ll help you make the most of it.

Disclaimer: General information only, not advice. Rules and figures can change. Take advice on your own circumstances before acting.