SEIS and EIS for investors: the arithmetic of a £20,000 cheque
What the reliefs actually do to your money — income tax relief, CGT exemption, loss relief, carry-back and reinvestment relief — with the 2026 limits and a worked example showing the real downside on a £20k SEIS investment.
Two-thirds of UK angels only invest where SEIS or EIS applies, and once you have seen the arithmetic you will understand why. The schemes do not make a bad investment good, but they change the shape of the risk so dramatically that a portfolio of early-stage cheques becomes a rational thing for a higher-rate taxpayer to hold. Here is what each relief does, in numbers.
The reliefs, 2026/27
| SEIS | EIS | |
|---|---|---|
| Income tax relief | 50% of the amount invested | 30% |
| Annual investment limit | £200,000 | £1,000,000 (£2m if the excess is in knowledge-intensive companies) |
| Capital gains on exit | Exempt after 3 years | Exempt after 3 years |
| Loss relief | Net loss set against income tax at your marginal rate | Same |
| Carry back | Treat the investment as made in the previous tax year | Same |
| Capital gains reinvestment | 50% of a gain reinvested is exempt | Gain deferred while invested |
| Inheritance tax | Usually business relief after 2 years | Same |
| Company limits | Under 3 years trading, gross assets under £350k, fewer than 25 staff, raises up to £250k | Under 7 years from first sale (10 if KIC), gross assets under £15m, fewer than 250 staff, £5m a year / £12m lifetime |
Relief is claimed on your tax return once the company issues the SEIS3 or EIS3 certificate, which it gets from HMRC after the shares are issued and (for SEIS) after four months of trading or 70% of the money is spent.
A £20,000 SEIS cheque, three ways
You pay tax at 45%.
- Day one: £20,000 invested. Income tax relief £10,000. Net cost £10,000.
- Total loss: the company fails, shares worth nothing. You have a £20,000 loss less the £10,000 relief already claimed: net loss £10,000, set against income at 45% = £4,500 back. Total recovered £14,500. Real loss: £5,500 of £20,000 — 27.5%.
- Exit at 5×: shares sold for £100,000 after three years. Gain of £80,000, no capital gains tax. Net cost was £10,000; you have £100,000. 10× on the money you actually put at risk.
- Exit at 1× (your money back): £20,000 back, £10,000 relief kept. 2× on net cost.
The same £20,000 under EIS: relief £6,000, net cost £14,000; total-loss recovery £6,000 + (£14,000 × 45% = £6,300) = £12,300, real loss £7,700 (38.5%); 5× exit tax-free.
What the arithmetic means for a portfolio
If you make ten £20,000 SEIS investments and six fail outright, two return your money and two return 5×, you have put £200,000 in at a net cost of £100,000, and got back: six failures £87,000 (£14,500 each), two at 1× £40,000, two at 5× £200,000 — £327,000 on £100,000 net. That is why the schemes exist and why experienced angels build portfolios rather than picking one winner.
The conditions that catch investors out
- You must hold the shares for three years or the relief is clawed back.
- You must not be "connected": no more than 30% of the company, and not an employee (a director is fine if unpaid at investment, or paid under SEIS, with conditions).
- Shares must be full-risk ordinary shares — no preference, no redemption rights, no guaranteed exits. Any investor protection that reduces risk can break the relief.
- Money must be in before the company breaches its limits; the company's advance assurance is HMRC's opinion in advance, not a guarantee.
- Relief is on the tax you actually pay. £10,000 of relief is no use if your tax bill is £6,000 (carry-back helps).
Questions investors ask
"Can I invest through a company or a pension?"
SEIS/EIS relief is for individuals paying UK income tax. Companies and pensions get none of it.
"What if the company loses its qualifying status later?"
If the company does something disqualifying within three years — stops trading, is acquired for shares, breaches the rules — relief can be withdrawn. Companies with a good adviser avoid it; it is a question to ask before investing.
"Does a loan note qualify?"
No. Only shares. An advance subscription agreement can, if structured for it; a convertible loan note does not.