Comparing SEIS and EIS tax reliefs and investment opportunities

The Seed Enterprise Investment Scheme (SEIS) and Enterprise Investment Scheme (EIS) are government schemes created to incentivise investment in innovative new businesses. Both offer significant tax advantages for investors backing early-stage businesses in the UK.

Both schemes offer attractive tax reliefs to investors that can be used to reduce income tax, inheritance tax and to reduce or defer capital gains tax. Holding shares in EIS and SEIS-eligible companies will give qualifying investors access to the full spectrum of tax reliefs available, for a greater degree of overall tax relief; the schemes are not mutually exclusive from a tax claim perspective.

For investors who are new to investing in EIS or SEIS and wondering where to start, this guide will help you determine the scheme best suited to your financial goals and tax situation. It should also help investors who have an investment in EIS or SEIS and are wondering whether to double down or add shares in the other scheme to their portfolio.

Do note that SEIS and EIS qualifying investments are into earlier stage, higher-risk companies. They are only suitable for experienced investors due to their illiquidity and the risk of loss of capital. Tax rules and benefits are subject to status and can change. This information is not advice or a personal recommendation and is accurate to the best of our knowledge.

SEIS vs EIS comparison table

Which scheme to start with?

Below we have outlined a few common situations investors in our funds experience and how to approach those questions when comparing SEIS and EIS opportunities. Please note, the information below is for comparison purposes only and should not be taken as advice.

Situation: high-income tax bill

You’re a high-earner looking to reduce the amount you pay in income tax.

• SEIS: Provides 50% income tax relief but has a maximum investment of £200,000.

• EIS: Provides 30% income tax relief but allows investments up to £1 million (£2 million if the first million is invested in knowledge-intensive companies).

• S/EIS carry-back relief: If you have a high tax bill from the previous tax year, S/EIS allows you to apply the relief to the prior tax year, effectively increasing the benefit.

Which makes most sense for you?

SEIS: for a higher percentage of relief and a bit more risk

SEIS lets you claim a maximum of £100,000 in tax relief against your income tax bill (assuming you invest £200,000). As SEIS invests in the earliest stages of company, they must have been trading for less than two years, these companies are very early in their journey and quite risky.

EIS: For a lower percentage of relief and potentially less risk

With EIS you receive 30% income tax relief on up to £1 million invested (£2 million if at least have of it is into Knowledge-intensive companies). While this represents a smaller amount of relief by the percentage of the amount invested, the companies you can invest in through EIS tend to be later in their development than SEIS companies.

In fact, companies that qualify for EIS can be trading for up to 7 years (10 years for knowledge-intensive companies) and can have as many as 200 employees (500 for knowledge-intensive companies). They are still risky but they are often further in their development than those raising SEIS.

Situation: high capital gains tax bill

I’ve got a capital gain I’d like to reduce (or defer).

• SEIS: If you reinvest a capital gain into SEIS, you can claim a 50% CGT exemption on the amount invested.

• EIS: With EIS, you can defer your capital gain as long as the investment is made within a specific time frame.

This means the gain only becomes taxable when you exit the EIS investment, allowing for strategic tax planning.

Which should you choose?

SEIS: If you prefer to permanently reduce your CGT liability in one go.

EIS: If you’d prefer to defer the gain until a later date.

Situation: exploring inheritance tax solutions

I want to leave something to my family after I’m gone.

• Both SEIS and EIS investments qualify for inheritance tax (IHT) relief after two years, provided you still hold the shares at the time of death.

• SEIS investments are in very early-stage companies, which can be riskier but may offer higher growth potential.

• EIS investments are generally in more established businesses, which could provide greater stability.

Which should you choose?

SEIS: If your priority is early-stage impact with a bit more risk.

EIS: If you prefer a balance between risk and stability.

Situation: looking to diversify your portfolio and support startups

Both SEIS and EIS allow investors to

• Invest in the British economy by backing early-stage businesses.
• Gain significant tax benefits.
• Improve the diversification and resilience of their broader portfolio by introducing an uncorrelated asset class.

To learn more about how venture capital fits into a broader investment strategy, check out our article: How much of your portfolio should be in VC?.

A few further insights for comparison

Which companies qualify for SEIS and EIS?

• SEIS companies must be less than 2 years old, have fewer than 25 employees, and less than £350,000 in gross assets.

• EIS companies can be up to 7 years old (10 for knowledge-intensive businesses), have fewer than 250 employees, and less than £15 million in gross assets.

How can I invest in SEIS or EIS?

• Direct investments – You can invest directly in qualifying startups.
• SEIS/EIS funds – These allow you to diversify by investing in multiple businesses.
• SyndicateRoom’s Access EIS fund – A diversified EIS investment option designed to back top-performing startups.

Final decision: which one is right for you?

If you want higher upfront tax relief on a small investment, SEIS is the better option. If you want to invest larger amounts and defer capital gains, EIS is likely a better fit. If you want inheritance tax relief, both options work, but EIS may offer a more balanced risk profile.

Learn more

For more details, check out our full guides on:

The Enterprise Investment Scheme (EIS)

The Seed Enterprise Investment Scheme (SEIS)

Details about the Access EIS Fund

Our fund, Access EIS, tracks the performance data of over 1,000 active startup investors. It then selects and co-invests with some of the best-performing “super angels” with the aim of replicating their collective success, and diversifying your investment across at least 50 super-angel-backed startups to minimise risk and capture as many potential “blockbusters” as possible. The angels we co-invest with significantly outperform the market.

We make the process of claiming relief on multiple investments as simple as possible for our investors.

Find out more about the fund and the innovative startups we've backed here. If it’s right for you, we'd love to welcome you into our community of more than 500 investors.

Disclaimer.

The information on this page does not constitute financial advice and is provided on an information basis only, based on research using the following sources:

• HMRC Tax relief guide for using venture capital schemes
• HMRC self-assessment helpsheet
• EIS Association website
• HMRC policy paper on EIS and knowledge-intensive companies