When does Entrepreneurs' Relief apply? What is the rate of Entrepreneurs' Relief? How to claim Entrepreneurs' Relief.  

A FREEVIEW guide to this valuable business disposal relief.

Subscribers to this site: see your detailed Subscriber guide to Entrepreneurs' Relief

and also our Virtual Tax Partner toolkits


At a glance

At a glance

Entrepreneurs' Relief (ER) is a Capital Gains Tax (CGT) relief which reduces the rate of tax paid on the disposal of business assets where the disposal proceeds are high enough to take you into the higher tax bands.

It applies to disposals of:

  • A sole trade and its assets.
  • Partnership interests and assets.
  • Shares in your own company.
  • Joint venture interests.
  • Business assets held by a trust.


  • It is available to CGT disposals made by individuals and trustees. It does not apply to disposals by companies.
  • Applies to qualifying disposals of business assets. It does not apply to the disposal of investment or non-business assets.

The effect of ER

  • It reduces the rate of CGT payable on qualifying disposals to 10%. 
  • An individual may claim ER up to a lifetime limit of qualifying capital gains.


  • ER does not apply to Carried Interest gains, these continue to be charged at normal CGT rates of 18% and 28%.

How ER works 

Chargeable gains covered by the ER are taxed at an effective tax rate of 10%.

The amount of ER given depends on the amount of the individual's ER Lifetime Allowance after taking previous disposals into account at the date of the disposal.

The Lifetime Allowance is as follows:

  • £1 million from 11 March 2020.
  • £10 million from 6 April 2011 £5 million from 23 June 2010.
  • £2 million from 6 April 2010 to 22 June 2010.
  • £1 million for 2008/09 to 2009/10,
  • Gains in excess of the lifetime allowance will be charged at the CGT rate applicable for that period.

The 'mechanics' of this relief have changed over the years, if you have made several disposals in your lifetime, this can make the calculation of your lifetime allowance tricky.

For example

John owns a sole trade and four companies and he disposes of his business and his shareholdings between 2009/10 and 2018/19 as follows.

He sold his sole trade and business premises making a £2 million capital gain in September 2009. The disposal qualified for ER and his gain was taxed as follows:

2009/10 - First disposal


(£1,000,000 x 5/9ths) x 18% =


£1,000,000 x 18% =


CGT due (ignoring annual exemption)


In May 2010 he sells all his shares in his first company, the £2million gain qualifies for ER. The Lifetime Allowance increased to £2 million on 6 April and so he now has £1 million of ER available to use up as follows:

2010/11 -Second disposal


(£1,000,000 x 5/9ths) x 18% =


£1,000,000 x 18% =


CGT due (ignoring annual exemption)


In July 2010 he sells his second company making a £5 million gain which again qualifies for ER. The Lifetime Allowance increased to £5 million on 23 June and so he now has £3 million of ER available to use up as follows:

2010/11 - Third disposal


£3,000,000 x 10% =


£2,000,000 x 28%* =


CGT due (ignoring annual exemption)


*CGT rate increases for higher rate taxpayers from 23 June 2010

In May 2018 he decides to retire and he sells his remaining company making a £6 million gain which again qualifies for ER. The Lifetime Allowance increased to £10 million on 6 April 2011, as he has used up £5 million of his Lifetime Allowance on his previous disposals only £5 million qualifies for relief.

2018/19 - Fourth disposal


£5,000,000 x 10% =


£1,000,000 x 28%* =


CGT due (ignoring annual exemption)



  • An individual will be able to make more than one claim for relief up to the total of the Lifetime Allowance prevailing at the date of the disposal.
  • In these examples, John can use his annual exemption to offset his gains that do not qualify for Entrepreneurs' Relief. If all his gains qualified for ER he would deduct his available annual exemption from the gain before calculating ER.

Different forms of ER

ER applies to a 'material disposal' of business assets, there are separate rules for the different classes of asset. These comprise:

Different forms of ER: Applies to:

Disposal of a business or part of a business

Sole traders or partners: S169I(2)(a) TCGA 1992

Disposal of the assets of a business following its cessation

Sole traders or partnerships: s.169I(2)(b)
Disposal of shares or securities in a company Officer or employee shareholders
Disposal of a joint venture interest Joint venture officer or employee shareholders
Disposal of trust business assets Trustees
Disposal associated with a material disposal Shareholders or partners
Disposal of shares or securities in a company (Investors' Relief) Investor shareholders (not officers or employers)


Try the Virtual Tax Partner© Toolkits for Entrepreneurs' Relief

These online tools are designed to work through the complex rules in minutes, they cover:

Entrepreneurs' Relief: business and asset disposals (sole traders)
This toolkit covers around 50 different permutations of the rules covering disposals made by an individual.

