Pay and equity6 min read

SEIS and EIS when you invest and join the board

Paid directors are usually excluded unless the business angel exemption applies. The order of events matters, and so does the 30% rule.

Harvey Knight

Founder, InvestingDirectors

Published 10 September 2026 · Last updated 10 September 2026

Key points

SEIS gives 50% income tax relief on up to £200,000 a year. EIS gives 30% on up to £1 million, or £2 million where the excess is in knowledge-intensive companies.
A paid director is normally a connected person and cannot claim relief — unless the business angel exemption applies.
The exemption depends on sequence: subscribe for the shares before you become a director, and relief can survive later paid appointment.
Hold more than 30% of the share capital or voting rights, counting associates, and you are connected regardless of the exemption.
An unpaid non-executive is not connected by the directorship alone, so the ordering problem does not arise.

Can you claim SEIS or EIS relief on shares in a company where you are a director?

Sometimes, and the order of events decides it. An unpaid director is not connected with the company by the directorship alone and can claim relief. A paid director normally is connected and cannot — unless the business angel exemption applies, which requires that the shares were subscribed for before the appointment.

This is the single most expensive sequencing mistake an investing director can make, and it is entirely avoidable.

What the schemes give you

SEIS gives 50% income tax relief on subscriptions of up to £200,000 in a tax year, with gains on the shares exempt from capital gains tax if they are held for at least three years. EIS gives 30% on up to £1 million a year — or £2 million where the amount above £1 million goes into knowledge-intensive companies — again with a three-year holding period.

Both also offer loss relief if the company fails, and both depend on the company qualifying as well as the investor. The company side is a separate question: advance assurance from HMRC is the normal way a company demonstrates it.

Why directors are treated differently

The relief exists to attract outside capital, not to subsidise people already inside the business. So the rules exclude investors who are connected with the company — by employment, by a paid directorship, or by holding more than 30% of it.

A paid director is an employee for these purposes. That is why an investing non-executive who accepts fees and then subscribes will usually find the relief is not available on that subscription.

The business angel exemption, and the order it requires

The exemption recognises the common case: an angel invests, then joins the board and is paid for the work. Broadly, if you subscribed for the shares before you became a director, and you had received no payment from the company before that subscription, remuneration for the later directorship does not destroy relief on those shares.

So the sequence matters, in this order: agree the terms, subscribe for and pay for the shares, have the shares issued, then be appointed a director, and only then start receiving fees. Reverse any two of those steps and you may have lost the relief on that tranche.

How your position affects relief on a subscription
Your position when you subscribe	Relief on that subscription
Not a director, not paid, later appointed and paid	Generally available (business angel exemption)
Unpaid non-executive director already appointed	Generally available — the directorship alone does not connect you
Paid director already receiving fees	Generally unavailable
Holding over 30% with associates	Unavailable regardless of role
Employee of the company	Unavailable

The 30% rule

Separately from any question of role, you are connected with the company if you and your associates hold more than 30% of the ordinary share capital, the issued share capital or the voting rights. Associates include close relatives and business partners, and the test looks at the position after the issue.

For most investing directors, tickets of £25,000 to £500,000 sit well under the threshold. It matters more in very small companies and in family businesses, where a modest cash sum can cross 30% of a small share capital.

What else can lose the relief

Selling the shares within three years. Receiving value from the company — a loan, a waived debt, a non-commercial payment. Shares carrying preferential rights, since relief requires ordinary shares with no preferential rights to dividends or assets.

A pre-arranged exit, or any arrangement whose main purpose is tax avoidance. And on the company side, the money not being used for a qualifying trade within the required period.

What to do in practice

Ask the company whether it has advance assurance before you commit. Agree the appointment and the investment as two documents, and diarise the order. Keep the fee agreement dated after the share issue. Keep the SEIS3 or EIS3 certificate when it arrives, because you cannot claim without it.

And take advice on your own position before you subscribe, not after. The rules are technical, they turn on facts specific to you, and the cost of advice is trivial next to the relief at stake.

This is not tax advice. This guide is general information about how the venture capital schemes treat directors, and InvestingDirectors is not a tax adviser. SEIS and EIS eligibility depends on your personal circumstances and on the company qualifying. Take advice from a suitably qualified specialist before you invest, and rely on HMRC's guidance and the legislation rather than on this summary.

Where to go next

For the governance side of investing into a company you join, can a non-executive director invest in the company. For how equity is treated when it is compensation rather than a subscription, advisory shares explained.

Common questions

Can a director claim EIS relief?

An unpaid director can. A paid director is normally treated as connected with the company and excluded, unless the business angel exemption applies: broadly, the shares were subscribed for before the person became a director, and they received no payment from the company before that subscription. Getting the order wrong loses the relief.

What is the business angel exemption?

A rule that allows an investor who subscribes for shares before becoming a director to keep SEIS or EIS relief on those shares even if they are later paid for the directorship. It applies to the shares already subscribed for, not to later subscriptions made once you are a paid director.

What is the 30% rule?

If you, together with your associates, hold more than 30% of the company's ordinary share capital, issued share capital or voting rights, you are connected with the company and cannot claim relief on that subscription. It applies whether or not you are a director.

How much relief do SEIS and EIS give?

SEIS: 50% income tax relief on annual subscriptions up to £200,000, with capital gains on the shares exempt after three years. EIS: 30% on up to £1 million a year, or £2 million where anything above £1 million is invested in knowledge-intensive companies, also with a three-year holding period.

Sources

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