Investors’ Relief: CGT Rate, £1M Limit, and Eligibility

Investors’ Relief cuts the capital gains tax rate on profits from selling shares in unlisted trading companies. For disposals on or after 6 April 2026, the qualifying gain is taxed at a flat 18% instead of the standard 24% higher rate, subject to a £1 million lifetime cap per investor.¹ The relief is aimed at outside investors who put fresh cash into private companies and hold the shares for at least three years. Two recent budgets have scaled it back sharply, so the tax saving is much smaller than when the relief launched in 2016.

The Rate You’ll Actually Pay

The Investors’ Relief rate has moved twice in quick succession. Disposals between 6 April 2025 and 5 April 2026 are taxed at 14%. From 6 April 2026, the rate climbs to 18%.¹ When the relief was first introduced, the rate was 10%.

From April 2026, that 18% figure matches the standard basic-rate CGT, so the relief only produces a saving for higher-rate and additional-rate taxpayers, who would otherwise pay 24%.² Even for them, the advantage is 6 percentage points rather than the 10-point gap the relief originally offered. Basic-rate taxpayers still get one benefit: the 18% flat rate applies to the whole qualifying gain, even where part of it would otherwise spill into the higher-rate band.

The £1 Million Lifetime Limit

The lifetime cap was cut heavily at the Autumn Budget 2024. For qualifying disposals on or after 30 October 2024, the limit is £1 million per individual, down from the original £10 million.³ Once you have used your £1 million across all qualifying disposals, further gains from qualifying shares fall back to the standard CGT rates.

The cap applies per person. Spouses or civil partners who each hold qualifying shares each have their own £1 million allowance. Investors’ Relief has its own separate limit from Business Asset Disposal Relief, so using one does not eat into the other.⁴

Who Can Claim

The relief is deliberately built for genuine outside investors. Neither you nor anyone connected with you can be an officer or employee of the company (or a connected company) at any point during your ownership of the shares.⁴ “Connected” is a wide net. It picks up your spouse or civil partner, siblings, ancestors, descendants, and the spouses or civil partners of those relatives. Business partners also count.

There is one narrow exception. If you become an unpaid director after investing, you can still qualify, provided you had no prior involvement in the company’s trade and receive no remuneration, disguised or otherwise.⁵ This is where claims tend to unravel in practice. A director who starts drawing consulting fees, benefits in kind, or expenses that look like pay in another form can lose the relief on the whole holding. Keep the arrangement documented and genuinely unpaid.

Which Shares and Companies Qualify

The shares must be ordinary shares that you subscribed for directly from the company in exchange for cash, and they must be fully paid up when issued.⁴ Buying existing shares from another shareholder on a secondary market does not qualify. The relief exists to route fresh capital into businesses, so it only bites when your money went straight to the company.

The shares must also have been issued on or after 17 March 2016, the date the relief took effect.⁶

The company itself must be an unlisted trading company or the holding company of a trading group. “Unlisted” means none of its shares or securities were listed on a recognised stock exchange when the shares were issued.⁶ AIM-traded companies count as unlisted for this purpose, because AIM is not a recognised stock exchange under UK tax law.

The trading condition applies throughout your ownership, not just at purchase and sale. If the business drifts into non-trading activity, such as managing investment property or sitting on surplus cash with no commercial purpose, the shares can lose their qualifying status.⁴

The Three-Year Holding Period

You must hold the shares continuously for at least three years before disposing of them. The clock starts on the date the shares were issued to you, not the date you decided to invest or signed a subscription agreement.⁶ There is no upper limit; you can hold indefinitely as long as the trading conditions keep being met.

Calculating the Gain

The qualifying gain is your disposal proceeds minus what you originally paid for the shares and any allowable costs, such as professional fees on the purchase or sale. You can also deduct the annual exempt amount (£3,000 for 2025–26) from your total gains before applying the tax.⁷ The reduced rate then applies to the qualifying portion of the gain, up to whatever remains of your £1 million lifetime allowance.

Keep the subscription agreement, bank transfer records, and any share certificates from the date of investment. Hold on to evidence of the company’s trading status and its unlisted status at the time the shares were issued. HMRC can ask for this documentation years later, and the burden of proving eligibility sits with you.

How to Claim

Investors’ Relief is not automatic. You have to make a written claim to HMRC. Most investors do this through the Capital Gains Summary pages (SA108) of their Self Assessment tax return. If you don’t normally file Self Assessment, you can submit a standalone written claim.⁴

A written claim needs to include:

Your name, address, HMRC office, and tax reference
A description of the shares disposed of and the name of the company
The date or dates of the disposals
The total of all previous gains on which you have claimed Investors’ Relief
A signed statement confirming the claim is made under section 169VM of the Taxation of Chargeable Gains Act 1992 and is correct to the best of your belief

The deadline is the first anniversary of the 31 January following the end of the tax year in which you sold the shares. For a disposal in 2025–26 (ending 5 April 2026), the claim must reach HMRC by 31 January 2028.⁴ Miss it and the relief is lost. HMRC has no discretion to extend.

Getting the Claim Wrong

Claiming Investors’ Relief when you don’t qualify can trigger HMRC’s inaccuracy penalties. A careless mistake (a failure to take reasonable care) attracts penalties of up to 30% of the underpaid tax. A deliberate error runs from 20% to 70%. If the error is both deliberate and concealed, penalties run from 30% to 100% of the additional tax due.⁸ Unprompted disclosure before HMRC contacts you generally moves the penalty toward the lower end of each band; obstructing an enquiry pushes it toward the top.

1
GOV.UK. Capital Gains Manual – CG63515 – Investors’ Relief: Rates From April 2025 and From April 2026
2
GOV.UK. Capital Gains Tax: What You Pay It On, Rates and Allowances – Rates
3
GOV.UK. Capital Gains Tax: Investors’ Relief – Reduction in the Lifetime Limit
4
HM Revenue & Customs. Investors’ Relief 2026 (HS308)
5
GOV.UK. Finance Bill 2016 Clause 76 – Investors’ Relief
6
Legislation.gov.uk. Taxation of Chargeable Gains Act 1992, Section 169VB – Qualifying Shares, Potentially Qualifying Shares and Excluded Shares
7
GOV.UK. Capital Gains Tax Rates and Allowances
8
GOV.UK. Penalties: An Overview for Agents and Advisers