What tax relief do SEIS and EIS give investors?

Full answer

The Seed Enterprise Investment Scheme (SEIS) and Enterprise Investment Scheme (EIS) are government incentives encouraging individuals to invest in higher-risk, unquoted UK trading companies. They affect investors who want to back start-ups and can use Income Tax relief, and the companies that need risk capital. Income Tax relief is the headline. SEIS gives relief at 50% of the amount invested; EIS gives 30%. The relief reduces your Income Tax bill (it cannot create a refund beyond tax actually paid). So a GBP 10,000 EIS investment can cut your Income Tax by GBP 3,000; a GBP 10,000 SEIS investment by GBP 5,000. You claim once the company issues an EIS3/SEIS3 certificate. Capital Gains Tax benefits are substantial. If you hold the shares for at least three years and the relief was given, any growth in the shares is exempt from CGT - valuable given 2026/27 CGT rates of 18% within the basic-rate band and 24% above, with only a GBP 3,000 annual exempt amount. SEIS also offers CGT reinvestment relief on other gains, and EIS offers CGT deferral. Downside protection matters because these are risky companies. If the shares are sold at a loss, loss relief can be set against income or gains, after deducting the Income Tax relief already received - softening the blow when a start-up fails. Conditions are strict: minimum three-year holding period, the company must carry on a qualifying trade and stay within size, age and gross-asset limits, and you generally cannot be connected as an employee or major shareholder. There are annual investment caps per investor and lifetime funding caps per company, set by HMRC; confirm the current limits before investing rather than assuming. Model the CGT you would otherwise pay on a disposal using the capital-gains-tax calculator, and your Income Tax position with the income-tax calculator.

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