The Ultimate Guide to SEIS Startup Investment in the UK

Usually I don’t write such detailed posts but registering your startup for SEIS could be a life changer, especially if your project is in the early stages (by the way that’s the stage where I like to invest or join the startup as a mentor).

SEIS is a tool for startups to find investors (and it’s open to foreign entrepreneurs too)

If you live in the United Kingdom you probably have a good idea of what  the SEIS program is, but there is a good chance that nobody explained  the unwritten rules to you or told you what can go wrong with the investors. If you live outside the UK, don’t worry as  you can still use the SEIS to raise money for your startup.

This guide is based on my experience with 10+ companies where I have served as a co-founder or an adviser.  I do NOT sell SEIS consultancy and this is not a post telling you how to leap frog your accountant. He will still be very useful at one point. However if you have closed a bad deal or made a mistake, no accountant can save your company from losing money or – worse – save you from an angry investor.

How does SEIS work

(You can jump to the next paragraph if you are already familiar with SEIS).

SEIS is an abbreviation for “Seed Enterprise Investment Scheme” (I could have used the word “acronym” instead of “abbreviation” but I don’t like using fancy words in a guide).  In short SEIS provides tax relief to investors. That translated in simple words means “If an investor puts money in a startup, he pays fewer taxes.”

Example: If Gabrielle invests £20,000 in a startup she saves up to £14,000 in taxes (usually 50%-70% depending on the circumstances). Thus Gabrielle gets shares of the startup worth £20,000 at a price of just £6,000. The startup gets the full £20,000 cash. Win.

Not only will Gabrielle be more open to investing, but she will also invest more. Every investor has an idea of how much money he can invest during a year, based on his attitude to risk and his income. If Gabrielle feels comfortable risking a maximum of £20,000, she can invest up to £66,700 and still risk only £20,000. The difference will be reimbursed by the State.

Why should you register your startup for SEIS?

The first reason is probably quite obvious. An investor prefers to invest in a startup qualified for SEIS against a non-qualified startup because he risks less money.

The opposite is also true. If an investor decides to invest in a non-SEIS startup he will probably ask for more shares for the same money because he risks more.

Unless you plan to bootstrap your startup without the help of any external investors, you should pre-apply for  SEIS from the very beginning (yes it’s possible to apply for SEIS even before having an investor and I will explain how to do it below). Don’t wait because in fact when you need the money it could be too late.

Q&A for getting SEIS investment

There is a long list of requirements provided by the HMRC – the UK tax agency – but they are very technical and I will list them in the next paragraph. I prefer to start with a short list of very practical requirements which you can rarely find on the Internet, including the case when the founders are not British.

Do I have to be British to apply for SEIS?

No, you don’t have to be a British citizen. Neither do you have to live in the United Kingdom, however the startup must be a UK company. And it makes sense from a political point of view. I have worked in many countries (53 countries to date and counting) and many bureaucrats tend to be jealous of their national identity. On the contrary, British politicians are very practical. Bring a company to them, and thus taxes in the future, and they will ignore your nationality (however opening a bank account for a foreigner is still a pain).

Does my company have to be a UK company?

Yes. Directors and shareholders can be from  anywhere in the world (see above), but not the startup: the company must be based in the UK. The goal of this regulation is to boost the British economy; the State can’t reimburse taxes to investors sending money abroad.

Does the investor have to be British?

That’s tricky.

  • No, the investor doesn’t need to be British and he  may be of any nationality.
  • The investor could be also resident in another country and not pay taxes in the UK at all.
  • However the investor can only ask for a reimbursement on the taxes that are paid in the UK.

Example: A startup is raising investment split among 4 individuals:

  1. A British living in England. He can clearly request a SEIS reimbursement.
  2. A British living in China. He doesn’t pay taxes in the UK, and thus even if he is British he can’t ask for a SEIS reimbursement.
  3. An Italian living in London (me). I can request a SEIS reimbursement even if I am not a British citizen because as a UK resident I pay taxes in the UK.
  4. A Swiss person living in Switzerland. He doesn’t pay taxes in the UK thus he can’t ask for SEIS reimbursement.

If we invest £20,000 each the startup gets a total sum of £80,000 (£20,000×4). However the investor risks different sums.

