Investors’ Relief (IR): A Capital Gains Tax relief (distinct from Business Asset Disposal Relief) which may be valuable for individuals who invest in qualifying private trading companies. IR is aimed broadly at external investors who subscribe for new ordinary shares in an unlisted trading company, or the holding company of a trading group. Where the conditions are met, the relief can reduce the Capital Gains Tax rate on qualifying gains. The relief is not automatic and must be claimed. It can apply where shares were issued on or after 17 March 2016 and are disposed of on or after 6 April 2019, provided the investor has held the shares for at least three years up to the date of disposal. For current disposals, the relief is now subject to a lifetime limit of £1 million of qualifying gains per individual. The Capital Gains Tax rate for qualifying Investors’ Relief gains is 14% for disposals made on or after 6 April 2025, increasing to 18% for disposals made on or after 6 April 2026. For disposals before 6 April 2025, the Investors’ Relief rate was 10%. Broadly, the main conditions are that:
The relief can be particularly relevant for individuals who have invested in start-up, growth, family-owned or other private trading companies, but who are not employees or directors involved in running the business. Spouses and civil partners are treated separately, so each may be able to claim IR in their own right, provided the relevant conditions are satisfied. Trustees of certain settlements may also be able to claim, although the rules for trusts are more specialised and need careful review.
There are also important traps. For example, not all shares in a company may qualify, particularly where some shares were acquired before 17 March 2016, bought from another shareholder rather than subscribed for directly from the company, or have not yet been held for three years. Relief can also be affected by reorganisations, exchanges, loan notes, or value received from the company. A claim must normally be made by the first anniversary of 31 January following the end of the tax year in which the qualifying disposal takes place. For example, for a disposal in the 2025/26 tax year, the claim deadline would be 31 January 2028.
If you have subscribed for shares in a private company, are considering a sale of those shares, or are raising external investment into a trading company, it is worth reviewing the position before any transaction takes place. Early advice can help ensure that the relief is preserved and properly claimed. Call 07973 20 44 23. Jay Doshi.
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