Investors' Relief (IR) was introduced in the Finance Act 2016 to encourage long-term external investment in unlisted UK trading companies. It gives qualifying investors a 10% CGT rate on gains of up to £1 million over a lifetime — a significant saving compared to the standard 24% rate for higher rate taxpayers. Unlike Business Asset Disposal Relief (BADR), Investors' Relief is specifically designed for those who are not employees or paid directors of the company.
This calculator shows you how much of your gain qualifies at the 10% IR rate, what is taxed at the normal rate, the total CGT due, and the saving compared to receiving no relief at all.
Qualifying Conditions for Investors' Relief
- Shares must be new ordinary shares subscribed for cash (not acquired on the secondary market).
- Issued on or after 17 March 2016 by an unlisted trading company.
- Held continuously for at least 3 years from date of issue.
- Investor must not be an employee or paid director at any time from issue to disposal.
- Lifetime limit: £1,000,000 of qualifying gains (separate from BADR limit).
Investors' Relief Calculator
IR lifetime limit: £1,000,000 (2025/26). Separate from BADR £1,000,000 lifetime limit. Both limits tracked independently. Conditions must be met — see above. Not financial advice.
Investors' Relief vs Business Asset Disposal Relief
Both Investors' Relief and BADR offer a 10% CGT rate and both have a £1 million lifetime limit (as of 2025/26). However, they target different types of shareholder. BADR is for active business participants: employees, directors, and partners with a meaningful stake in the business. Investors' Relief is for passive external investors who provide capital but are not involved in running the company.
This distinction matters because many angel investors and venture capital supporters will not qualify for BADR (as they are not employees or directors with a 5% stake), but may qualify for Investors' Relief if they subscribed for new shares in a qualifying unlisted trading company and held them for at least three years. The two reliefs have different entry conditions but the same headline rate benefit.
An individual can potentially access up to £2 million of lifetime gains at 10% in total — £1 million under BADR and a further £1 million under Investors' Relief — if they have qualifying disposals under each separate regime.
The Subscription Requirement
One of the most important qualifying conditions for Investors' Relief is that the shares must have been newly issued (subscribed for) rather than acquired from an existing shareholder. This means that buying shares in an unlisted company from another investor does not qualify, even if all other conditions are met. The purpose is to direct the relief toward fresh investment capital flowing into growing businesses, not to reward secondary market trading.
The shares must also be ordinary shares subscribed for wholly in cash. Shares received in consideration for services, shares acquired under an employee share scheme, or shares exchanged for other assets do not qualify. This makes Investors' Relief different from EIS and SEIS, which have their own sets of conditions and reliefs but also require new issue subscriptions.
The Three-Year Holding Requirement
Qualifying shares must be held for a continuous period of at least three years from the date of issue (or from 6 April 2016 for shares issued between 17 March and 5 April 2016). This minimum holding period prevents the relief from being used for short-term tax arbitrage. If shares are disposed of before the three-year period is completed, the disposal will not qualify for Investors' Relief and normal CGT rates apply.
The holding period clock generally resets if shares are reorganised, unless the reorganisation qualifies for the normal CGT share reorganisation rules. Professional advice is recommended if a company undertakes a rights issue, bonus issue, or restructuring during the holding period, as the effect on IR qualification depends on the specific circumstances.
Companies That Qualify
The company must be an unlisted qualifying trading company throughout the period from share issue to disposal. A trading company is one carrying on trading activities (as opposed to investment activities). Companies with substantial non-trading activity, such as property investment companies or those holding significant cash reserves above working capital needs, may fail the trading test.
The company must also not be listed on a recognised stock exchange. Shares traded on AIM have historically been treated as unlisted for CGT purposes, but investors should verify the current HMRC position for the specific company. Shares that become listed during the holding period may lose their IR qualification from the point of listing onwards.
Frequently Asked Questions
What is Investors' Relief?
Investors' Relief reduces the CGT rate to 10% on qualifying gains from the disposal of unlisted ordinary shares in trading companies, up to a lifetime limit of £1 million. It was introduced to encourage external investors — those who are not employees or directors — to invest in unlisted trading companies.
What is the Investors' Relief lifetime limit?
The lifetime limit is £1,000,000 of qualifying gains. This is separate from the BADR lifetime limit, also £1,000,000. Both limits are tracked independently, so a qualifying individual could access up to £2 million of gains at 10% across both reliefs.
Who qualifies for Investors' Relief?
External investors who subscribed for new ordinary shares in cash in an unlisted trading company on or after 17 March 2016, who held those shares for at least 3 years, and who were not employees or paid directors during the holding period. The investor must be an individual (not a company).
What is the difference between Investors' Relief and BADR?
BADR targets employees, directors and business owners with at least 5% of shares. Investors' Relief is for external investors who are not employees or paid directors. Both offer 10% CGT and have separate £1 million lifetime limits.
Can I claim both Investors' Relief and BADR on the same gains?
No. The same gain cannot qualify for both reliefs. However, an individual can build up separate lifetime gains under each — up to £1 million IR gains and up to £1 million BADR gains — on different qualifying disposals.
What CGT rate applies to gains above the IR limit?
Gains above the £1 million IR lifetime limit are taxed at the standard rate: 18% for basic rate taxpayers or 24% for higher and additional rate taxpayers (2025/26 rates for non-residential assets).
Do the shares need to be newly issued to qualify?
Yes. Shares must be newly subscribed for cash in the company on or after 17 March 2016. Shares acquired on the secondary market (buying from another shareholder) do not qualify for Investors' Relief.
What is the minimum holding period?
Shares must be held for a continuous period of at least 3 years from the date of issue. Disposal before this period means the gain does not qualify for Investors' Relief.
Can an employee claim Investors' Relief?
No. Being an employee or paid director of the company (or a connected company) at any time from share issue to disposal disqualifies the investor from Investors' Relief. They may qualify for BADR instead.
Is Investors' Relief available for listed company shares?
No. Investors' Relief only applies to shares in unlisted trading companies. Shares on AIM have historically been treated as unlisted for CGT purposes but specific advice should be sought for each investment.
How do I claim Investors' Relief?
Claim it on the Capital Gains Tax pages (SA108) of your Self Assessment tax return. Report the disposal, identify the qualifying gain, state the lifetime IR gains used to date, and claim the 10% rate on the qualifying portion.
What happens if the company becomes listed?
If the company becomes listed after you subscribed, your shares may no longer qualify for Investors' Relief for the period after listing. Professional advice is recommended if the company plans a stock exchange admission during your holding period.