--- title: Entrepreneurs' Relief now extended to external investors description: Explore how the Government's Investors' Relief offers a 10% capital gains tax rate for external investors in unlisted trading companies. image: https://blog.shorts.uk.com/hubfs/Images/Brick%20wall%20images/David%20Robinson.jpg --- [![Shorts_logo_White](https://blog.shorts.uk.com/hubfs/New%20Site%202018/Shorts_logo_White.svg "Shorts_logo_White")](https://www.shorts.uk.com/) [Blogs & News](https://blog.shorts.uk.com/) > [Business Taxes](https://blog.shorts.uk.com/topic/business-taxes) # Entrepreneurs' Relief now extended to external investors David Robinson - 20 October 2016 ###### Select topic - Please Select - [ Audit ](https://blog.shorts.uk.com/topic/audit) [ Business Taxes ](https://blog.shorts.uk.com/topic/business-taxes) [ Radius – R&D Tax Relief & Patent Box ](https://blog.shorts.uk.com/topic/radius-rd-tax-relief-patent-box) [ Corporate Finance ](https://blog.shorts.uk.com/topic/corporate-finance) [ GENUS Management Accounts ](https://blog.shorts.uk.com/topic/genus-management-accounts) [ VAT ](https://blog.shorts.uk.com/topic/vat) [ Private Client ](https://blog.shorts.uk.com/topic/private-client) [ Payroll ](https://blog.shorts.uk.com/topic/payroll) [ EOT ](https://blog.shorts.uk.com/topic/eot) [ International Taxes ](https://blog.shorts.uk.com/topic/international-taxes) ![featured image](https://blog.shorts.uk.com/hubfs/Images/Brick%20wall%20images/David%20Robinson.jpg) ###### In an attempt to further encourage an enterprise and investment culture, and to help ensure that companies have the capital available to expand and create jobs, with effect from 6 April 2016 the Government has effectively extended Entrepreneurs' Relief to external investors in unlisted trading companies. The ‘extension’, entitled Investors’ Relief, applies a rate of 10% to capital gains on disposals of qualifying shares which can result in a tax saving of 10% for higher rate taxpayers (since the headline CGT rate is 20%). In order for a disposal to qualify for Investors’ Relief, the shares being disposed of must satisfy the following conditions: - Be newly issued, having been subscribed for by the person(s) making the disposal, - Be in an unlisted trading company, or in the holding company of a trading group, - Be issued by the company on, or after, 17 March 2016 and have been held for a period of 3 years from 6 April 2016, - Have been held continually for a period of 3 years before disposal, - Have been held by an unconnected person(s), i.e. not an officer or employee of the company. Unlike Entrepreneurs' Relief, there is no requirement to hold 5% of the ordinary share capital and have 5% of the voting rights in the company and so Investors’ Relief is even more accessible. The relief is subject to a lifetime cap of £10 million of chargeable gains per individual which HMRC have stated will also apply to beneficiaries of trusts and is in addition to the current £10 million cap on Entrepreneurs' Relief. **Example** Sarah is a higher rate taxpayer and wishes to sell 100 shares for a total of £1,000,000. The shares were originally purchased for £400,000 creating a capital gain of £600,000. If the shares do not satisfy the conditions for Investors’ Relief then the gain will be subject to 20% capital gains tax meaning that Sarah will be due to pay £120,000 in tax. If, however, the shares do satisfy the conditions outlined above then Investors’ Relief may be claimed and a 10% rate of tax applied. This would create a tax saving of £60,000. This is a useful addition to the tax code to encourage individuals to invest in UK businesses, and compliments other investor tax reliefs such as EIS / Seed EIS and VCT. If you would like more information on Entrepreneurs' relief or Investors’ Relief, or would like to discuss your tax affairs in general, please [contact us.](https://www.shorts.uk.com/contact-us/) ![author](https://blog.shorts.uk.com/hubfs/Team%20profile%20round%20images/David%20Robinson%20Round%20circle.jpg) #### David Robinson As a Tax Partner, I advise clients on all aspects of UK tax, ranging from business taxes, transactions and private client matters, helping to achieve the objectives and aspirations of businesses and their owners. [View my articles](https://blog.shorts.uk.com/author/david-robinson) Tags: [Business Taxes](https://blog.shorts.uk.com/topic/business-taxes) Share this on - - - [Questions? Get in touch with us](https://www.shorts.uk.com/contact/) ###### Tax Saving Guide 2026-27 Written especially for entrepreneurs and owner-managed businesses, this guide is full of planning ideas and tax risks to avoid. 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