Convertible notes, ASAs and SAFEs in the UK (2026)

What problem these instruments solve

A priced round needs a valuation, a full set of legal documents and often several weeks of negotiation. Early investors can send money sooner if you agree that their money will turn into shares at a later priced round. The instruments that do this go by several names, and in the UK the most common is the advance subscription agreement, or ASA.

This is general information, not legal or tax advice. Get a startup lawyer to check the documents before anyone sends money.

ASA, SAFE and convertible note: how they differ

Russell-Cooke describes SAFEs and ASAs as essentially the same instrument with different regional names. The SAFE came from Y Combinator in 2013 and was written for US companies. Russell-Cooke cautions that the standard Y Combinator forms are not necessarily the best option for UK companies, and recommends a version designed to operate under UK law.

A convertible loan note is a different instrument. It is a loan that converts into shares, so it usually carries interest and a repayment date. That is the reason it does not fit SEIS or EIS, which expect the investor's money to be at risk in new shares. An ASA is not a loan, so it has no interest and no repayment.

How an ASA converts

Sprintlaw explains that an ASA converts on a conversion event. The usual trigger is a qualifying financing round, often defined by a minimum amount of new money, with an example of £250k. The ASA also has a longstop date, by which conversion happens even if no priced round has taken place.

Investors usually get one or two protections. A discount reduces the share price in the qualifying round, and Sprintlaw puts the typical range at 15 to 25%. A valuation cap sets a ceiling on the price. The conversion price is usually the lower of the cap and the discounted round price.

The SEIS and EIS conditions

HMRC's Venture Capital Schemes Manual sets out the conditions for an ASA to qualify for SEIS. The agreement must not permit the subscription payment to be refunded under any circumstances. It cannot be varied, cancelled or assigned, it must bear no interest, and it must have a longstop date by which the shares must be issued.

HMRC expects the longstop date to be no more than six months from the date the ASA is entered into. For a longer period, advance assurance is unlikely to be granted. Russell-Cooke makes the same point for SEIS and EIS: conversion has to be certain, there can be no refund right, and the long-stop should be six months at most.

When the tax relief starts

HMRC states that SEIS relief is available only from the date of the share issue. Signing the ASA does not start it. A compliance statement must not be sent before the shares are actually issued.

This matters for planning. If your investors need relief in a particular tax year, they need the shares issued in that year. A six-month longstop does not help if the priced round is likely to take nine months. In that case a different structure, or an earlier share issue, may be the better route.

If your investors are not using SEIS or EIS, you have more freedom on timing and structure, because the six-month longstop expectation comes from the tax schemes. Ask each investor early whether they plan to claim relief, so you can design one document that suits everyone in the round.

What the SEIS limits mean for the amount you raise

The SEIS rules cap the total at £250,000 for the company. The company must have gross assets of no more than £350,000 and fewer than 25 full-time equivalent employees when shares are issued, and it must not have been trading for more than three years in a qualifying trade. Investors receive 50% income tax relief on up to £200,000 a year.

An ASA counts towards these limits once it converts into shares. Check the total raised under SEIS across all ASAs and any later rounds before you sign a new one. Over-raising can put the relief for earlier investors at risk, and a dispute with angels over this is hard to repair.

Advance assurance before you sign

HMRC advance assurance is a request for HMRC to confirm that an investment would meet the conditions of a venture capital scheme. You send the investment amount, a business plan, forecasts, the latest accounts, your register of members and your articles. If HMRC agrees, it sends a statement saying the investment is likely to qualify.

The assurance is conditional. HMRC says to tell it about any changes since the application, or the assurance will no longer apply. HMRC also says that once assurance is given, it will not offer further assurance on later changes to the agreement. Those are checked when you submit the compliance statement. So send the final ASA wording for assurance, and avoid editing it afterwards.

Terms to negotiate

Sprintlaw lists several terms worth negotiating: no repayment or interest, proportionate information rights, transfer restrictions, and a most favoured nation clause, which gives earlier investors the benefit of better terms offered to later ones. A clear method for pricing the conversion at the longstop date also matters. Sprintlaw warns that ambiguity here leads to disputes or delays to later rounds.

I'd also model dilution before agreeing a cap and discount. Several ASAs at different caps convert at the same time, and the combined effect on your holding can surprise you. Add the converting amounts to your cap table as if the next round were closing tomorrow, and see where you land.

Keep the paperwork consistent across investors. If you sign ASAs on different terms with different people, the conversion mechanics become hard to run. Using one template for the round makes the cap table, the legal work and the later share issue much simpler.

Which route I'd take

If your round is small and your investors want SEIS relief, a UK-drafted ASA with a six-month longstop is a practical option, provided you expect to close a priced round within that time. If you need longer, speak to a lawyer about a priced seed round on simple terms.

InvestorUniverse helps with the step before this one, which is finding the investors who write ASA-style cheques at your stage. Our ranked list gives reasons for each match, so you can open conversations that suit the instrument you plan to use.