Entrepreneurs’ Relief explained

by | Sep 18, 2014

Back in March, we looked at the kinds of funding available to those setting up a business in the technology sector, which often attracts those with new business ideas.

This month, we focus on one of the incentives the government has put in place to encourage those who are prepared to take a risk and strike out in business in any area. Entrepreneurs’ Relief.  

Entrepreneurs’ Relief is designed to reward those who successfully develop and establish a business from scratch. It allows a reduced 10% Capital Gains Tax (CGT) rate to be applied when you sell your business – or certain business shares and assets – and make a profit.

With CGT rates currently at 18% and 28% for individuals, depending on taxable income, using this benefit could result in significant savings.

There are a number of rules which govern whether this benefit can be taken advantage of. You can claim Entrepreneur’s Relief as an individual if:

  • you are a partner or employee in a business or a sole trader, provided the company is trading
  • you have owned at least 5% of the shares in the business for a year.

For those who build up multiple businesses, there is no limit to how often you can claim Entrepreneurs’ Relief but you can only claim up to £10 million of relief in total during your lifetime.

To make sure you qualify, you should plan at least 2 years in advance if you’re planning the sale of a business. 

View our short video ‘What is Entrepreneurs’ Relief?’ on YouTube

Contact us

Alternatively, please call us on (020) 7330 0000 to discuss how you can potentially take advantage of Entrepreneurs’ Relief.

Tell us about your business

Explore where you want to go, what you need to get there and how ABG can help.

ICAEW Chartered Accountants
Probate Accountants
International Accountants EAI members
BAS Approved Chartered Accountants