SEIS and EIS Loss Relief Explained

Early-stage investing is risky. Complete losses in the portfolio are part of the game. SEIS and EIS loss relief exists to cushion that blow.

You may be able to recover up to 70% of your SEIS investment when using all available tax advantages – but only if you know how to claim it correctly. For example, a £100,000 SEIS investment that fails completely can be reduced to just a £30,000 net loss.

In this guide, we'll show you exactly how SEIS and EIS loss relief works, when to claim it, and how to maximize your tax recovery.

 

Key Takeaways

• Loss relief cuts your downside on SEIS and EIS investments. You can set a loss against income (for this and/or last tax year) or capital gains.
• Allowable loss = what you paid – any S/EIS income tax relief – what you got back (if anything).
• Dead or 'zombie' companies still qualify. If shares are near-worthless, you can usually make a negligible value claim to trigger the loss now.

What is SEIS and EIS loss relief?

SEIS and EIS loss relief is a crucial part of the two powerful enterprise investment schemes that enable investors to invest into early-stage businesses while reducing the overall risk of the investment through its many tax advantages.

One of these tax advantages is the SEIS and EIS loss relief which limits the impact of a potential loss of a qualifying investment.

The Seed Enterprise Investment Scheme (SEIS) offers up to 50% upfront income tax relief for up to £200k annually. The Enterprise Investment Scheme (EIS) offers up to 30% upfront relief for up to £1m (or £2m for knowledge-intensive companies) annually.

Investing in startups at an early stage means more upside potential, but also more risk of failure. If a company fails, and you lose money on your investment after those upfront reliefs, you can set the remaining loss against your income or against CGT.

How SEIS and EIS loss relief works

Has the investment fallen below the effective cost?

Your investment only qualifies for SEIS and EIS loss relief if the investment value has fallen below the 'effective cost' of the investment. The effective cost of an investment is the initial amount investment minus any income tax relief you received.

Effective cost = subscription minus SEIS/EIS income tax relief actually kept

Relief actually kept means that the tax relief has not been clawed back, e.g. in the case that the shares were disposed within 3 years.

What is the allowable loss?

Allowable loss = effective cost minus disposal proceeds (if any)

The allowable loss you can set against your income or capital gains is the difference between your subscription amount and the income tax relief you received or will receive from HMRC as well as any proceeds from the company.

Should I set it against income tax or capital gains tax?

• Against income tax: You can set the allowable loss against your income tax in the year of loss, the previous year, or both. The loss relief is calculated as the allowable loss multiplied by your marginal tax rate. The larger your income tax bracket, the bigger your relief payout will be. The claim time limit is the 31 January + 1 year after the loss tax year. Share loss relief counts towards the general cap on income tax reliefs (£50,000 or 25% of adjusted total income, whichever is greater).
• Against capital gains tax: You can use the allowable loss against your capital gains in the current tax year, or carry it forward. The tax saved is the allowable loss multiplied by your CGT rate (18% or 24%). You normally have 4 years from the end of the tax year of loss to notify the loss to HMRC.

What if the shares aren't sold but worthless?

If the shares aren't sold and the company isn't liquidated yet but your shares are worthless, you can make a negligible value claim. This will make the shares be treated as disposed of at (or almost at) nil, which makes them eligible for SEIS loss relief. HMRC has specific guidance for unquoted shares.

How does loss relief work as part of an SEIS and EIS portfolio?

If you invested through SEIS or EIS into a portfolio of qualifying companies, every company is viewed as a separate investment. Hence, loss relief is claimed for each loss in the portfolio, not for the portfolio value. This means you can claim loss relief on failed investments while still holding successful ones.

3-year holding period and clawback risk

To keep your SEIS or EIS income tax relief, you must hold the shares for at least 3 years from the date of issue (or 3 years from the start of the trade, if later). If you dispose of the shares before this period ends, HMRC will claw back the income tax relief you received.

This will affect your loss relief calculation as it reduces the relief actually kept which doesn't include clawed-back relief. If you sell within 3 years, your effective cost goes back up to your original subscription. And, loss relief can only be claimed once the clawback is settled.

Example: You invest £100,000 in a SEIS company and receive £50,000 income tax relief. After 18 months, you sell for £20,000. HMRC claws back the £50,000 relief. Your actual loss is £80,000, and this can be claimed as loss relief (since no relief was ultimately kept).

SEIS and EIS loss relief examples

Assumptions: UK rates 2025/26 (income 20/40/45; CGT 18/24). SEIS upfront relief 50%, EIS upfront relief 30%.

