Knowledge Base: SEIS Income Tax Relief for Investors

The Seed Enterprise Investment Scheme (SEIS) is a government initiative designed to encourage investment in early-stage startups by offering tax reliefs to investors. Understanding how these tax reliefs work can help investors maximize their benefits. Also see our comprehensive SEIS/EIS Guide.

How to claim

If your investment was under the SEIS or EIS scheme then, in due course, the founders will provide an SEIS3 or EIS3 form. This is your key to claiming tax relief from HMRC, which you can claim via your next tax return or right now. Growth Capital Ventures have a great article on undertaking this task.

How SEIS Income Tax Relief Works

1. Claiming Tax Relief for the Current and Previous Tax Year

• Investors can claim SEIS tax relief for the current tax year in which they invest.

• They can also carry back the relief to the previous tax year, provided they have available SEIS allowance for that year.

• This means an investment made today (during the 2024/25 tax year) could provide tax relief for both 2024/25 and 2023/24, reducing tax liability for both years.

For Example: If an investor puts £10,000 into a startup today, they could:

• Claim £5,000 relief against 2024/25 tax year.

• Carry back £5,000 to claim against 2023/24, reducing their tax bill for that year.

2. Claiming Forward – Timing Your Investment for Maximum Benefit

• Investors can time their investments across two tax years to make the most of their SEIS relief.

• The best approach is to invest some funds now and some after the new tax year starts.

For Example: If an investor is planning to invest £20,000:

• They could invest £10,000 before April 5, 2025, claiming relief for 2024/25.

• They could then invest £10,000 after April 6, 2025, claiming relief for 2025/26.

• This allows them to spread their tax relief benefits over multiple years.

FAQs

Who Can Invest?

Investors under SEIS/EIS should be a UK taxpayer with sufficient tax paid in the current year, or prior year, to offset the investment.

Investors must not be:

• A family member of any of the founders (see more).

• An employee of the company, though directors can make use of SEIS.

Investors must hold the shares for at least three years.

Can SEIS Be Applied Retrospectively?

Yes! SEIS can be applied retrospectively. Investors can claim SEIS relief for the current tax year and carry back the claim to the previous tax year. More details are available from HMRC: HMRC SEIS Guidance.

What Happens If SEIS3 Is Filed After the Tax Deadline?

The SEIS3/EIS can be filed up to five years after the deadline. More information can be found here: CrowdCube SEIS Tax Relief.

What If EIS Investment Is Sent Before SEIS?

SEIS must be received before any EIS investment. More details: How to Raise SEIS and EIS in the Same Round.

Does It Matter If Investors Transfer Slightly Different Amounts?

Yes, investors must transfer the exact amount stated in the investment paperwork. SEIS/EIS legislation requires that shares be fully paid in cash at the time of issuance. If the amount is incorrect, SEIS relief may not be granted.

More details: HMRC SEIS Guidance.

What Happens If Too Much Money Is Sent?

If an investor transfers more than the agreed amount, they will not receive SEIS relief on the excess portion. The investment should match the agreed paperwork exactly to ensure full eligibility.

You should return any excess to the investor.