EIS vs SEIS: which scheme should your startup target in 2026?

For early-stage UK companies, EIS and SEIS are the two most powerful fundraising tools available. Both offer investors significant upfront income tax relief, CGT exemption on gains, and loss relief if the company fails. But they target different stages, have different eligibility rules, and carry very different fundraising limits. Choosing the right scheme — or sequencing them correctly — can be the difference between a fully-funded round and a difficult conversation with investors who discover they cannot claim relief.

The Seed Enterprise Investment Scheme is designed for the earliest stage. To qualify, your company must be less than three years old, have fewer than 25 full-time equivalent employees, and hold gross assets of no more than £350,000 before the investment. The maximum you can raise under SEIS is £250,000 per company in total — not per round, per company, ever. Investors receive 50% upfront income tax relief on investments up to £200,000 per year and are exempt from CGT on any gain if they hold the shares for three years. If the company fails, they can claim loss relief on the net investment after the 50% relief has been applied.

The Enterprise Investment Scheme targets companies past the very earliest stage. As of April 2026, the gross assets limit has doubled to £30 million before investment, and the annual investment limit has risen from £5 million to £10 million. Knowledge-intensive companies — broadly, those spending at least 15% of operating costs on R&D or holding significant IP — can raise up to £40 million over their lifetime and have up to ten years of trading history rather than the standard seven. Investors receive 30% income tax relief on up to £2 million per year (or £1 million for non-KIC eligible shares) and a CGT-free exit after three years.

The sequencing question matters because you cannot run SEIS and EIS simultaneously. HMRC requires SEIS investment to be fully deployed before EIS investment begins. The standard approach for qualifying companies is to raise under SEIS first — typically a pre-seed or seed round of up to £250,000 — and then move to EIS for subsequent rounds. Attempting to raise EIS before SEIS shares are fully issued will disqualify the SEIS investors from claiming relief.

Advance assurance from HMRC is not mandatory but is strongly recommended for both schemes. Most sophisticated angel investors and institutional angel networks will not invest without it. Advance assurance is HMRC's confirmation that, based on the information provided, the company appears to qualify. It is not a guarantee — HMRC can withdraw it if circumstances change — but it gives investors sufficient comfort to commit. The application typically takes six to eight weeks, though HMRC processing times vary. For companies planning to fundraise, applying for advance assurance before you begin investor conversations is the right sequence.

Not all companies qualify. Property investment companies, financial services firms, energy generation companies above certain thresholds, and hotels are excluded. The excluded activities list is broad, and HMRC applies it strictly. If your business model has any ambiguity — for instance, a software company with a licensing revenue stream — you should get specific advice before applying. A failed advance assurance application, or worse, a successful raise followed by an HMRC challenge, is costly and reputationally damaging.

From the investor's perspective, the 2026 changes have made EIS significantly more attractive relative to VCTs. VCT income tax relief dropped from 30% to 20%, while EIS held at 30%. For investors allocating to early-stage UK companies, EIS now offers a better upfront relief, no management fee (unlike VCTs), and direct ownership of the underlying company — though with correspondingly higher risk. The shift in relative attractiveness means more investors are actively looking for EIS-qualifying opportunities.

For founders, the practical implication is this: if you are pre-revenue or pre-product and raising your first external capital, target SEIS. If you have a working product, some revenue or traction, and gross assets below £30 million, target EIS. If your company qualifies as knowledge-intensive, you have the most favourable set of rules — use them. And in either case, start the advance assurance process before you start pitching. Running it in parallel costs you nothing and saves you weeks when investors are ready to move.

Stertha Advisory has helped numerous UK startups obtain EIS and SEIS advance assurance, structure their fundraising rounds, and maintain ongoing compliance throughout their investment period. If you are planning a raise in the next six months, a conversation now saves time, money, and stress. Book a consultation.