EIS vs. SEIS: Which Investment Scheme is Right for You?

Investing in early-stage companies can be an exciting way to support innovative concepts and earn potentially substantial returns. Enterprise Investment Scheme (EIS) and Seed Enterprise Investment Scheme (SEIS) are two investment schemes established by the British government to encourage investment in enterprises and small businesses. Both programmes offer tax incentives to investors, but their eligibility requirements and benefits vary. This article will examine the main distinctions between EIS and SEIS to assist you in deciding which investment scheme is best for you.

Eligibility Requirements:

The primary distinction between the EIS and SEIS. SEIS is designed particularly for very early-stage companies, while EIS is geared towards more established businesses. To be eligible for SEIS, a business must be less than two years old, have fewer than 25 employees, and have aggregate assets that do not exceed £200,000. In contrast, enterprises with up to £15 million in gross assets and 250 employees are eligible for EIS.

Tax Benefits:

Both EIS and SEIS offer investors attractive tax incentives, although at distinct rates. Under SEIS, investors can receive income tax relief of up to fifty percent on investments of up to one hundred thousand pounds per tax year. If you invest £10,000, you can reduce your income tax liability by £5,000. Moreover, SEIS investments are exempt from the capital gains tax (CGT) if they are held for at least three years. Investors can also claim loss relief against income tax in the event of a loss.

EIS offers a 30% income tax deduction for investments of up to £2 million per tax year. Therefore, if you invest £10,000, you can deduct £3,000 from your income tax liability. Additionally, EIS investments are exempt from CGT after a minimum three-year retention period. EIS also provides investors with deferral relief, enabling them to defer capital gains tax (CGT) on gains from the sale of other assets by reinvesting the gain amount in EIS-eligible companies.

Investment Limits:

The SEIS investment limit is lower than the EIS investment limit. SEIS-eligible companies can receive a maximum of £100,000 per tax year from investors. This investment cap applies to both income tax deductions and capital gains tax exemptions. In contrast, the EIS has a higher investment limit of £2 million per tax year, allowing investors to allocate capital across a broader portfolio of companies.

Risk Profile:

Investing in early-stage enterprises is inherently risky, and so are both EIS and SEIS investments. However, SEIS investments are deemed hazardous due to the immature nature of the involved companies. SEIS-eligible enterprises are typically in their infancy, and their success is difficult to predict. Despite the inherent risk, EIS investments are typically made in slightly more established companies with a demonstrated track record or market presence.

Portfolio Diversification:

Due to the higher investment limit, EIS may be more suited for investors who are interested in diversifying their portfolios. With a maximum investment limit of £2 million, investors have the flexibility to invest in multiple companies, mitigating the impact of potential losses. With a maximum investment of £100,000, the SEIS may limit portfolio diversification options for larger investors.


The choice between EIS and SEIS is contingent on a number of factors, including your risk tolerance, investment objectives, and the quantity of capital you wish to invest. If you are comfortable with greater risk and wish to support entrepreneurs in their earliest stages, SEIS could be a viable option. Alternatively, if you prefer a significantly more established companies and the potential for greater portfolio diversification, EIS might be the right choice for you.

It’s essential to assess your own financial situation, investment goals, and risk tolerance before deciding which scheme to pursue. Consider consulting with a financial advisor who can provide personalized guidance based on your individual circumstances.

Additionally, it’s worth noting that both EIS and SEIS investments come with certain rules and restrictions. For example, the investment must be held for a minimum period to retain the tax benefits, and there are limitations on the types of companies eligible for these schemes. It’s crucial to familiarize yourself with the specific requirements and regulations outlined by HM Revenue and Customs (HMRC) to ensure compliance.

Lastly, keep in mind that investing in early-stage companies carries inherent risks. While these schemes offer tax incentives, there is no guarantee of a return on investment. Startups and small businesses can be volatile and subject to various challenges and uncertainties. It’s vital to conduct thorough due diligence on any company you consider investing in, assessing factors such as the team’s expertise, market potential, and financial stability.

In conclusion, both the EIS and SEIS schemes provide attractive tax incentives to investors interested in supporting early-stage companies. SEIS is geared toward very early-stage startups, offering higher income tax relief but with lower investment limits. EIS, on the other hand, targets slightly more established businesses, providing a lower income tax relief rate but with higher investment limits and additional benefits such as deferral relief.

Ultimately, the decision between EIS and SEIS should align with your investment objectives, risk appetite, and financial circumstances. Consider seeking professional advice to make an informed decision and ensure that your investment strategy aligns with your long-term goals. By carefully evaluating the eligibility criteria, tax benefits, risk profile, investment limits, and portfolio diversification options, you can determine which investment scheme is right for you and embark on a rewarding journey of supporting early-stage companies in the UK.