Entrepreneurs' Relief

Eligibility

You may be able to pay less Capital Gains Tax when you sell (or ‘dispose of’) all or part of your business.

Entrepreneurs’ Relief means you’ll pay tax at 10% on all gains on qualifying assets.

If you’re selling all or part of your business

To qualify for relief, both of the following must apply for at least 2 years up to the date you sell your business:

  • you’re a sole trader or business partner
  • you’ve owned the business for at least 2 years

The same conditions apply if you’re closing your business instead. You must also dispose of your business assets within 3 years to qualify for relief.

If you’re selling shares or securities

To qualify, both of the following must apply for at least 2 years up to the date you sell your shares:

  • you’re an employee or office holder of the company (or one in the same group)
  • the company’s main activities are in trading (rather than non-trading activities like investment) - or it’s the holding company of a trading group

There are also other rules depending on whether or not the shares are from an Enterprise Management Incentive (EMI).

If the shares are from an EMI

You must have both:

  • bought the shares after 5 April 2013
  • been given the option to buy them at least 2 years before selling them

If the shares are not from an EMI

For at least 2 years before you sell your shares, the business must be a ‘personal company’. This means that you have at least 5% of both the:

  • shares
  • voting rights

You must also be entitled to at least 5% of either:

  • profits that are available for distribution and assets on winding up the company
  • disposal proceeds if the company is sold 

If the number of shares you hold falls below 5% because the company has issued more shares, you may still be able to claim Entrepreneurs’ Relief.

You need to choose or ‘elect’ to be treated as if you had sold and re-bought your shares immediately before the new shares were issued. This will create a gain on which you can claim Entrepreneurs’ Relief.

You can also choose or ‘elect’ to postpone paying tax on that gain until you come to sell your shares.

You can do this by:

  • completing the additional information section of the Capital Gains summary form of your tax return
  • writing to HMRC if you do not have to complete a tax return for the year

If the company stops being a trading company

If the company stops being a trading company, you can still qualify for relief if you sell your shares within 3 years.

If you’re selling assets you lent to the business

To qualify, both of the following must apply:

  • you’ve sold at least 5% of your part of a business partnership or your shares in a personal company
  • you owned the assets but let your business partnership or personal company use them for at least one year up to the date you sold your business or shares - or the date the business closed

If you’re a trustee

You may also qualify if you’re a trustee selling assets held in the trust.