Investors’ Relief Explained: How It Can Reduce Capital Gains Tax on Business Shares

*Update: September 2026

Capital Gains Tax rates and Investors’ Relief rules have changed since this article was originally published. From 6 April 2026, the main Capital Gains Tax rates for individuals are 18% and 24%, while qualifying gains benefiting from Investors’ Relief are subject to an 18% rate. The lifetime limit for Investors’ Relief was also reduced from £10 million to £1 million for qualifying disposals made on or after 30 October 2024. This article is currently being reviewed and updated to reflect these changes.

Making smart investment decisions is only half the equation when it comes to building personal wealth — the other half lies in minimising your tax liability to retain as much of your gains as possible. As the UK economy faces a prolonged period of stagnant growth, the government naturally seek ways in which to stimulate and encourage private investment to support business growth. One tool which has been at their disposal since 17 March 2016 but has perhaps gone underpromoted is Investors’ Relief (IR). Our accountants share their expertise and explain how to utilise IR to your benefit.

What is Investors’ Relief?

Investors’ Relief (IR) is a type of tax relief that allows you to reduce the rate of capital gains tax (CGT) if you incur gains on your disposals of shares in an unlisted trading company. It’s typically used by external investors, because whilst it may at first glance appear similar to Business Assets Disposal Relief (BADR), the key difference is that IR is specifically designed for those who are not employees in the company they hold the qualifying shares in.

So, who can use Investors’ Relief?

IR is only available to private individuals and limited companies are unable to use this tax relief. IR particularly benefits certain types of investors, ranging from high-net-worth individuals who are comfortable with investing in early-stage companies, angel investors and business angels, or even friends and families wishing to support and invest in a love one’s business venture. However, one key aspect to being able to utilise IR is that as the investor, you must not be an officer or employee of the company. There is one exception to this where you have already invested and received shares, then become a non-remunerated director in the company. You may remain eligible so long as all other qualifying conditions are met.

What are the qualifying conditions for Investors’ Relief?

To make sure your investment and subsequent disposal qualifies for IR, you’ll need to comply with all HMRC’s strict eligibility requirements. Even failing to meet any one of the conditions will mean you’ll be unable to claim for reduced CGT rates on your gains:

• The shares must be new ordinary shares in an unlisted trading company (although shared listed on the Alternative Investment Market are still treated as unlisted).
• The company must be continuously trading throughout the entire period of share ownership (or be a holding company of a trading group).
• The shares must be fully paid for in cash.
• The shares must be held for at least three years before disposal
• You must not receive any value from the company within the three-year period of ownership other than in instances where the company is repaying a commercial loan to you, issuing dividends which do not exceed normal investment return, and/or the company is paying your market value rent for use of property that is owned by you.
• You must not have exceeded your IR £1 million lifetime limit which is a separate lifetime allowance to the BADR £1 million lifetime limit.

What are the tax benefits when using Investors’ Relief?

Clearly, there’s substantial risk involved when investing in early-stage unlisted companies and even more so when you have no influence on how the business is run. Whilst other schemes such as the Seed Enterprise Investment Scheme (SEIS) and Enterprise Investment Scheme (EIS) can help minimise loss on investments, IR instead boosts the benefits when you make a gain offering significant tax savings. Our team can advise on how you can strategically utilise different tax relief schemes across your investment portfolio to ensure you retain as much of your gains as possible.

When you come to dispose of your shares and are fortunate to make a gain, you’ll be subject to CGT.

If the disposal qualifies for Investors’ Relief, qualifying gains within the applicable lifetime limit are taxed at a rate of 18% for disposals made on or after 6 April 2026. This is the same as the current basic rate of CGT for individuals, but can provide a tax saving for higher and additional rate taxpayers, who would otherwise generally pay CGT at 24% on gains subject to the higher rate.

The rate of Investors’ Relief depends on the date the qualifying disposal takes place:

• 18% rate: Disposals made on or after 6 April 2026 (2026/27 tax year onwards)
• 14% rate: Disposals made between 6 April 2025 and 5 April 2026 (2025/26 tax year)
• 10% rate: Disposals made before 6 April 2025

Different lifetime limits also apply depending on when the disposal took place. For qualifying disposals made on or after 30 October 2024, the lifetime limit for Investors’ Relief is £1 million. A £10 million lifetime limit applies to qualifying disposals made on or before 29 October 2024.

How to claim Investors’ Relief

When you dispose of assets and make a gain, it is your responsibility to report this gain to HMRC and pay any tax due on it. The process to report your gain can be completed in your annual self-assessment tax return (so be sure to have registered in time if you are not already registered to file a personal tax return). This needs to be done by the 31^st January following the end of the tax year in which you made your disposal. So, for example, if you sold your shares in July 2025 (the 2025/26 tax year), you would need to submit a self-assessment tax return to report your capital gains by 31^st January 2027.

When completing your tax return, you will need to make sure you fill in the Capital Gains Summary (SA108) section and report the disposal of shares. Be sure to include the date in which you acquired the shares as well as the date you sold or disposed of them, along with the name of the company in which you held shares. Don’t miss out on ticking the box which indicates that BADR or IR is being claimed, and then you’ll need to specify IR in the relevant section. Whilst HMRC do not require you to submit supporting evidence alongside your tax return, you must retain all documentation for at least a year in case HMRC decide to open up an investigation.

How to claim Investors’ Relief

If you’re considering making a disposal we can help check whether you qualify for investors’ relief to reduce your capital gains tax, as well as help you make your claim with HMRC. Get in touch with us today.