SEIS and the tax year: What founders need to know

For many early-stage UK startups, raising under the Seed Enterprise Investment Scheme (SEIS) can make fundraising significantly easier. The scheme offers generous tax relief to investors, which makes backing early-stage companies less risky.

However, many founders are surprised by how much timing and structure can affect whether their investors actually receive that tax relief.

With the tax year ending on 5 April, here are the key things founders should understand when raising SEIS funding.

Why investors care about the tax year

SEIS allows investors to claim 50% income tax relief on qualifying investments, which can significantly reduce their tax bill.

For example:

• If an investor invests £10,000 in a qualifying SEIS company,
• they can claim £5,000 in income tax relief.

Investors can claim this relief against the tax year in which they invest. However, SEIS also allows a carry-back rule, meaning the relief can instead be applied to the previous tax year, provided the investor still has available SEIS allowance.

For example, if an investor makes a £10,000 investment during the 2025/26 tax year, they could:

• claim £5,000 relief against their 2025/26 tax liability, or
• carry the relief back and claim £5,000 against their 2024/25 tax bill.

Because of this flexibility, investors often pay close attention to when investments complete around the tax year deadline (5 April).

Timing investments across tax years

Some investors also plan their SEIS investments strategically across tax years to maximise their tax relief.

For example, if an investor intends to invest £20,000, they might:

• invest £10,000 before 5 April 2026, claiming relief in the 2025/26 tax year, and
• invest £10,000 after 6 April 2026, claiming relief in the 2026/27 tax year.

This allows them to spread their tax relief across multiple tax years.

For founders, this is why the period leading up to the tax year end often becomes a busy time for SEIS fundraising, as investors look to complete investments before the deadline.

What actually needs to happen before 5 April

Many founders assume that receiving the money is enough for an investment to count within a tax year.

In reality, several things need to happen:

• the investment funds must be received by the company
• the shares must be issued
• the share certificates and statutory registers must be updated

If these steps are completed before 5 April, the investment will normally count for that tax year.

Why some investments miss the tax year

A common complication occurs when founders use an Advanced Subscription Agreement (ASA).

ASAs are a popular fundraising instrument because they allow companies to raise money quickly without immediately setting a valuation.

However, ASAs delay the share issue until a later date (often several months later). Since SEIS relief is tied to the share issue, this can push the tax relief into the following tax year.

For investors focused on claiming relief in a specific tax year, a direct equity investment is often the preferred route.

The critical rule: SEIS must come before EIS

Many companies plan to raise money under both SEIS and the Enterprise Investment Scheme (EIS).

However, there is a strict rule that founders must understand:

All SEIS investment must be completed before any EIS investment is received.

If a company accepts even a small amount of EIS investment first, it permanently loses the ability to issue SEIS shares.

This is one of the most common mistakes founders make when structuring mixed SEIS and EIS rounds.

Watch the SEIS gross asset limit

Another important rule relates to the gross asset test.

To qualify for SEIS, a company must have no more than £350,000 in gross assets at the time the investment is received.

This can create unexpected problems if a large institutional investment arrives before SEIS funds. If the company exceeds the asset threshold, it may no longer qualify for SEIS.

For this reason, founders usually structure rounds so that SEIS investors complete first, followed by larger EIS or institutional investments.

Make sure investors transfer the correct amount

A small but important technical detail: investors must transfer exactly the amount stated in the legal documents.

If an investor sends even slightly less than the agreed amount, HMRC could technically argue that the shares were not fully paid for in cash, which may affect eligibility for SEIS relief.

Founders should always ensure investors transfer the exact amount specified in the investment paperwork.

What happens after the investment closes

After the round has closed, the company must complete the SEIS compliance process with HMRC before investors can claim tax relief.

The typical steps are:

1. The company files an SEIS1 compliance statement with HMRC.
2. HMRC reviews the submission and issues a Unique Investment Reference (UIR).
3. The company sends investors their SEIS3 certificates.
4. Investors use the SEIS3 form to claim tax relief.

This process is essential - investors cannot claim SEIS relief until the SEIS3 certificates have been issued.

Final thoughts

SEIS is one of the most powerful fundraising tools available to UK startups. For founders, understanding how the rules interact with the tax year can make a significant difference when closing a round.

By structuring the round correctly, sequencing SEIS and EIS investments carefully, and completing the compliance process promptly, founders can ensure their investors receive the tax relief they expect.