If an SEIS company fails, you can set your loss against income, not just against capital gains. The loss is what you paid minus the 50% income tax relief you kept and anything you got back, and you can deduct it from your income for the tax year of the loss, the year before, or both (Income Tax Act 2007, section 132). For a £10,000 investment that becomes worthless, a higher-rate taxpayer ends up £3,000 down and an additional-rate taxpayer £2,750 down.
Figures are as at 9 October 2026 and use 2026 to 2027 income tax rates for taxpayers outside Scotland (GOV.UK).
How the loss is calculated
Start with what you paid, take off the SEIS income tax relief that was given and not withdrawn, then take off anything you received for the shares. HMRC’s helpsheet HS393 sets out the first step: in computing a loss, “you must reduce the cost of your shares by the amount of any Income Tax relief given and not withdrawn”. So £10,000 invested with £5,000 relief kept gives a £5,000 loss if the shares become worthless, or £4,000 if you sell them for £1,000 after three years.
The loss is allowable even though a gain on the same shares would have been exempt (VCM40100). Share loss relief then turns that capital loss into a deduction from income, provided the disposal is one of four kinds: a sale at arm’s length, a distribution in a winding up, the entire loss or extinction of the shares, or a negligible value claim (section 131). SEIS shares can qualify as shares you subscribed for in a qualifying trading company, and HMRC’s investor guidance confirms SEIS losses can be set against income.
What you get back, by tax band
The value of the deduction depends on your marginal rate. The table assumes full 50% SEIS relief (30% for EIS), a company that returns nothing, and a loss that falls entirely within one tax band. The CGT row uses the 24% rate for higher and additional-rate taxpayers (GOV.UK).
| Per £10,000 that fails | Rate | Tax saved on £5,000 SEIS loss | SEIS net loss | EIS net loss, for comparison |
|---|---|---|---|---|
| Basic-rate taxpayer | 20% | £1,000 | £4,000 (40%) | £5,600 (56%) |
| Higher-rate taxpayer | 40% | £2,000 | £3,000 (30%) | £4,200 (42%) |
| Additional-rate taxpayer | 45% | £2,250 | £2,750 (27.5%) | £3,850 (38.5%) |
| Loss set against capital gains instead | 24% | £1,200 | £3,800 (38%) | £5,320 (53.2%) |
The arithmetic: an SEIS loss of £5,000 (£10,000 less £5,000 relief) saves £1,000 at 20%, £2,000 at 40% and £2,250 at 45%. An EIS loss of £7,000 (£10,000 less £3,000 relief) saves £1,400, £2,800 and £3,150. Our worked examples set these against outcomes where the money comes back.
Two effects can raise the saving. Because the loss is deducted in working out net income, a taxpayer with income between £100,000 and £125,140, where the personal allowance is withdrawn at £1 for every £2 (GOV.UK), can recover allowance as well. And SEIS losses sit outside the cap that limits many income tax reliefs to £50,000 or 25% of adjusted total income, whichever is higher (section 24A), so a large loss is not restricted. Scottish taxpayers use different bands and rates.
How it interacts with your income tax relief
The two reliefs are designed to work together, not to overlap: you cannot get income tax relief and loss relief on the same pound. Three rules matter.
- Failure within three years need not claw back relief. A sale at arm’s length before the third anniversary reduces relief by the smaller of the relief given and 50% of what you receive (VCM36020), so a sale for nothing removes nothing; a disposal that is not at arm’s length withdraws the relief in full (section 257FA). A winding up or dissolution for genuine commercial reasons, not tax avoidance, does not break the company’s trading requirement (section 257DB). HMRC’s manual says the usual such reason is insolvency, and that the sooner a company goes into liquidation after it stops trading, the sooner it can be established that investors keep their relief (VCM34030).
- A sale for something within three years shrinks both reliefs. In HMRC’s own example, £100,000 invested with £50,000 relief is sold within three years for £60,000; £30,000 of relief is withdrawn and £20,000 stays (HS393). On our reading of the rule above, the allowable loss is then £20,000: £100,000 less £20,000 relief kept, less £60,000 received.
- If relief is withdrawn for another reason, the loss grows. Where the company or investor breaks the scheme rules and HMRC withdraws relief, there is no relief left to deduct, so the loss is computed on the full cost.
Liquidation or a negligible value claim
A failed company usually ends in one of two ways for the investor. In a liquidation, the loss arises on a distribution in the winding up or when the company is dissolved, because the extinction of an asset counts as a disposal (Taxation of Chargeable Gains Act 1992, section 24). That can take a long time, and the timing is not yours.
A negligible value claim lets you act sooner. If the shares have become of negligible value, which HMRC reads as “worth next to nothing” (CG13125), you can claim to be treated as selling and immediately reacquiring them at that value. You can choose an earlier date, up to two years before the start of the tax year in which you claim, if the shares were already negligible then (section 24(2)). The company must still exist when you claim: once it has been dissolved, a negligible value claim will not succeed, and you must tell HMRC about the loss for it to be allowable.
| Liquidation or dissolution | Negligible value claim | |
|---|---|---|
| When the loss arises | On a distribution in the winding up, or when the company is dissolved and the shares cease to exist | At the date of the claim, or an earlier date you choose within the time limit |
| Who controls the timing | The insolvency process, not you | You, once the shares are worth next to nothing |
| Choice of date | None | Up to two years before the start of the tax year in which you claim, if the shares were already of negligible value then |
| Main condition | A distribution, or the extinction of the shares | The company must still exist, and the shares must be negligible at the claim date and any earlier date chosen |
Timing and how to claim
- Fix the year of the loss. That is the tax year of the sale, distribution, dissolution or deemed disposal under a negligible value claim.
- Choose where to set it. Against income of that year, the previous year, or both; if both, the claim must say which year comes first (section 132). Setting it against a year of higher income can save more tax.
- Claim in time. The deadline is the first anniversary of the normal Self Assessment filing date for the year of the loss: for a loss in 2026 to 2027, that is 31 January 2029. HMRC’s Self Assessment helpsheet HS286 covers negligible value claims and share losses (CG13125).
- Keep the evidence. Your SEIS3 certificate, proof of what you paid and received, and any liquidator’s or administrator’s correspondence.
If you do not claim against income, the loss can still be used against capital gains (HS393). Our sister title SEIS Investments explains SEIS loss relief with more examples and has a calculator for other amounts.
Loss relief is the last line of the SEIS maths, not a reason to invest. Our SEIS guide for investors covers all four reliefs, and our questions for founders are about avoiding the claim in the first place.
