How does the Entrepreneurs’ Relief work?

If you decided to move on from your business, the good news is that you may take advantage of something called the Entrepreneurs’ Relief.

It’s one of the most attractive tax reliefs in the UK:

• 10% CGT on qualifying assets
• £1,000,000 lifetime gains.

Is my business eligible?

Yes, if it’s one of these kinds of businesses:

• a sole trader business
• a partnership
• or a limited company.

But not companies who are in financial services or investments.

Am I eligible?

Yes, if:

• you’ve owned the business for at least two years before the date you sell it, or
• you’ve been with the company for at least two years if you’re selling shares, or
• if your shares are not EMI shares, you had the option to buy them at least two years before you’re selling them.

How do I calculate the Entrepreneurs’ Relief?

1. add together the capital gains (what you sold your shares for), deduct losses (if any), and work out the total taxable gain eligible
2. next, substract your tax-free capital gains (CGT) allowance
3. you pay 10% tax on what’s left.

Is the Entrepreneurs’ Relief available for EMI shares?

Yes, but only if:

• you’ve been with the company for two years
• plus you have at least 5% of shares
• and you also have 5% of the voting rights.

If you don’t know what the Enterprise Management Scheme (EMI) is, you can read more about it here.

What if I sold my business or shares before 11 March 2020?

You might be eligible to claim up to £10,000,000 – the Entrepreneurs’ Relief was recently reduced.

You might also need to only have owned the shares or business for a year instead of two.

How do I claim it?

Either:

• by filling in Section A of the HS275 form
• through your Self Assessment tax return (easiest).

You have three years from the sale until you can claim.