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.
Estimated reading time: 2 min
Due to the potential for losses, the Financial Conduct Authority (FCA) considers this investment to be high risk.
What are the key risks?
If you are interested in learning more about how to protect yourself, visit the FCA’s website here.
Around £1.9 billion has been invested into some 19,000 early-stage companies through the Seed Enterprise Investment Scheme (SEIS) since its launch in 2012.
Investors receive some of the most generous tax breaks available, acknowledging the high risks of backing such young companies – including income tax and capital gains tax reliefs of up to 50%. Tax rules can change and benefits depend on circumstances.
Important: The information on this website is for experienced investors. It is not advice, research, nor a personal recommendation to invest. The video represents the views of the people interviewed – you should form your own view. If you’re unsure an investment is right for you, please seek advice.
We’ve asked the managers of two of our featured SEIS funds as well as the founder of a fast-growing startup they've both backed.
The discussion ranges from the potential benefits of SEIS for investors, new businesses and the economy and the considerable risks.
Why consider investing in SEIS now? What sectors are most interesting in the managers' view? Why did both managers invest in this founder’s startup? What’s the impact of recent SEIS rule changes? And why do these managers believe SEIS provides “the best tax relief in the world”?
Joining me around the table are:
This fund is managed by four successful entrepreneurs with first-hand experience of successfully founding, growing and selling businesses. It invests in sectors the team knows well, such as software-as-a-service, on-demand, gig economy and digital consumer.
This longstanding SEIS fund is managed by SFC Capital, one of one of Europe’s most active seed investors. It invests in very early-stage companies with innovative products and disruptive technologies.
Platform helping consumers consolidate household bills with 9x run-rate revenue growth to £5.5 million since 2021. Backed by institutional investors Haatch Ventures, SFC Capital and The SidebySide Partnership, Bunch aims to be the UK’s leading bill management platform.
Investing in startups can be rewarding but is also very risky. Some of these companies might do very well, but inevitably others will struggle and some will fail.
The tax incentives the government offers through SEIS provide a valuable buffer. They are intended to encourage investment in young companies, the engine of economic growth.
Below is a brief outline based on current rules: there are detailed conditions and rules you should consider carefully before investing. Decisions should be based on the investment merit, not the tax reliefs alone.
A £100,000 investment could provide a £50,000 saving on that year’s income tax bill. To claim this, you must have sufficient income tax liability and hold the shares for at least three years. You can invest up to £200,000 per tax year.
Assuming you have the allowance, you could ‘carry back’: offset the tax relief against last year’s tax bill and potentially get back tax you’ve already paid. So if you use both years’ allowances you could potentially invest up to £400,000 in one go.
You normally pay no capital gains tax (CGT) when realising SEIS shares, provided you have claimed income tax relief on them and the companies still qualify. This is known as ‘SEIS disposal relief’.
You could reduce the CGT on gains made elsewhere by up to 50%. To benefit, you must have had the income tax relief in the same year.
Under current rules, an investment in an SEIS-qualifying company should benefit from 100% relief from inheritance tax, provided the investment is held for two years and at the time of death.
From 6 April 2026 100% IHT relief on SEIS private companies will be limited to the first £1 million of qualifying assets (including private companies and agricultural property), with the remainder eligible for 50% IHT relief (an effective IHT rate of 20%). Any qualifying SEIS companies quoted on AIM will be eligible for 50% IHT relief (an effective IHT rate of 20%).
If things don’t go to plan, you can choose to offset any loss, less the income tax relief received, against your income tax bill.
So, an additional-rate taxpayer could effectively reduce a total loss of £1 to 15.5p once all the tax reliefs available have been taken into account. Read more on how SEIS loss relief works.
Guides & factsheets
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 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.
