How SEIS Reduces Your Capital Gains Tax

Capital gains tax is an increasingly significant consideration for UK investors. With the annual CGT allowance reduced to just £3,000 and rates of 18–24% on most gains, the tax burden on successful investments has grown materially. SEIS offers two powerful mechanisms for managing CGT: a complete exemption on gains from SEIS shares, and reinvestment relief that can shelter 50% of gains made on other assets.

CGT Exemption on SEIS Gains

When an investor sells SEIS-qualifying shares at a profit, no capital gains tax is due — provided the shares have been held for at least three years and income tax relief was claimed. This is a 0% CGT rate on potentially unlimited gains. In the context of venture capital investing, where successful exits can deliver multiples of the original investment, this exemption can be worth tens or even hundreds of thousands of pounds in tax savings.

To illustrate: Haatch’s SEIS investment in Native Teams delivered a 7.4x all-cash return, with the entire gain completely free from capital gains tax. For an investor who deployed £10,000 into that position, the £64,000 gain carried zero CGT liability — a saving of up to £15,360 at the higher rate.

CGT Reinvestment Relief

SEIS reinvestment relief allows investors who have made a capital gain on any asset to exempt up to 50% of that gain by investing the full amount of the gain into SEIS-qualifying shares in the same tax year. The relief is available regardless of whether the original gain was from shares, property, or any other chargeable asset.

Worked Example

An additional rate taxpayer sells a buy-to-let property and realises a £80,000 capital gain. Normally, they would owe £19,200 in CGT at 24%. By investing the full £80,000 into the Haatch SEIS Fund in the same tax year, they can claim CGT reinvestment relief, exempting £40,000 (50%) of the gain. This reduces their CGT bill to £9,600 — a saving of £9,600. Additionally, they receive 50% income tax relief on the SEIS investment itself (£40,000), bringing their net outlay on the £80,000 investment down to just £40,000.

Timing Flexibility

SEIS reinvestment relief offers surprising flexibility. The gain being sheltered does not need to occur in the same tax year as the SEIS investment. Investors can apply the relief to gains made up to five years after the SEIS investment, or carry it back to gains in the previous tax year. This means a strategic SEIS investment today could shelter gains you have not yet realised.

Combining CGT Reliefs

The CGT exemption on SEIS gains and CGT reinvestment relief can be used together as part of a broader tax planning strategy. An investor could use reinvestment relief to shelter gains from a property sale, hold their SEIS shares for three years, and then exit CGT-free on any SEIS gains. Used alongside the 50% income tax relief and loss relief, the total tax benefit from a single SEIS investment can be substantial.