Investors' Relief
A Capital Gains Tax relief that applies a reduced flat rate on gains from disposing of shares in unlisted trading companies, aimed at encouraging external investors in small businesses. The rate was 10% until April 2025, rising to 14% for 2025-26 and 18% for 2026-27. To qualify, shares must have been held for at least three years and issued after 17 March 2016, and the investor must not be an employee of the company. There is a separate lifetime limit of £1 million of qualifying gains distinct from the BADR lifetime limit.
How it works
Investors' Relief is aimed specifically at external, hands-off investors rather than the founders or working owners a relief like BADR targets — the core eligibility test is that you must not be, and must not have been, an employee or paid officer of the company at any point while you held the shares. This makes it a useful relief for people who put money into an unlisted trading company as a passive shareholder, such as through an early-stage investment round, without taking a board seat or a salary from the business.
The three-year minimum holding period runs from the date the shares were issued to you, not the date you first considered investing, and only shares issued after 17 March 2016 qualify at all — shares acquired secondhand from another shareholder, rather than newly issued by the company, generally don't count. Because the £1 million lifetime limit for Investors' Relief is entirely separate from the BADR lifetime limit, someone who has already used up their full BADR allowance as a business owner can still separately claim Investors' Relief on qualifying investments made in an unrelated company.
The rate has followed the same upward path as BADR — 10% until April 2025, rising to 14% for 2025-26 and 18% for 2026-27 — reflecting a broader policy trend of reducing the tax advantage of these lower flat-rate Capital Gains Tax reliefs over time. Because the relief only applies to unlisted trading companies, shares in a company that later floats on a public stock exchange can lose their qualifying status going forward.
Example: Claiming Investors' Relief
Suppose you subscribed for newly issued shares in an unlisted trading company in 2021, have never been an employee or officer of the company, and sell your stake in 2026-27 for a £50,000 gain.
Because you've held the qualifying shares for well over three years and meet the other conditions, the gain qualifies for Investors' Relief at the 2026-27 rate of 18%: £50,000 × 18% = £9,000 in Capital Gains Tax.
Frequently asked questions
Can I claim Investors' Relief if I work for the company I invested in?
No — Investors' Relief specifically excludes anyone who is or has been an employee or paid officer of the company, which is the main feature distinguishing it from BADR.
Is the Investors' Relief lifetime limit the same as the BADR limit?
No — they're separate £1 million lifetime limits, so using up your BADR allowance as a business owner doesn't reduce how much Investors' Relief you can separately claim on unrelated investments.
Do shares bought from an existing shareholder qualify for Investors' Relief?
Generally no — the relief is aimed at newly issued shares subscribed for directly from the company after 17 March 2016, not shares bought secondhand from another investor.
Related Terms
Capital Gains Tax
A tax on the profit (gain) you make when you sell or dispose of an asset that has increased in value, such as shares, investment property, or business assets.
Business Asset Disposal Relief (BADR)
A Capital Gains Tax relief on qualifying business disposals — charged at a flat rate of 10% for 2024/25, 14% for 2025/26, and 18% from April 2026 — up to a £1 million lifetime limit per individual.
Annual Exempt Amount
The amount of capital gains you can make in a tax year before Capital Gains Tax becomes due, currently £3,000 for individuals.
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