UK Seed Deal Volumes Fell 27 Per Cent as SEIS Funds Keep Selling Out
Updated: 7 days ago
Seed stage deal volumes in the UK fell 27 per cent year on year, according to the British Business Bank's Small Business Equity Tracker 2026, even as overall equity investment was propped up by a relatively small number of large AI transactions. Against that backdrop, professionally managed Seed Enterprise Investment Scheme funds have kept selling out. That contradiction, harder to raise, easier to fill a SEIS fund, is worth contemplating, because it points to a live question this publication believes nobody has properly answered yet: what happens to SEIS relief when the shares underneath it are tokenised.
This is an open editorial question, not tax or investment advice, and HMRC has not issued formal guidance on it. But enough of the picture is settled that it is worth laying out plainly, so the genuinely open part can be seen clearly rather than lost in caution.
Why this matters to a founder who has never heard of a token
Most founders raising a SEIS round are not thinking about blockchain. They are thinking about whether they can close before the runway runs out, and whether the investor writing the cheque needs the fifty per cent income tax relief SEIS offers to make the numbers work. For a founder outside London, without a warm introduction to a fund, that relief is very often the deciding factor in whether an angel says yes.
SEIS is aimed at exactly the earliest companies, those under three years old, with fewer than 25 employees and modest gross assets, and it remains capped at a lifetime raise of 250,000 pounds per company, unchanged by the 2025 Budget even as EIS company limits were widened to 24 million pounds, 40 million for knowledge intensive companies, from 6 April 2026. SEIS was deliberately left alone. It is still doing the heaviest lifting at the earliest stage.
That is precisely why the tokenisation question matters more for this pillar than for any other part of the sector. If tokenised equity and PISCES linked secondary trading can genuinely shorten the realistic horizon before a SEIS investor sees any liquidity, that is not a technology story. It is a capital access story, because it changes the risk calculation for the angel deciding whether to back a founder with no track record and no network.
What is actually settled
Start with the part that is not in dispute, because it gets muddled in conversation more often than it should. The three year holding period attached to SEIS and EIS relief is a condition of the tax relief, not a legal lock on the shares themselves. An investor is free to sell before three years elapse. They simply forfeit the relief on the shares sold early. Nothing in company law or the scheme rules prevents an earlier sale, and framing the three year period as some kind of statutory lockup misunderstands what the relief actually requires.
From that starting point, the position on tokenisation is more settled than most founders assume. A tokenised seed share does not need to threaten SEIS status at all, provided the underlying ordinary share is issued and filed in the conventional way, with Companies House remaining the authoritative register of who owns what. On that structure, the token becomes a tradable representation of an interest sitting inside a compliant nominee or custody arrangement, rather than a novel instrument competing with the share itself for legal standing. The legal share exists exactly as it always has. The token is a wrapper that makes an interest in that share easier to transfer.
Combine that structure with PISCES, the London Stock Exchange's regulated venue for trading private company shares, and the practical case becomes clearer still. Pairing tokenised seed shares with scheduled PISCES trading windows could compress the realistic liquidity horizon for a SEIS investor from the seven to ten years that has historically been the norm down to as little as three, simply by placing the first trading window at or beyond the three year relief threshold. That is not a guarantee of liquidity.
Trading events are intermittent and companies choose when they happen, who can participate and what price range applies. But it is a genuine widening of what is possible, achieved without asking HMRC to change a single rule.
What is genuinely open
Here is where the confidence has to stop, and where this publication thinks the real conversation needs to happen. Nobody has published formal guidance on how a tokenised ledger reconciles in practice with Companies House as the statutory register, particularly where a custody or nominee structure sits between the two. Nobody has confirmed which specific nominee and custody arrangements would satisfy both HMRC's requirements for SEIS qualifying status and the FCA's requirements for a regulated custodian, especially at the pre-seed end of the market where legal budgets are thinnest. And nobody in government has said what formal HMRC guidance on tokenised SEIS and EIS shares would actually say, because none has been published.
These are not small gaps. They are the difference between a workable idea and a live product a fund manager would put client money behind with confidence. Several pilots are reportedly being built to test exactly this reconciliation in practice, which is the right way to answer the question, through evidence rather than assertion.
Not a verdict
This publication is not going to pretend to answer a question that HMRC has not ruled on. What does a compliant nominee structure actually needs to contain.
The underlying question predates tokenisation. DAOs and evergreen funds asked, in their own often chaotic way, whether capital formation could be structured to be fairer and less founder hostile than the traditional venture model. Most of those experiments have not survived contact with reality in their original form. But the question was a good one, and tokenisation paired with PISCES is now advancing it through regulated, durable mechanics rather than untested vehicles. That is progress worth taking seriously, even while the implementation questions remain open.
Key Takeaways
UK seed stage deal volumes fell 27 per cent year on year according to the British Business Bank's Small Business Equity Tracker 2026, even as SEIS funds continued to sell out.
The SEIS company raise cap remains 250,000 pounds, unchanged by the 2025 Budget, while EIS company limits rose to 24 million pounds, 40 million for knowledge intensive companies, from 6 April 2026.
The three year SEIS and EIS holding period is a condition of tax relief, not a legal lock on the shares, and early sale simply forfeits relief on those shares.
Tokenised seed shares can retain SEIS status where the underlying ordinary share is issued and filed conventionally, with Companies House as the source of truth and the token as a tradable representation held in compliant custody.
The open questions are practical, not conceptual: how a tokenised ledger reconciles with Companies House in practice, which custody structures satisfy both HMRC and the FCA, and what formal HMRC guidance would say.
This piece is general information and an open editorial question, not tax or investment advice. Founders and investors should take independent advice on their own circumstances.
Sources and invitation to respond
HMRC guidance on SEIS company limits and the Finance Act 2026 changes to EIS limits.
EISA, SeedLegals, Philip Hare and Associates, BDO, Saffery, Linklaters, Clifford Chance, Bird and Bird, Burges Salmon, TLT, Osborne Clarke, Mishcon de Reya, Farrer and Co, the London Stock Exchange Private Securities Market, JP Jenkins and Asset Match are invited to respond for a follow up piece.
Frequently asked questions
How much did UK seed deal volumes fall according to the British Business Bank?
The British Business Bank's Small Business Equity Tracker 2026 reports that UK seed stage deal volumes fell 27 per cent year on year. Overall equity investment was propped up by a relatively small number of large AI transactions, while professionally managed SEIS funds kept selling out.
What is the SEIS limit on how much a company can raise?
SEIS remains capped at a lifetime raise of 250,000 pounds per company, unchanged by the 2025 Budget. By contrast, EIS company limits were widened to 24 million pounds, or 40 million pounds for knowledge intensive companies, from 6 April 2026.
Can SEIS or EIS investors sell their shares before three years?
Yes. The three year holding period is a condition of the tax relief, not a legal lock on the shares. An investor who sells early forfeits the relief on the shares sold.
Can tokenised seed shares keep SEIS status?
A tokenised seed share need not threaten SEIS status, provided the underlying ordinary share is issued and filed conventionally, with Companies House as the authoritative register and the token held in a compliant nominee or custody arrangement. HMRC has not issued formal guidance on tokenised SEIS and EIS shares, so practical questions about reconciliation and custody remain open.
How could PISCES shorten the wait for liquidity on SEIS investments?
Pairing tokenised seed shares with scheduled PISCES trading windows could compress the realistic liquidity horizon from the historical seven to ten years to as little as three, by placing the first window at or beyond the three year relief threshold. It is not a guarantee of liquidity, as trading events are intermittent and companies choose when they happen.
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