Increased investment in SEIS – what’s driving investor appetite?
Don't invest unless you’re prepared to lose all the money you invest. This is a high-risk investment and you are unlikely to be protected if something goes wrong. Take 2 mins to learn more.
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Due to the potential for losses, the Financial Conduct Authority (FCA) considers this investment to be high risk.
What are the key risks?
- You could lose all the money you invest
- If the business you invest in fails, you are likely to lose 100% of the money you invested. Most start-up businesses fail.
- You are unlikely to be protected if something goes wrong
- Protection from the Financial Services Compensation Scheme (FSCS), in relation to claims against failed regulated firms, does not cover poor investment performance. Try the FSCS investment protection checker here.
- Protection from the Financial Ombudsman Service (FOS) does not cover poor investment performance. If you have a complaint against an FCA-regulated firm, FOS may be able to consider it. Learn more about FOS protection here.
- You won’t get your money back quickly
- Even if the business you invest in is successful, it may take several years to get your money back. You are unlikely to be able to sell your investment early.
- The most likely way to get your money back is if the business is bought by another business or lists its shares on an exchange such as the London Stock Exchange. These events are not common.
- If you are investing in a start-up business, you should not expect to get your money back through dividends. Start-up businesses rarely pay these.
- Don’t put all your eggs in one basket
- Putting all your money into a single business or type of investment for example, is risky. Spreading your money across different investments makes you less dependent on any one to do well.
- A good rule of thumb is not to invest more than 10% of your money in high-risk investments.
- The value of your investment can be reduced
- The percentage of the business that you own will decrease if the business issues more shares. This could mean that the value of your investment reduces, depending on how much the business grows. Most start-up businesses issue multiple rounds of shares.
- These new shares could have additional rights that your shares don’t have, such as the right to receive a fixed dividend, which could further reduce your chances of getting a return on your investment.
If you are interested in learning more about how to protect yourself, visit the FCA’s website here.
HMRC’s latest figures show £276 million was invested under the Seed Enterprise Investment Scheme (SEIS) in the 2024/25 tax year – surpassing the previous year’s high by 14%. The investment was across 2,430 companies.
- Companies from one sector – ‘Information and Communication’ – received the lion’s share of investment: £115 million, or 42% of the total SEIS investment.
- The next three largest sectors – the ‘Professional, Scientific and Technical’, ‘Manufacturing’ and ‘Wholesale and Retail Trade, Repairs’ sectors – together accounted for 33% of total SEIS investment.
- Around 75% (1,775) of the companies were raising funds under SEIS for the first time.
What's been driving the increase in SEIS investment? Read on to find out more.
If you’re interested to hear about my own experience investing in SEIS, read: My best and worst SEIS investments – and what I learned along the way
Important: The information on this website is for experienced investors. It is not advice nor a research or personal recommendation to invest. If you’re unsure, please seek advice. SEIS investments are high risk and you could lose the money you invest.
What could be driving greater investor appetite for SEIS?
A number of factors could potentially be making SEIS more attractive to investors. These range from a more generous investment allowance since 2023, to generous tax benefits at a time when the tax burden on high earners is steadily rising.
- Increased investor allowance – Since April 2023, the maximum amount you can invest in SEIS each tax year has doubled from £100,000 to £200,000.
- Increased fundraising limits – the maximum amount a young company can raise under SEIS has increased to £250,000 (previously £150,000).
- Heavier tax burden making SEIS tax reliefs more appealing – SEIS offers investors some of the most generous tax reliefs available, reflecting the elevated risks of backing very young, ambitious companies.
Free factsheet: SEIS at a glance
This short and simple fact sheet explains in more detail the current tax treatment of the government-endorsed Seed Enterprise Investment Scheme – which generous tax reliefs are offered, and potential risks and benefits.
What tax relief might you receive?
When you back young – and hence high-risk companies – under SEIS, you could benefit from a generous set of tax savings across income, capital gains and inheritance tax.
