What is Entrepreneurs' Relief?
Definition of Entrepreneurs’ Relief
Entrepreneurs’ Relief is a type of UK tax relief that relates to the sale of a business, assets lent to a business when the business is being sold or closed, or shares or securities in a company.
When a sale qualifies for Entrepreneurs' Relief, the individual who makes the sale will pay a lower rate of 10% Capital Gains Tax on any “gain” they make from it.
Entrepreneurs' Relief is available to business owners, company directors and shareholders in the scenarios outlined below.
Qualifying for Entrepreneurs’ Relief
If you’re selling a business, you will qualify for Entrepreneurs’ Relief if the following conditions have been in place for at least two years prior to the sale:
- you’re a sole trader or business partner
- you’ve owned the business for at least two years
If you’re selling assets that you lent to your business because you’re selling your business or shares, or the business has closed, you will qualify for Entrepreneurs' Relief if:
- the business had access to these assets for at least one year prior to the date of the sale or closure of the business
- you have sold at least 5% of your part of a business partnership or at least 5% of your shares in a personal company
If you’re selling shares or securities in a company, you will qualify for Entrepreneurs' Relief if the following conditions have been in place for at least two years prior to the sale:
- you have been an employee or office holder of the company (or the group that it’s in) for at least two years
- the company is a ‘trading’ company or the holding company of a trading group
There are also conditions that relate to whether the shares you are selling were originally acquired through an Enterprise Management Incentive (EMI). These details are outlined on HMRC’s website.
Disclaimer: The content included in this glossary is based on our understanding of tax law at the time of publication. It may be subject to change and may not be applicable to your circumstances, so should not be relied upon. You are responsible for complying with tax law and should seek independent advice if you require further information about the content included in this glossary. If you don't have an accountant, take a look at our directory to find a FreeAgent Practice Partner based in your local area.
Frequently Asked Questions
Can I claim Entrepreneurs’ Relief more than once?
Yes, you can claim Entrepreneurs’ Relief on multiple qualifying sales but only to the combined value of £10 million. You can find out more about the limit on HMRC’s website.