The benefits of Investors’ Relief and how to claim it

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 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 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There are instances where Investors’ Relief will be withdrawn, even when you met the conditions at the time you made the investment.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

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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