Below we give an overview of the tax reliefs available, against the backdrop of recent tax hikes.
Please note: to retain these reliefs, conditions must be met – e.g. you must hold SEIS shares for at least three years and the company must remain qualifying. This is a brief overview and does not cover all the conditions. You should not invest based on the tax benefits alone. Tax rules can change and tax benefits depend on circumstances.
Income tax
Although headline tax rates have not been raised, the Treasury raised £328 billion in 2025/26 tax year, up from £303 billion the previous year.
This is largely the result of the long-term freeze on tax rate thresholds pushing more taxpayers into higher tax brackets. The OBR expects fiscal drag to be generating an extra £56 billion in income tax revenue annually by 2030/31.
In addition, the rate of dividend tax has increased, pushing basic and higher dividend tax rates up to respectively 10.75% and 35.75%. For additional rate taxpayers the dividend tax remains 39.35%. Meanwhile the tax-free dividend allowance has progressively been whittled from £5,000 down to the current £500.
How SEIS tax relief could help
- Income tax relief of up to 50% – A £100,000 investment could provide a £50,000 saving on that year’s income tax bill. You have the option to apply the relief to your previous year’s tax bill instead, using “carry back”.
- Loss relief – If the investment doesn't work out, you can offset any net loss against your income tax or CGT bill.
Capital gains tax
In October 2024, CGT rates increased to 18% and 24% (previously 10% and 20% for basic-rate taxpayers and higher and top-rate taxpayers respectively).
Earlier the same year, the annual tax-free allowance had been reduced to £3,000 (down from £12,300 in 2022/23). The combination of these two measures means far more investors now face higher CGT bills on smaller profits.
How SEIS tax relief could help
- Up to 50% capital gains reinvestment relief – If you have a capital gain made on assets elsewhere, and invest this gain into a qualifying SEIS company, you can claim relief of up to 50% the value of the investment. For example, if you had a gain of £100,000 and reinvested the full amount under SEIS, up to £50,000 of the gain could be exempt from CGT, meaning you would only pay CGT on the remaining £50,000 of the gain. You could also claim back CGT you have already paid.
- Tax-free growth (disposal relief) – There is no CGT to pay on any growth if the SEIS investment is realised after three years.
Inheritance tax
Inheritance tax (IHT) receipts reached a record £8.3 million in 2024/25. Official forecasts suggest this upward trajectory – underway for around 15 years – will accelerate from 2027, when unused pension assets will start to be included in individuals’ estates for IHT purposes.
The combination of frozen IHT thresholds and the inclusion of pensions in IHT calculations is expected to significantly increase the number of estates liable for IHT. Estimates suggest an additional 10,500 estates will be brought into the IHT net, and around 38,500 will pay more than they would have previously done.
How SEIS tax relief could help
- Inheritance tax relief – Investments in SEIS-qualifying companies should benefit from IHT relief, if held for at least two years and at time of death.
- 100% IHT relief is available on the first £2.5 million of qualifying assets (£5 million for married/civil partnership couples). The remainder is eligible for 50% IHT relief.
Wealth Club aims to make it easier for experienced investors to find information on – and apply for – investments. You should base your investment decision on the offer documents and ensure you have read and fully understand them before investing. The information on this webpage is a marketing communication. It is not advice or a personal or research recommendation to buy, sell or hold any of the investments mentioned, nor does it include any opinion as to the present or future value or price of these investments. It does not satisfy legal requirements promoting investment research independence and is thus not subject to prohibitions on dealing ahead of its dissemination.
Alex Davies
Chief Executive
Alex was a board director at Hargreaves Lansdown, where he worked for 15 years. He was responsible for building Hargreaves Lansdown into the biggest direct-to-consumer SIPP provider in the UK with more than 150,000 clients and over £12 billion under management. He is a keen investor with a portfolio of shares, funds, student property, EIS and VCT investments.