  • Between 6 April 2014 and 29 October 2018.
  • Between 29 October 2018 and 5 April 2019.
  • On or After 6 April 2019.

Entrepreneurs' Relief: share disposals
This toolkit covers share disposals and share disposals following incorporation and all the different permutations of the relief for shares for disposals.

  • Between 6 April 2014 and 29 October 2018.
  • Between 29 October 2018 and 5 April 2019.
  • On or After 6 April 2019,



What's new?

The rules for Entrepreneurs' Relief have undergone multiple changes over the years, for full details see Subscriber Guide: Entrepreneurs' Relief.

For the current version of the legislation see Section 169H to 169V TCGA 1992.

Renaming of the relief

Draft Finance Bill 2020 includes provisions to rename the relief 'Business Asset Disposal Relief' from April 2020.

Budget 2020 proposals

  • A reduction in the lifetime allowance from £10 million to £1 million.

Budget 2018 changes

Changes to the definition of personal company 

For disposals on or after 29 October 2018:

In addition to the existing 'personal company' condition requiring 5% of share capital and voting rights, the claimant must, throughout the relevant period, have at least:

  • a 5% interest in the distributable profits of the company and
  • a 5% interest the assets available for distribution to equity holders in a winding up OR
  • an entitlement to at least 5% of the sales proceeds on the disposal of the ordinary share capital of the company.

These changes do not affect EMI share options as there is no requirement for the personal company tests to be met by shareholdings acquired under an EMI scheme.

See ER: a disposal of shares or securities in a company

Qualifying period extends from one year to two

For disposals on or after 6 April 2019

The minimum period throughout which certain conditions must be met to be eligible for relief is extended from one year to two years.

  • Where the business ceased or ceased to be a trading company (or holding company of a trading group) before 29 October 2018, the one year period will continue to apply.
  • This change applies for EMI share options; the two year period must be met from the date of the grant of the options.

See ER: a disposal of securities in a company

Protecting ER on diluted shareholdings:

  • Legislation was in the Finance Act 2019 to protect ER for shareholders whose holding is diluted below 5% after a commercial fundraising.
  • For share issues taking place on or after 6 April 2019 shareholders can elect to treat their shares as disposed of and immediately reacquired at market value and claim ER.
  • See ER: disposal of shares and securities

Investors' Relief

  • Individual company investors who are not officers or employees of the company can claim ER on qualifying shares, subject to a lifetime cap of £10 million. 
  • Although not unlike ER it has different qualifying conditions, it is covered in a separate note, see Investors' Relief.

Transactions in Securities (TiS)

HMRC can use the Transactions In Securities (TiS) anti-avoidance rules to counteract an income tax advantage for a shareholder in certain circumstances. When a counteraction is made an otherwise capital receipt is taxed as income and ER does not apply.

From 6 April 2016 the definition of a TiS is extended to include:

  • A repayment of share capital or share premium.
  • A distribution in respect of securities on a winding up.
  • A Targeted Anti-Avoidance Rule (TAAR) has also been introduced to target ‘phoenixing’.

See Transactions in Securities.

Goodwill on Incorporation

  • From 3 December 2014, ER can be restricted on certain disposals of goodwill to a close company where the individual transferring the goodwill is a related party by virtue of having rights over more than 5% of the share capital of the new company.  
  • This is subject to a set of complex special rules which apply for quick re-sale of the company, certain disposals are permitted and there are anti-avoidance provisions.
  • See Entrepreneurs' Relief: A disposal of a business or part of a business.

Changes in 2014/15

Disposals made on or after 18 March 2015

  • ER-associated disposals rules: ER will not be available to reduce Capital Gains Tax on gains accruing on assets used in a business carried on by a company or a partnership, unless they are disposed of in connection with a disposal of at least a 5% shareholding in the company, or a 5% share in the partnership assets.
  • ER and joint venture companies: the definition of a trading company changes for ER. Finance Act 2016 introduced changes to these rules which are backdated to 18 March 2015.  See Finance Act 2016 above.

Disposals made on or after 3 December 2014

  • ER is restricted on the disposals of goodwill on incorporation between related parties.
    • Finance Act 2016 introduced changes to this restriction which are backdated to 3 December 2014. See Finance Act 2016 above.
  • Gains that are eligible for ER that are realised on or after 3 December 2014 may be reinvested in EIS (or Social Investment Tax relief) and will still remain eligible for ER when the deferred gain is realised. See EIS relief. 

Finance (No. 2) Act 2010 (FA (2) 2010):

Restriction on QCBs

From April 2010 ER was restricted so that it no longer applied to gains deferred using Qualifying Corporate Bonds (QCBs).


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