Fiscal Umbrella Accountants
SEIS vs EIS: which one does your startup qualify for?
Most founders asking this question already have an answer sitting in their own filing history. The trade start date, the gross assets and the headcount decide it, and the order you use the two schemes in can cost you a quarter of a million pounds if you get it the wrong way round.
Published 18 October 2026
6 min read
Fasih Khan, Partner, ACCA qualified
When a founder asks whether their startup qualifies for SEIS or EIS, they usually expect a long answer. It is normally a short one. SEIS is for companies that have only just started trading and are still small. EIS is for everything after that. The tests that separate them are mostly mechanical, and you can check them yourself in an afternoon.
Where it gets expensive is the sequence. Take EIS money first and you lose SEIS for good, and SEIS is the one investors want most because the income tax relief is higher and the risk at that stage is highest. I have seen founders close a round under EIS because it was what their adviser knew, then discover the following year that the £250,000 of SEIS they could have used had gone.
Here is how we work through it with founders before a raise.
The age of your trade decides most of it
SEIS is written for a company at the point it starts to trade. If the qualifying trade has already been carried on for more than three years, by you or by anyone who transferred it to you, SEIS is gone. Your company also must not have carried on any other trade before the new one. That second rule catches more people than the first. A company incorporated three years ago to do consulting, then pivoted to software, has a problem, because the consulting counts.
EIS has no equivalent three-year cut-off on the trade itself, but it has a seven year clock running from your first commercial sale. If your first commercial sale was more than seven years ago and you have never taken venture capital scheme money, raising under EIS gets much harder unless you qualify as knowledge-intensive, which means carrying out a significant amount of research, development or innovation.
So the first two questions in any SEIS or EIS conversation are: when did you first sell something, and has this company ever traded as anything else. If the answers put you inside the early window, SEIS is the one to go for, and you should go for it before you take any other investment.
Size limits: assets, headcount and the ceiling
SEIS has hard numbers attached and they are checked at the moment the shares are issued, not at the start of the process.
- Gross assets of the company and any subsidiaries must be no more than £350,000 when the shares are issued.
- Fewer than 25 full-time equivalent employees in total at that point.
- A maximum of £250,000 raised under SEIS, which includes any other de minimis state aid in the three years up to and including the date of the investment.
That £250,000 is a lifetime figure, not a per round figure, and it counts towards the limits on later venture capital scheme investment. EIS carries much larger lifetime ceilings and a different set of conditions, including a permanent establishment in the UK and not being controlled by another company.
The asset test is the one that bites founders who have already put real money in or capitalised development spend. If you are close to £350,000 of gross assets and planning a seed round, the timing of your share issue matters more than almost anything else in your fundraising calendar. Sort the SEIS allocation first, then let the balance sheet grow.
Take EIS money first and SEIS is gone for good. There is no fix, no appeal and no workaround, and it is the early backers taking the most risk who lose out.
What your company actually does matters
Both schemes require a qualifying trade, and HMRC publishes a long list of excluded activities that neither scheme will touch. Dealing in land, shares or other financial instruments is out. So are banking, insurance, money lending and debt factoring. Leasing assets, receiving royalties or licence fees, property development, farming, running hotels or care homes, and all energy-generating activities are excluded, as are legal and accountancy services.
The royalties and licence fees line is the one that worries software founders, and it usually should not. HMRC’s own guidance treats excluded activities as a problem when they form a substantial part of the trade, and where they account for no more than about 20 per cent of the trade measured by something sensible like turnover or capital employed, they are normally accepted as not substantial.
It is still worth being honest with yourself here. If your revenue model is genuinely licensing intellectual property you did not create, you have a conversation to have before you write the application, not after. And if your IP is registered and you are generating profit from it, patent box may be a better fit than you think.
Use SEIS first, then EIS, never the reverse
This is the part I want founders to take away. You cannot use SEIS if you have already received investment through EIS or from a venture capital trust. The reverse is fine. Raise your first £250,000 under SEIS, spend it within three years on the qualifying trade or on research and development expected to lead to it, then go on to EIS for the larger round.
Get the order wrong and there is no fix. The relief is simply unavailable to your early backers, and those are the people taking the most risk on you.
In practice, that means advance assurance should be in hand before you start talking numbers with an angel. HMRC received more SEIS advance assurance applications in 2025 to 2026 than the year before, and approval is not automatic, so building the application into your raise timetable rather than bolting it on at the end is the sensible move. We cover the timing in more detail in our piece on how long advance assurance takes and what HMRC asks.
Keeping the relief once it is granted
Qualifying is the start. The reliefs are withheld or withdrawn from your investors if the company stops following the rules within three years of the investment being made, and that is a problem you carry rather than they do. An investor who loses relief because of something you did in year two will remember it when you come back for the next round.
The usual causes are ordinary business decisions taken without anyone checking the rules first: setting up a subsidiary that is not a qualifying subsidiary, letting another company take control, drifting into an excluded activity as the revenue mix changes, or spending the money on something outside the qualifying trade. None of these are exotic. They happen because the person who wrote the application was never going to see the company again.
That is the argument for keeping the scheme work with whoever does your year end and your corporation tax. The same person who files the accounts sees the subsidiary appear, sees the revenue mix shift, and can say something before it becomes a withdrawal notice. I obtained SEIS advance assurance for my own software company before raising, so I have sat on both sides of this.
Common questions
Can we use SEIS and EIS in the same funding round?
You can use both, but the SEIS shares must be issued first and the SEIS money must be received before any EIS investment. If EIS or venture capital trust money has already come in, SEIS is no longer available to the company. In practice we issue the SEIS shares, let that settle, then move to the EIS shares.
Does advance assurance mean the relief is guaranteed for investors?
No. Advance assurance is HMRC’s view based on the information you give them, and it is what most angels ask to see before committing. The relief itself still depends on the company meeting the conditions for at least three years after the investment, and on the compliance statement being submitted correctly after the shares are issued.
We pivoted from consulting to software. Can we still use SEIS?
It depends on whether the consulting counted as a trade carried on by the company. SEIS requires that the company has not carried on any other trade before the new qualifying one, and that the qualifying trade has not been carried on for more than three years. A pivot inside a company that was already trading often rules SEIS out, so this needs checking against your actual filing history.
Does software licensing count as an excluded activity?
Receiving royalties or licence fees sits on HMRC’s excluded activities list, which worries founders. The test is whether excluded activities form a substantial part of the trade. HMRC normally accepts that no more than around 20 per cent, measured by turnover or capital employed, is not substantial. Most software businesses selling their own product are fine, but the wording of your application matters.
How quickly do we have to spend SEIS money?
Within three years of the share issue, on the qualifying trade, on preparing to carry out that trade, or on research and development expected to lead to it. You cannot use it to buy shares in another company, with a narrow exception for a qualifying 90 per cent subsidiary that spends the money on a qualifying business activity.
Related reading
Our take
On SEIS vs EIS, which one does your startup qualify for usually comes down to three facts you already have: when the trade started, what the gross assets look like today, and whether anyone has put venture capital scheme money in before. Early, small and clean means SEIS. Past that window, or already backed, means EIS.
The nuance is in the excluded activities and the three-year compliance period, and that is where a few hours of thinking before the raise saves a long conversation afterwards. If you are heading into a round in the next six months and nobody has checked your position, that is exactly the kind of thing we look at with founders. Answer a few quick questions and we will tell you where you stand.