CGT—entrepreneurs' relief
Produced in partnership with Satwaki Chanda
CGT—entrepreneurs' relief

The following Tax guidance note Produced in partnership with Satwaki Chanda provides comprehensive and up to date legal information covering:

  • CGT—entrepreneurs' relief
  • Qualifying business disposals
  • Material disposals—shares or securities
  • Personal company test
  • Trading test
  • Officer/employee test
  • Material disposals—assets other than shares or securities
  • Material disposals—partnerships
  • Disposals of trust business assets
  • Associated disposals
  • more

Entrepreneurs' relief is a capital gains tax (CGT) relief designed to encourage individuals to set up and expand their own businesses. Provided that the conditions are satisfied, the effect of the relief is to reduce the rate of CGT on the sale of certain business assets to 10%.

The relief applies to individuals, whether operating as sole traders or in partnership, or through a corporate vehicle. It also applies where the business assets are held by the trustees of a settlement. Companies are not eligible for entrepreneurs' relief.

There is a lifetime limit on the amount of entrepreneurs' relief that can be claimed by any one individual. For disposals taking place on or after 11 March 2020, the maximum amount of gains that may benefit from entrepreneurs' relief is £1m (reduced from the previous limit of £10m). All past claims to entrepreneurs' relief, since the rules were introduced in 2008, count towards this limit. For an example, see below (Amount of relief).

This Practice Note looks at the types of disposal that will attract entrepreneurs' relief, and describes how the relief is calculated. It also describes how the relief can apply to share-for-share exchanges.

Qualifying business disposals

Entrepreneurs' relief applies to 'qualifying business disposals', of which there are three main categories. These are listed below, then considered in more detail in the remainder