For UK businesses seeking funding, the Seed Enterprise Investment Scheme (SEIS) and the Enterprise Investment Scheme (EIS) are powerful tools to attract investors. These government-backed initiatives offer attractive tax benefits to investors, making them popular for startups and growing businesses competing for investor attention.
But when it comes to comparing SEIS vs EIS, how do you determine which scheme aligns best with your needs?
Let’s break it down.
What is SEIS and EIS?
SEIS and EIS are schemes designed to encourage investment in small, innovative businesses. This is done by offering significant tax relief to investors who invest through the scheme. While they share similarities, the two schemes target businesses at different stages of growth and come with unique benefits and requirements.
SEIS (Seed Enterprise Investment Scheme): Tailored for very early-stage startups, SEIS allows you to raise to £250,000 in funding. Investors can claim up to 50% tax relief on investments of up to £200,000 per tax year. While funding beyond this amount won’t qualify for SEIS benefits, it opens opportunities to explore other funding routes as your business grows.
EIS (Enterprise Investment Scheme): Designed for more established businesses, EIS lets you raise £10 million per year and up to £24 million in total. Anything raised outside of this will not be eligible for tax reliefs. Investors can claim 30% tax relief on investments of up to £1 million annually.
Introduction to SEIS
SEIS is ideal for businesses in their early stages. Think of it as the launch pad for your entrepreneurial journey. It’s particularly beneficial for startups operating in high-risk industries, such as tech or biotech, where early-stage funding is critical.
Example:
Imagine you’re developing an AI-based productivity tool, you’re at the idea stage or have a working MVP but lack the capital make that next step. SEIS can help you attract investors willing to take a calculated risk, knowing they’ll receive generous tax benefits in return.
Check the eligibility criteria for SEIS to see if your business qualifies.
Introduction to EIS
EIS is the next step up, targeting businesses that have typically demonstrated some traction. If you’re scaling up operations, entering new markets, or expanding your product line, EIS can provide the substantial funding needed to make it happen.
Example:
Suppose your AI productivity tool has a few paying customers, and you’re looking to hire a sales team or invest in marketing. EIS can attract larger investments, helping you achieve your growth goals.
See also: EIS Eligibility 2026: The Ultimate Guide to Qualify & Benefit
Is your business eligible for SEIS or EIS?
| Criteria | SEIS Eligibility | EIS Eligibility |
| Age | New or less than 3 years from first commercial sale | New or less than 7 years from first commercial sale (10 years for knowledge-intensive companies) |
| Location | UK-Based | UK-Based |
| Structure | Not listed on a stock exchange, no parent co. | Not listed on a stock exchange, no parent co. |
| Gross Assets | £350,000 or less | £30 million before investment (£35 million after investment) |
| Employees | Fewer than 25 full-time employees | Fewer than 250 full-time employees (500 for knowledge-intensive companies) |
| Business Activities | Must engage in a qualifying trade | Must engage in a qualifying trade |
| Funding Limits | Raise up to £250,000 | Raise up to £10 million annually, £24 million lifetime (£20 million annually and £40 million lifetime for knowledge-intensive companies) |
Understanding these schemes can be complex, but you don’t have to do it alone. We make it easy for you to understand your eligibility, apply for the right scheme and maximise your investment potential.
Knowledge-Intensive Companies (KICs)
If you run a knowledge-intensive company (KIC), the Enterprise Investment Scheme (EIS) lets you raise up to £20 million per tax year, with a lifetime limit of £40 million (including other venture capital schemes). Unlike SEIS, EIS is ideal for innovation-focused businesses seeking larger funding and extended eligibility.
Key criteria for KICs to qualify for EIS:
- R&D spend: You must have spent at least 15% of operating costs on R&D in one of the last 3 years (or 10% annually over 3 years).
- Innovation or skilled workforce: You must either be developing IP that will become your main revenue source, or at least 20% of your staff must hold master’s degrees (or higher) and be directly engaged in R&D for 3 years post-investment.
- Investment window: Your first EIS/SEIS investment must generally be received within 10 years of your first commercial sale or the date your turnover first reached £200,000.
Understanding these schemes and can be complex, but you don’t have to do it alone. We make it easy for you to understand your eligibility, apply for the right scheme and maximise your investment potential.
Who cannot benefit from SEIS or EIS?
For your company to qualify for SEIS or EIS, it must carry out a qualifying trade. While most businesses meet this requirement, certain types of trades are excluded.
Your business will not qualify if over 20% of its trade involves any of the following activities:
- Coal or steel production
- Farming or market gardening
- Leasing activities
- Legal or financial services
- Property development
- Running a hotel or nursing home
- Generation of energy (e.g., electricity or heat)
- Production of gas or other fuels
- Exporting electricity
- Banking, insurance, debt, or financing services
Fundraising through both SEIS and EIS: A strategic guide
Fundraising can be a complex landscape for emerging businesses. The UK’s investment schemes offer unique opportunities, particularly through SEIS and EIS, but understanding their strategic deployment is crucial.
The golden rule is sequence: SEIS comes first. Designed for pre-seed and seed-stage companies, SEIS provides initial capital. EIS then supports more developed businesses.
One key limitation: SEIS investment should generally be completed before raising EIS funds, as companies cannot later return to SEIS after issuing EIS shares.
Here’s what we recommend:
- Raise up to £250,000 through SEIS
- Separate investment rounds by at least one day
- Issue SEIS certificates before EIS shares
Timing is everything. By understanding these nuanced investment schemes, startups can maximise funding potential while maintaining regulatory compliance.
SEIS and EIS tax benefits: Why investors love them
Both SEIS and EIS stand out as golden opportunities for investors, offering the chance to support innovative businesses and reap significant tax benefits. These schemes are designed to reward investors for backing high-risk, high-growth potential ventures, making them a win-win for both parties. Here’s why SEIS and EIS are so attractive:
1. Income Tax Relief
With SEIS, investors can reduce their income tax bill by a generous 50%. EIS offers a solid 30% reduction, which, while slightly lower, is still a substantial saving. This immediate financial relief makes investing in your business an even more appealing prospect.
2. Capital Gains Tax (CGT) Relief
There is no CGT to pay on gains from shares held for at least three years under SEIS or EIS.
3. Loss Relief
If an investment doesn’t go as planned, investors can offset their losses against their income or capital gains. This safety net can make even the riskiest ventures more palatable.
4. Inheritance Tax Relief
Once shares have been held for two years, they may qualify for Business Relief, potentially reducing inheritance tax liabilities making them a smart choice for long-term financial planning.
Making the right choice
SEIS and EIS are designed to help businesses secure vital funding, but the right scheme depends on your stage of growth and trade activities. Understanding the qualifying criteria, including your trade type, is essential for ensuring your eligibility and attracting the right investors.
At Rise Accounting, we’ve guided hundreds of early-stage businesses through the process and are committed to delivering unparalleled excellence. We guide startups and investors through the complexities of SEIS and EIS Advance Assurance and more. Whether it’s eligibility, application preparation or submission, our team is here to help you succeed.
Ready to take the next step? Book a call with our team today.
