Tax relief
How SEIS and EIS tax relief works.
The relief is the part you can calculate in advance. Everything else about an early-stage investment is uncertain.
The relief ledger
An illustration, not advice or a personal recommendation.
£50,000
If the company fails
Assumes shares held at least 3 years, sufficient income tax liability to absorb the relief, the company retaining its qualifying status, and loss relief claimed against income. Growth on a successful exit is normally free of capital gains tax. Figures are illustrative and your circumstances will differ.
The rate is 45%, not 50%
The UK’s top rate of income tax is the additional rate of 45%, which applies to non-dividend income above £125,140. That threshold was reduced from £150,000 in April 2023 and has been frozen since.
A 50% rate existed only for the three tax years from 2010/11 and was reduced to 45% from 2013/14. Older marketing material still quotes it. If you are working out what a scheme is worth to you, use 45%.
The limits, side by side
| SEIS | EIS | |
|---|---|---|
| Income tax relief | 50% | 30% |
| Annual investment limit | £200,000 | £1m (£2m KIC) |
| Company raise limit | £250,000 lifetime | £5m a year, £12m lifetime |
| Gross assets test | £350,000 | £15m |
| Minimum holding | 3 years | 3 years |
| CGT on growth | Exempt | Exempt |
| CGT on other gains | 50% reinvestment relief | Unlimited deferral |
| Inheritance tax | Business relief after 2 years | Business relief after 2 years |
Figures current for 2025/26. Verify against HMRC before relying on them.
Where people come unstuck
- Not having enough income tax liability in the year to absorb the relief. The excess cannot be taken as cash, though an EIS subscription can be carried back a year.
- Selling within three years, which withdraws the income tax relief and the capital gains exemption.
- Becoming connected with the company, broadly by holding more than 30% of it or by becoming an employee.
- Assuming relief is available on day one. It follows the SEIS3 or EIS3 certificate, which the company can only issue after four months of trading.
- Treating relief as a substitute for diversification. The relief is the same whether you hold one company or fifteen; the outcome is not.
Common questions
Is the top rate of UK income tax 45% or 50%?
It is 45%. The additional rate applies to non-dividend income above £125,140. A 50% rate applied only for the three tax years from 2010/11 and was reduced to 45% from 2013/14. Older material sometimes still quotes 50%.
How much income tax relief can I claim?
SEIS gives income tax relief at 50% on up to £200,000 invested in a tax year. EIS gives 30% on up to £1 million, or up to £2 million where the amount above £1 million is invested in knowledge-intensive companies. You need sufficient income tax liability to absorb the relief; it is not paid out in cash.
How long do I have to hold the shares?
At least three years from the issue of the shares, or from the start of the company's trade if that is later. Selling earlier withdraws the income tax relief and the capital gains tax exemption.
What happens if the company fails?
Loss relief may be available on the net cost of your investment, which is the amount you invested less the income tax relief already claimed. That loss can normally be set against income or against capital gains. Loss relief reduces what a failure costs you; it does not return your capital.