Equity Crowdfunding Tax in the UK 2026: SEIS, EIS and What Happens When It Goes Wrong
Platforms like Seedrs and Crowdcube often market equity crowdfunding deals alongside SEIS or EIS tax relief, but the relief isn't automatic and the failure rate for early-stage companies is genuinely high. Here's how the tax actually works, including relief for losses.
How Equity Crowdfunding Tax Relief Actually Works
Platforms such as Seedrs and Crowdcube let members of the public invest directly in early-stage private companies, often in amounts as low as £10-£100 per campaign. Many (though not all) of the companies listed structure their raise to qualify for SEIS or EIS relief, since the tax incentive is a significant part of what makes early-stage, high-risk investment attractive to retail investors.
Important: qualification is company-specific and campaign-specific, not platform-wide. A platform might host some SEIS-eligible campaigns, some EIS-eligible campaigns, and some campaigns with no tax relief at all (for example, later-stage companies that no longer meet the qualifying conditions). Always check the specific campaign's own investment memorandum or HMRC advance assurance documentation.
SEIS vs EIS for Crowdfunding: Quick Comparison
| Feature | SEIS | EIS |
|---|---|---|
| Income tax relief | 50% of investment | 30% of investment |
| Annual investment limit for relief | £200,000 | £1,000,000 (£2,000,000 if knowledge-intensive) |
| Minimum holding for relief | 3 years | 3 years |
| CGT treatment on other gains | Up to 50% of a reinvested gain exempt | Gain can be deferred (not exempt, just postponed) |
| CGT on the SEIS/EIS shares themselves | Exempt if held 3+ years and relief maintained | Exempt if held 3+ years and relief maintained |
| Typical company stage | Very early-stage/seed | Early to growth-stage |
| Company age/size limits | Broadly under 2 years trading, under £350,000 gross assets, fewer than 25 employees | Broadly under 7 years trading (10 for knowledge-intensive), under £15m gross assets, fewer than 250 employees |
Worked Example: SEIS Crowdfunding Investment That Fails
Suppose a higher-rate (40%) taxpayer invests £5,000 in an SEIS-qualifying crowdfunding campaign, and the company fails completely within 2 years, with the shares becoming worthless.
| Step | Amount |
|---|---|
| Amount invested | £5,000 |
| SEIS income tax relief claimed (50%) | £2,500 |
| Net cost after initial relief | £2,500 |
| Loss for Loss Relief purposes (net cost, since shares are now worthless) | £2,500 |
| Loss Relief available at marginal rate (40%) | £1,000 |
| Final net cost after both reliefs | £2,500 − £1,000 = £1,500 |
The investor put in £5,000 and, through combined SEIS income tax relief and Loss Relief, effectively bears a net loss of £1,500 rather than the full £5,000 — a real and meaningful cushion, but still a genuine loss, not a break-even outcome.
Worked Example: EIS Crowdfunding Investment That Succeeds
Suppose the same investor instead puts £5,000 into an EIS-qualifying campaign, and after 4 years the company is acquired, with the shares worth £20,000.
| Step | Amount |
|---|---|
| Amount invested | £5,000 |
| EIS income tax relief claimed (30%) | £1,500 |
| Effective net cost | £3,500 |
| Sale proceeds after 4 years (held past 3-year minimum) | £20,000 |
| CGT on the gain | £0 — EIS shares held past the minimum period are exempt |
| Total return | £20,000 received + £1,500 relief already banked, against £5,000 originally invested |
This illustrates the genuine upside case, but it's important to recognise that a single large winner like this is not the typical outcome across a portfolio of early-stage investments — most equity crowdfunding portfolios contain a mix of failures, break-evens and occasional large winners.
Claiming Loss Relief: The Mechanics
If an SEIS or EIS-qualifying investment fails or is sold at a loss, you can generally choose to:
- Offset the loss against income tax in the year of the loss, or carry it back to the previous tax year — this is the more valuable option for most higher-rate taxpayers, since income tax relief on a loss is usually worth more than capital gains relief.
- Offset the loss against capital gains instead, in the normal CGT way, if that's more beneficial to your specific tax position.
The loss you can claim relief on is calculated net of any SEIS/EIS income tax relief already received — you can't claim relief twice on the same pound of investment.
Practical Risk Reality Check
Equity crowdfunding platforms are required to present risk warnings prominently, and for good reason: a substantial proportion of early-stage, SEIS/EIS-eligible companies fail to return investors' capital in full. The tax reliefs available are specifically designed to compensate for this elevated risk — they are not evidence that the underlying investment is safe. Treat equity crowdfunding as a small, high-risk portion of a diversified portfolio, never as a core savings vehicle, and never invest money you can't afford to lose entirely, tax relief notwithstanding.
Frequently asked questions
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