How can entrepreneurs leverage the Seed Enterprise Investment Scheme (SEIS) when forming a UK startup?

11 June 2024

As entrepreneurs, you are continuously in the hunt for better ways to secure funding for your startups. Starting a business always comes with its fair share of challenges, with the financial aspect being one of the most significant. The Seed Enterprise Investment Scheme (SEIS) can play a vital role in your quest for funding. This government-backed scheme encourages investors to put their capital in early-stage companies by offering them attractive tax reliefs. This article will guide you on how to leverage this scheme to your advantage when setting up a startup in the UK.

Understanding the Seed Enterprise Investment Scheme (SEIS)

Before you can leverage the Seed Enterprise Investment Scheme, you need a comprehensive understanding of what it is and how it works. Introduced by the UK government in 2012, SEIS aims to stimulate economic growth by promoting investment in new and potential businesses. It does this by offering tax reliefs to individual investors who put their money into qualifying startups.

SEIS is particularly beneficial for investors as they can claim back up to 50% of their investment in income tax relief. Additionally, if the startup grows and achieves a successful exit, the investor can potentially enjoy significant capital gains tax relief. These tax incentives serve to mitigate the risk involved in investing in early-stage companies, thus encouraging more investment.

Qualifying for the Seed Enterprise Investment Scheme

When it comes to leveraging SEIS, eligibility is of crucial importance. Not all startups will qualify for this scheme. The rules set by the government are stringent, and for a good reason. The intention is to drive investment into startups with high growth potential and create more jobs in the economy.

To qualify for SEIS, your business must be a UK-based company and have been trading for less than two years. The company must not be listed on any recognized stock exchange and should have fewer than 25 employees. Additionally, the enterprise's gross assets must not exceed £200,000 before the investment.

The business must also meet the 'risk to capital' condition. This means that there must be a genuine risk that the investor will lose more capital than they could gain as a net return. The company must also have objectives to grow and develop over the long term.

Utilizing SEIS for startup funding

Once your startup is SEIS-eligible, the next step is to strategically utilize this scheme for your funding needs. The tax reliefs offered by SEIS can be a powerful tool to entice potential investors to support your business.

Your business plan should highlight your SEIS eligibility and explain the tax reliefs investors can expect. This detail can make your investment proposition more attractive, as it reduces the financial risk for the investor. Remember, investors are always looking for opportunities that offer a good return and minimal risk.

Additionally, you can use SEIS as a negotiation tool. For example, you might offer investors a lower share in your company's equity in exchange for a smaller investment amount, given the tax reliefs they'll enjoy.

Reaping long-term benefits from SEIS

SEIS is not just about getting initial funding; it can also benefit your business in the long run. The capital injection could assist in accelerating product development, expanding marketing efforts, or hiring essential staff, thus speeding up your growth process.

Moreover, a successful SEIS funding round can raise your company's profile and build credibility, making it easier to attract further investment in the future. The scheme also fosters a closer relationship between startups and investors, as the tax incentives mean investors are more likely to take a more active role in the company. This active involvement can lead to valuable mentorship and guidance to steer your business towards success.

In conclusion, understanding and effectively leveraging the Seed Enterprise Investment Scheme can be a game-changer for your startup. It reduces the financial burden and opens up opportunities for growth and success. So, as you embark on your entrepreneurial journey, don't overlook the potential benefits of SEIS.

Attracting Angel Investors Through SEIS

Angel investors play a significant role in early-stage venture funding, and the SEIS scheme is an advantageous tool for attracting these types of investors. Angel investors are typically individuals who back startups with their own wealth. They provide both capital and mentorship, dramatically increasing your chances of success.

The substantial tax reliefs provided by the SEIS scheme can entice angel investors to support your startup. As mentioned, under SEIS, investors can claim up to 50% of their investment back in income tax relief. Besides, they can enjoy potential capital gains tax relief if your business succeeds.

In your pitch to potential angel investors, emphasize your SEIS eligibility and the tax incentives it offers. Show them how the scheme reduces their investment risk while increasing potential returns. Remember, the majority of investors are weighing risk against reward – the less risky a venture appears, the more likely they are to invest.

The SEIS scheme also extends loss relief to investors. If your startup fails, investors can claim loss relief against their capital gains or income tax, thus further reducing their financial risk. This feature further strengthens your proposition to potential investors, as it offers a safety net if things don't go as planned.

Maximizing The Impact of SEIS

To leverage the SEIS scheme effectively, it's crucial that you understand its full potential and use it to its maximum. Remember, the benefits of SEIS don't stop at initial funding. The scheme can have a lasting, positive impact on your startup's future growth and success.

One way to maximize the impact of the SEIS scheme is through reinvestment. You can encourage your investors to reinvest their tax reliefs back into your company. This strategy can lead to a larger capital injection and a stronger financial foundation for your startup.

Moreover, don't underestimate the power of the SEIS badge on your business plan. It serves as a proof of government support and an indication that your business has been assessed and deemed a viable, high-potential enterprise. This validation can boost investor confidence, help raise further capital, and attract high-quality talent to your team.


The Seed Enterprise Investment Scheme (SEIS) is a powerful tool for entrepreneurs looking to launch a startup in the UK. It provides significant tax reliefs that can attract potential investors, including seasoned angel investors. At the same time, it reduces the financial risk for these investors, making your startup a more appealing investment opportunity.

But remember, SEIS goes beyond securing initial funding. When leveraged effectively, it can foster long-term relationships with investors, accelerate your growth, and raise your profile in the business world. It's a testament to your business's credibility and potential for success.

Therefore, as you devise your startup strategy, don't neglect the power of SEIS. Understand it, leverage it, and make it a key part of your business plan – it could be the game-changer your startup needs to thrive.