Why EIS, SEIS and EMI Still Matter for UK Startup Founders and Investors

Helping shape the future of UK entrepreneur tax reliefs

The UK government is reviewing whether the tax system is doing enough to support entrepreneurs, founders and scaling businesses. As part of its “Tax Support for Entrepreneurs: Call for Evidence”, HM Treasury invited feedback on the effectiveness of existing tax incentives, including the Enterprise Investment Scheme (EIS), Enterprise Management Incentives (EMI) and Business Asset Disposal Relief (BADR) and how the UK can better support businesses to start, scale and remain in the UK.

ACCA invited Onside Accounting to contribute feedback to the consultation, recognising our expertise in advising entrepreneurs and high-growth businesses. Drawing on our experience supporting founders, investors and scaling companies, we provided insights into how these schemes work in practice, including their role in attracting investment, supporting growth and encouraging reinvestment after a successful exit. This feedback formed part of ACCA’s submission to the government, helping inform potential reforms to the UK’s tax support for entrepreneurs.

The government is also expanding key EMI and EIS limits from 6 April 2026, signalling continued policy support for entrepreneurial growth, although founders still face significant administrative friction when using the schemes.

In our view, the Enterprise Investment Scheme (EIS), Seed Enterprise Investment Scheme (SEIS), and Enterprise Management Incentives (EMI) remain some of the most powerful tools supporting early-stage innovation. However, over time the administrative burden and tax environment around these schemes have evolved in ways that are increasingly noticeable for founders, investors and advisers.

Below are some of the key observations from our experience working with high-growth companies.

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Also, you can download a guide at the bottom of this page , which is based on our experience advising founders and investors. This Onside guide focuses on the real-world structuring decisions that affect eligibility, investor confidence and long-term tax outcomes.

EIS and SEIS: critical for early-stage investment

Early-stage technology startups are inherently high risk – often operating with unproven models, negative cash flow, and long timelines before a potential exit.

Because of this, EIS and SEIS play a critical role in attracting the types of investors who fund the earliest stages of growth.

These schemes typically incentivise:

• UK angel investors
• High-net-worth individuals reinvesting capital from previous exits
• Early-stage venture funds bridging the gap between angels and institutional VC

In practice, many technology startups follow a predictable funding ladder:

1. Angel or SEIS round
2. EIS follow-on round
3. Institutional VC funding

Without the tax incentives provided by SEIS and EIS, this early-stage capital layer would be significantly reduced. These schemes effectively allow founders to offer a risk-adjusted investment opportunity, helping marginal investment decisions become real investments.

Increasing administrative complexity

The policy intent remains strong, but in practice the compliance process has become more documentation-heavy, increasing cost and time for founders and advisers.

HMRC now expects a far more structured submission process. For example, compliance statements often require a detailed package including:

• Business plans and financial projections
• Subscription agreements and investment documentation
• Cap tables and shareholder lists
• Constitutional documents and share rights analysis
• Investor materials such as pitch decks
• Separate investor reporting spreadsheets

A key element is the “risk to capital” narrative, which has evolved from a short explanation into a more structured analysis of the commercial risks within the business.

This means advisers frequently need to coordinate multiple rounds of documentation and clarification with founders before submission.

In addition, practical challenges remain around Advance Assurance, particularly timing – balancing investor expectations for certainty against HMRC’s engagement process.

Overall, the schemes remain effective but increasingly documentation-heavy, which has led to higher professional fees and more time spent on compliance.

The opportunity to modernise the system

Many of the challenges founders face relate not to policy design but to administrative infrastructure.

Even with recent moves toward online submission processes, the system still relies heavily on spreadsheets and manual uploads. There is limited visibility for founders and advisers once submissions are made, and follow-up queries from HMRC can sometimes request information already provided.

There is significant opportunity to improve the user experience through:

• A fully integrated HMRC portal for EIS and SEIS
• Better data reuse across submissions
• Clearer tracking of application status
• More consistent handling of queries

Reducing administrative friction would make these schemes significantly easier for early-stage founders to access.

EMI: still essential for attracting talent

Enterprise Management Incentives (EMI) remain one of the most important tools available to scaling companies competing for talent against larger firms.

Equity incentives allow startups to attract high-quality employees even when they cannot match corporate salaries.

However, several developments have reduced the perceived attractiveness of EMI in recent years, including:

• Higher capital gains tax rates
• The reduced value of Business Asset Disposal Relief (BADR)

There can be income tax and NIC exposure where EMI options are granted at a discount to market value or where qualifying conditions are not met, making robust valuation support important.

The bigger practical risks usually arise from valuation, timing, disqualifying events and administrative errors rather than growth in share value itself.

EMI remains attractive, but its relative advantage has narrowed as BADR has become less generous and the gap between BADR and standard CGT rates has reduced.

Administrative weaknesses in EMI

Like EIS, the administration of EMI remains outdated.

Companies often manage option schemes using spreadsheets and manual record-keeping. HMRC’s EMI online service remains clunky in practice. It does not retain a clear record of past notifications within the portal, and correcting submissions is difficult, which increases compliance risk and admin time.

This creates:

• Increased compliance risk
• Higher advisory costs
• Additional administrative burden for growing companies

Modernising the digital infrastructure around EMI could significantly improve its usability for scaling businesses.

Encouraging reinvestment in UK startups

One of the most powerful drivers of startup ecosystems globally is the recycling of entrepreneurial capital.

Founders who successfully exit businesses frequently go on to invest in new startups as angel investors. Tax policy can play a major role in encouraging this cycle.

The UK already offers EIS deferral relief and SEIS reinvestment relief, but the current rules are technical and fragmented. A simpler, more visible reinvestment framework could do more to encourage founders to recycle exit proceeds into UK startups.

Business Asset Disposal Relief (BADR)

Business Asset Disposal Relief continues to influence founder decision-making around exits, but several aspects of the regime have become increasingly restrictive.

Common concerns include:

• The £1m lifetime relief cap, which many view as too low for modern high-growth companies
• The current BADR rules can be restrictive for founders and minority shareholders, although EMI-acquired shares can qualify under a separate route
• The two-year officer/employee requirement

As a result, some shareholders with smaller ownership stakes may face significantly higher capital gains tax rates.

Revisiting the structure and thresholds of BADR could help ensure the relief remains aligned with the realities of modern startup ownership structures.

Final thoughts

The UK has historically built one of the strongest startup ecosystems in Europe, and tax incentives such as EIS, SEIS and EMI have played an important role in that success.

The underlying policy framework remains strong. However, improving administrative simplicity, digital infrastructure and reinvestment incentives would help ensure these schemes continue to support founders, investors and the next generation of innovative UK businesses.

You can read more about ACCA's observations on its website here

At Onside we advise venture-backed startups and investors on EIS, SEIS and EMI throughout the company lifecycle - from fundraising to exit planning. If you're planning an investment round or implementing an option scheme, our team can help ensure the tax structure supports your long-term growth.

Download a practical guide

Based on our experience advising founders and investors, this downloadable Onside guide focuses on the real-world structuring decisions that affect eligibility, investor confidence and long-term tax outcomes.