Why tax relief matters for early-stage investing
Early-stage investing is high risk. Many investments will not return capital. The UK government recognised this and created the Enterprise Investment Scheme (EIS) and Seed Enterprise Investment Scheme (SEIS) specifically to incentivise private capital into early-stage companies.
For HealthTech and MedTech investors, these schemes can materially change the downside maths because:
- Many pre-seed and seed healthcare companies qualify
- The tax relief significantly improves the effective risk/return profile
- The loss relief provides downside protection that is genuinely meaningful
SEIS - Seed Enterprise Investment Scheme
SEIS is designed for the earliest stage companies. Key parameters:
- 50% income tax relief on investments up to £200,000 per tax year
- The company must be under 3 years old and have assets under £350,000 at investment
- 100% CGT exemption on gains from SEIS shares held for 3+ years
- Loss relief - if the investment fails, you can offset the loss (net of tax relief) against income tax
Example: You invest £50,000 in a SEIS-eligible HealthTech startup. You receive £25,000 income tax relief. Your effective cost is £25,000. If the company succeeds and you exit at £200,000, the gain is CGT-exempt.
EIS - Enterprise Investment Scheme
EIS covers a wider range of companies at a slightly less generous rate:
- 30% income tax relief on investments up to £1,000,000 per tax year (up to £2,000,000 in knowledge-intensive companies)
- Company must have been trading for under 7 years (or 10 for knowledge-intensive)
- CGT deferral and 100% IHT exemption after 2 years
- Loss relief against income or capital gains
Most seed-stage HealthTech and MedTech companies qualify as knowledge-intensive companies, which extends both the company age limit and the investor annual limit.
What qualifies as a knowledge-intensive company?
HMRC defines knowledge-intensive companies as those that:
- Have employees with relevant Masters or higher degrees comprising at least 20% of the workforce, OR
- Spend at least 15% of operating costs on R&D or innovation in one of the last 3 years, OR
- Spend at least 10% of operating costs on R&D across 3 of the last 5 years
Most HealthTech and MedTech companies meet at least one of these tests.
Important caveats
This guide is for general information only. Tax treatment depends on individual circumstances and is subject to change. Always consult a qualified tax advisor before making investment decisions based on tax considerations.
The availability of SEIS or EIS relief for a specific investment is confirmed by HMRC Advance Assurance - check that this is in place before investing.
If you are a healthcare professional thinking about your first angel investment, our getting started guide covers EIS and SEIS in context alongside eligibility, syndicate mechanics, and what a sensible first deal looks like.
Pulse Angels flags EIS and SEIS eligibility in all investor briefings. We work with specialist advisors to ensure founders obtain Advance Assurance early in their fundraise.