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Last updated: 25 May 2022
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The benefits of Investors’ Relief and how to claim it

With recent changes to Business Asset Disposal Relief (BADR), Investors’ Relief is now a far more attractive relief for entrepreneurs looking to invest in UK businesses. In this article we share the benefits of Investors’ Relief and how to make a claim.
What is Investors’ Relief?

What is Investors’ Relief?

Investors’ Relief was introduced in the Finance Act 2016 and was designed to encourage more people to invest in UK businesses. If you make a disposal of shares in an unquoted trading company, Investors’ Relief may be available so that any gains will then be taxed at 10% instead of 20%, subject to a lifetime limit of £10 million.

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Rume Oshenye

+44 (0)20 7556 1398
oshenyer@buzzacott.co.uk

What is Investors’ Relief?

Investors’ Relief was introduced in the Finance Act 2016 and was designed to encourage more people to invest in UK businesses. If you make a disposal of shares in an unquoted trading company, Investors’ Relief may be available so that any gains will then be taxed at 10% instead of 20%, subject to a lifetime limit of £10 million.

How is it different to BADR?

How is Investors’ Relief different to Business Asset Disposal Relief (BADR)?

The lifetime allowance for BADR was reduced from £10 million to £1 million in the 2020 Budget. Consequently, anyone making a material disposal of a BADR qualifying asset where gains exceed £1 million will pay more tax. Investors’ Relief is similar to BADR but with fewer conditions to satisfy.

How to make a claim

How to make an Investors' Relief claim

You need to make the claim for Investors’ Relief to HMRC on your tax return by the first anniversary of 31 January, following the tax year in which the disposal took place. For example, for a business disposal that took place in the 2021/22 tax year (i.e. a disposal made between 6 April 2021 and 5 April 2022), the deadline to make the claim is 31 January 2024.

A common pitfall

A common pitfall of Investors’ Relief to be aware of

There are instances where Investors’ Relief will be withdrawn, even when you met the conditions at the time you made the investment. This may happen, for example, where you start to receive payments as a director or become a ‘relevant’ employee of the company.

The future of Investors' Relief

The future of Investors' Relief

HMRC has published the figures for 2019/20, which the first year where a claim for Investors’ Relief is possible. So far, taxpayers have been able to claim this relief on £134 million of gains, saving up to £13 million of tax. With this relief shared amongst fewer than 1,000 individuals, it will be interesting to see if Investors’ Relief increases in popularity in the years to come.

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