Tax relief changes how much of your own money is at stake in a start-up, not the chance that it succeeds. On £10,000, SEIS income tax relief of 50% leaves £5,000 of your money at risk and EIS relief of 30% leaves £7,000 (HMRC). Loss relief then cuts the downside by an amount that depends on your tax band. The tables below are illustrations, not forecasts.
The assumptions
- £10,000 subscribed for new shares in the 2026 to 2027 tax year, with full income tax relief. The investor owes enough tax to absorb it (VCM31130).
- Any sale or failure comes at least three years after the share issue, so relief is kept and gains are exempt from capital gains tax (CGT) under both schemes (VCM40020; HMRC).
- On failure, the allowable loss is the cost minus the income tax relief kept (HS393), set against income of that year or the year before (ITA 2007, section 132). It saves tax at 40% (higher rate) or 45% (additional rate), the 2026 to 2027 rates outside Scotland (GOV.UK), with the whole loss assumed to fall in that band.
- No fees, dividends, inflation, reinvestment relief or CGT deferral.
SEIS: £10,000 invested
| Per £10,000 invested | Company fails (£0 back) | Money returned (£10,000) | Value triples (£30,000) |
|---|---|---|---|
| Income tax relief at 50% | £5,000 | £5,000 | £5,000 |
| Net cost after income tax relief | £5,000 | £5,000 | £5,000 |
| Allowable loss | £5,000 | None | None |
| Loss relief at 40% (higher rate) | £2,000 | None | None |
| Loss relief at 45% (additional rate) | £2,250 | None | None |
| CGT on the gain | None | None | None: £20,000 gain exempt |
| Net result, higher rate | Loss of £3,000 | Gain of £5,000 | Gain of £25,000 |
| Net result, additional rate | Loss of £2,750 | Gain of £5,000 | Gain of £25,000 |
In the failure case, £10,000 less £5,000 of relief is a £5,000 allowable loss. Relief at 40% is £2,000, leaving £3,000 lost (30% of the stake); at 45% it is £2,250, leaving £2,750 (27.5%). If the money comes back, the kept relief leaves the investor £5,000 ahead.
EIS: £10,000 invested
| Per £10,000 invested | Company fails (£0 back) | Money returned (£10,000) | Value triples (£30,000) |
|---|---|---|---|
| Income tax relief at 30% | £3,000 | £3,000 | £3,000 |
| Net cost after income tax relief | £7,000 | £7,000 | £7,000 |
| Allowable loss | £7,000 | None | None |
| Loss relief at 40% (higher rate) | £2,800 | None | None |
| Loss relief at 45% (additional rate) | £3,150 | None | None |
| CGT on the gain | None | None | None: £20,000 gain exempt |
| Net result, higher rate | Loss of £4,200 | Gain of £3,000 | Gain of £23,000 |
| Net result, additional rate | Loss of £3,850 | Gain of £3,000 | Gain of £23,000 |
For EIS, £10,000 less £3,000 of relief is a £7,000 allowable loss. Relief at 40% is £2,800, a net loss of £4,200 (42%); at 45% it is £3,150, a net loss of £3,850 (38.5%).
What the numbers show
In these examples the tax band only matters when the company fails. Income tax relief is a flat percentage, and gains are exempt for anyone who keeps their relief, so the higher-rate and additional-rate rows differ only in the first column. SEIS halves the money at risk and EIS cuts it by 30%, but EIS companies can be larger and older, and the EIS annual investor limit is higher.
The effective loss can differ from these tables. Share loss relief is deducted in working out net income, so someone with income between £100,000 and £125,140, where the personal allowance is withdrawn at £1 for every £2 (GOV.UK), can save more than 40%. Basic-rate relief at 20% leaves a £4,000 net SEIS loss. Set against capital gains at 24% instead (GOV.UK), the £5,000 loss saves £1,200. Scottish taxpayers have different bands and rates.
Reinvestment relief adds a separate saving for SEIS investors with a gain in the same tax year: matching the £10,000 subscription to a £10,000 gain exempts £5,000 of it, worth £1,200 at the 24% rate (HS393). If relief is withdrawn because the company or investor breaks the rules, the sums get worse, not better.
None of this changes the starting point: the FCA warns that most start-ups fail and that even a successful one may take several years to return your money. For other amounts, our sister title SEIS Investments has an SEIS calculator. The rules behind these tables are in our SEIS guide for investors and SEIS loss relief explained, and SEIS, EIS and VCTs compared sets out the wider rules.