A) SEIS income tax set-off (40% bracket)

• You invest £100,000; SEIS income tax relief £50,000
• Company fails; no proceeds.
• Allowable loss: £100,000 – £50,000 - £0 = £50,000
• Loss relief (income 40%): £50,000 * 40% = £20,000

If you invest £100,000 under SEIS, and the company fails with no proceeds, you will receive £50,000 income tax relief as well as £20,000 loss relief when setting it off against income, totalling £70,000 of tax advantages and reducing the actual net loss to £30,000.

B) EIS CGT set-off (CGT 24%)

• You Invest £100,000; EIS income tax relief £30,000
• Company fails, no proceeds.
• Allowable loss: £100,000 – £30,000 = £70,000
• Loss relief (CGT 24%): £70,000 * 24% = £16,800
  

If you invest £100,000 under EIS, and the company fails with no proceeds, you will receive £30,000 income tax relief as well as £16,800 loss relief when setting if off against capital gains, totalling £46,800 of tax advantages and reducing the actual net loss to £53,200.

C) SEIS income tax partial set-off (40% bracket)

• You invest £100,000; SEIS income tax relief £50,000
• Company fails; £10,000 proceeds.
• Allowable loss: £100,000 – £50,000 - £10,000 = £40,000
• Loss relief (income 40%): £40,000 * 40% = £16,000

If you invest £100,000 under SEIS, and the company fails with £10,000 of proceeds, you will receive £50,000 income tax relief as well as £16,000 loss relief when setting it off against income, totalling £76,000 of tax advantages and proceeds, and reducing the actual net loss to £24,000.

Which one should I use?

Whether to claim loss relief against income tax and capital gains tax depends on each investor's circumstances. Higher-rate payers often get more using income because of the higher marginal rate. Though, it's always worth calculating both – especially if there are large gains to absorb that year.

SEIS vs. EIS loss relief comparison

For the tax year 2025/2026 for a £100,000 investment.

How to claim SEIS and EIS loss relief

To claim SEIS and EIS loss relief, you will need your SEIS3 or EIS3 certificate, subscription details, any proceeds, and a brief note on the disposal (or negligible value claim).

1. Decide income vs. CGT set-off: High-rate income taxpayers often do better using income.
2. If shares are sold or have negligible value: calculate your allowable loss with the formula above.
3. Self Assessment
   1. Income tax claim (share loss relief): include in SA100 with SA108 and note HS286. You can claim the income loss relief for the year of loss and/or the previous year. The deadline for submission is 31st January + 1 year after the loss year.
   2. CGT tax claim: show the capital loss on SA108; use against current gains and carry forward any excess. The deadline for submission is 4 years after the end of the loss year.
4. Negligible value claim (if no sale): You can put your claim on the return or write to HMRC. Keep evidence that the shares are worthless (administrator's letter, directors' update,accounts).
5. Keep records: SEIS3 certificate, contract notes, bank proof, liquidation letters, and your calculations (in case HMRC asks for it).

When do you actually receive the relief?

In practice, HMRC processing times vary. Many investors see income tax refunds within a few months of filing, but it can be longer. For CGT set-offs, the loss either reduces your tax bill for that year or carries forward to offset future gains. Negligible value claims can take longer for HMRC to process, especially if they need evidence the shares are worthless.

The initial income tax relief you claim via Self Assessment after receiving your SEIS3/EIS3 certificate. Relief typically come through your tax return (6-12 months after year-end).

FAQ

Can I claim loss relief if I never claimed the original income tax relief?
Yes. Your allowable loss is then your full subscription minus proceeds (no reduction for unclaimed relief). You still need the shares to qualify and the loss to be allowable.

My company was dissolved without a formal liquidation – can I still claim?
You cannot make a negligible value claim after a company has been dissolved, because you no longer own the shares. However, the dissolution itself is treated as a disposal, usually at nil, so you may still have an allowable capital loss in that tax year. If the company and the shares met the SEIS/EIS (or qualifying trading company) conditions, that loss can potentially be used for share loss relief against income, subject to the usual time limits and caps.

Should I make a negligible value claim or wait for liquidation?

• Claim negligible value now if: You want to use the loss against current year income or gains, liquidation may take years, or the company is clearly a "zombie" with no assets. You can often backdate a negligible value claim by up to two tax years (if the shares were already of negligible value then), which can be useful for tax planning.
• Wait for liquidation if: It's imminent (within 6-12 months), you don't have immediate income/gains to offset, or you want certainty –HMRC may challenge negligible value claims if the company is still trading.

What are the time limits?

• Income set-off: claim by 31 January + 1 year after the tax year of loss (and you can carry back to the previous tax year).

• CGT set-off: 4 years after the end of the tax year of loss.

Do heirs get loss relief if they inherit SEIS and EIS shares that fell in value?
No. Share loss relief against income is only available to the original subscriber. Heirs inherit the shares at market value at the date of death; any later fall can give rise to a normal capital loss, not SEIS/EIS share loss relief.

Tax benefits are subject to individual circumstances. Subject to changes.