  1. The British living in the UK risks £6,000 but the startup receives £20,000
  2. The British living in Asia risks £20,000 and the startup receives £20,000 (unless he has some income in the UK that is taxable in the country. Then he can benefits from SEIS as investor no. 1)
  3. The Italian living in the UK risks £6,000 but the startup receives £20,000
  4. The Swiss living in Switzerland risks £20,000 and the startup receives £20,000 (unless he has some income in the UK that is taxable in the country)

With a (real) investment of just £52,000, the startup gets £80,000. If all the investors were British resident, with an investment of £24,000, the startups still gets £80,000. And so on, you get the idea.

This is just an example, and the ratio is not always £6,000 to £20,000. The tax relief can be different, however it can’t be less than 50% of the sum. In our example every British investor gets at least £10,000 on £20,000. To date UK has the best regulation for startup and angel investor in the world, at least among the countries I know (if you are aware of a better regulation, please let me know writing in the comments. I am always interested on this subject.

Does the investor have to be accredited?

Again, that’s tricky.

An “accredited investor” is an individual with regular funds and experience. For instance you can’t register with as an investor if you don’t have a net worth of $1 million or an income of $200,000 per year (these are the US requirements).

There are no such requirements for SEIS. The idea behind this regulation was to encourage ordinary people to invest in startups and to use the “money hidden under the mattress”. In fact venture capitals are excluded from SEIS benefits because they already invest professionally.

However, you can get tax relief only if you pay taxes.

Example: a young professional who pays £20,000 in taxes per year can get a maximum tax relief of – you guessed it! – exactly £20,000. If he invests £100,000 he can’t ask for the full 50-70% back.

In other words, if you are an investor in theory you can reduce your taxes to zero (and that’s good) but no more than that. You can’t ask the State to wire you extra money.

Can I apply for SEIS before I meet the investors?

Yes you can (and you should).

The name of the application is “SEIS Advanced Assurance”. Basically you send a form to the tax agency (HMRC) and they will reply if your company is eligible on the basis of your wording.

I am going to describe the process in detail in a specific chapter of this guide. But the main point is that it’s good to apply for Advanced Assurance because if they reject the application it’s possible that you can fix the mistake before you close a deal with the investors. On the contrary, if the SEIS is rejected after the investors have paid the money the rejection is final (and you will have to deal with angry investors that are also shareholders – and possibly even worse: their  lawyers).

How do you deal with a SEIS investor?

In other words how much should the SEIS benefits influence your negotiation with the investors? For instance, an investor who pays the startup £20,000 but only risks £10,000; how differently should he be treated to an investor who risks £6,000 or £20,000? And last but not least, do you have to ask your investor how much money he will save with SEIS in order to make a more accurate offer?

I have heard all kind of advice from startups and mentors. My personal suggestion: apply for SEIS than ignore it.

A) You should apply for SEIS as soon as possible, because it’s not  particularly time consuming – and because it’s your job as a founder. If you run a startup you are not a programmer anymore, or a marketer or whatever you were before. You have decided to become an entrepreneur, and entrepreneurs are always open for business (even when it’s boring).

B) However, after your startup is qualified for SEIS, ignore it. The point isn’t to calculate how risky it is for the investor to join your company (that’s their job), the point is to decide (i) how many shares YOU want to give away and (ii) for how much money.

Knowing that an investor can benefit from the SEIS is clearly useful in negotiation, but it’s only one of the many ways of leverage that you can use. If you don’t have a long experience with investor deals, you will find out in time that an investor – especially a good one – is less interested in how much money he can save and more in your product and team.

I prefer to invest in Amazon without any discount, than in with a 100% tax relief (anybody remember They were the first online library but they went busted in the ‘90). Even if I don’t risk money at all with a 100% tax relief (and that’s very improbable in practice) I can lose a lot of time following the wrong startup. And time, like money, is limited. Even worse, in my world finding money is hard but possible, finding time is quite more difficult.

So, understand how SEIS works (more in the next chapter) and setup your strategy. Then outsource everything to a consultant, forget it and go out there and be awesome.

– Stefano

[The next chapter will be online in a few days]

Image source: JDHancock at

2 thoughts on “The Ultimate Guide to SEIS Startup Investment in the UK”

  1. Hi Stefano I am not British (born Belgium). May I benefit of the SEIS tax credit for my UK company?

    1. Yes you can!
      In fact the tax credits are not for you, but for the investors. If they pay taxes in the UK, then they can ask their taxes back. That’s going to benefit your company in an indirect way:
      If the investor gets his tax back, he risks less money ===> if he risks less money, he’s going to be more willing to invest in a startup (hopefully your company).

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