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UNDER SEIS Tax Relief
SEIS tax relief guide
The Seed Enterprise Investment Scheme (SEIS) is a government-backed venture capital scheme aimed at encouraging private investment in early-stage businesses. It provides tax incentives for those willing to invest in startups, which play a vital role in driving innovation, creating jobs, and boosting the economy.
Investing in these young companies carries higher risk compared to traditional assets like property or shares, so the tax benefits help mitigate some of that risk.
SEIS specifically targets the smallest and most high-risk ventures, offering particularly attractive tax relief for investors. Furthermore, it's possible to combine SEIS with other schemes, such as the Enterprise Investment Scheme (EIS), allowing investors to claim relief from both within the same year.
SEIS and income tax relief
With SEIS, investors can reduce their Income Tax bill by 50% of the amount invested. For example, if you invest £10,000 in a company eligible under SEIS, you can claim a £5,000 reduction on your Income Tax when you submit your tax return.
As of April 2023, the annual investment limit for SEIS has increased to £200,000, doubling from the previous cap of £100,000.
Capital Gains disposal relief
Typically, selling shares results in paying Capital Gains Tax on any profit made. However, under SEIS, you pay no Capital Gains Tax (CGT) on the profit from the sale, regardless of the size of the exit.
To qualify for this SEIS benefit, investors must hold the shares for at least three years before selling them.
Capital Gains reinvestment relief
If you reinvest profits from a non-SEIS company into an SEIS-eligible company, you can reduce your Capital Gains Tax liability by 50% on the amount reinvested.
Loss relief
If your SEIS investment results in a loss, you can offset this against your Income Tax bill. The amount you can claim is calculated by taking your at-risk investment (the amount lost minus any Income Tax relief already claimed) and multiplying it by your Income Tax rate, whether that's 20%, 40%, or 45%. For further details, visit the relevant page on gov.uk.
Inheritance tax relief
SEIS shares are exempt from Inheritance Tax, provided they have been held for at least two years.