Are you an early-stage company owner wondering how to make your business genuinely attractive to angel investors without giving away half the equity? The answer often lies in two HMRC-backed schemes: the Enterprise Investment Scheme (EIS) and the Seed Enterprise Investment Scheme (SEIS). These are not loans or grants; they are tax reliefs that transfer value from the investor's tax bill to your company's balance sheet.
SEIS targets the riskiest stage. For 2025/26, an investor putting money into a SEIS-eligible company can claim 50% income tax relief on investments up to £100,000 per tax year. Take a software startup raising £75,000 from a single angel. That investor reduces their income tax liability by £37,500. If they hold the shares for three years, any gain on sale is completely exempt from capital gains tax. They can also defer other capital gains by reinvesting them into SEIS shares using form A1.
EIS is for companies that have moved beyond the seed phase. It offers 30% income tax relief on investments of up to £1,000,000 per tax year, or £2,000,000 for knowledge-intensive companies (a common status for R&D-heavy businesses). Like SEIS, EIS shares held for at least three years attract no capital gains tax on disposal. Both schemes include loss relief: if the company fails, the investor can offset the loss against income or capital gains at their marginal rate, capping their effective downside.
Qualifying is not automatic. Your company must be UK-based, unquoted, and carry on a qualifying trade. Property development, financial services, and legal services are excluded. Gross assets must not exceed £15 million for EIS or £200,000 for SEIS at the time of investment. The shares must be newly issued, and the funds must be deployed into the qualifying trade within two years. A common trap: directors and employees are "connected persons" and cannot claim income tax relief on their own investment, though they can invest as a non-connected individual if they are not remunerated (subject to strict conditions).
What this means in practice: EIS and SEIS do not give your company a tax deduction. They give the investor one. That makes your equity cheaper for them, which can be the difference between a yes and a no. For a manufacturing SME or a healthcare practice launching a tech spinout, these schemes can unlock £100,000 to £2 million of growth capital without immediate dilution of your control, because the relief attaches to the investor, not to the company's share structure.
When this matters for UK business owners: It matters from the moment you decide to raise external equity, not after you have already found an investor. Advance assurance from HMRC (form EIS/SEIS AA) should be obtained before the shares are issued. Without it, investors cannot be certain the relief will be available, and many will walk away. If you are a sole trader or partnership considering incorporation, structuring the new company as EIS-eligible from day one can save significant tax planning headaches later.