What is Entrepreneurs' Relief and when you should claim it
Entrepreneurs’ Relief allows you to pay less Capital Gains Tax (CGT) when you sell all or part of your business, close it down, or sell qualifying assets and securities. It was renamed Business Asset Disposal Relief in 2020, but the term is still commonly used.
What is Entrepreneurs’ Relief?
If you’re a sole trader or business partner, you can qualify for a Capital Gains tax rate of 10% payable on qualifying assets by using Business Asset Disposal Relief (formerly Entrepreneurs’ Relief until 2020).
There’s no limit how many times you can claim under the scheme, but a total lifetime limit of £1 million applies. And if you sell or close your business, there’s a deadline of two years to claim from the end of that tax period. For example, if you closed up during the 2022 to 2023 tax year, the deadline is January 31st, 2025.
The tax reduction is available to individuals operating a business including sole traders, partnerships, personal companies, joint ventures, and trusts. It’s not applicable to companies themselves.
How to claim Business Asset Disposal Relief
You can claim Business Asset Disposable Relief either through your Self Assessment tax return, or by filling in Section A of the Business Asset Disposal Relief help sheet.
The current deadlines are:
- 2022-2023 tax year: January 31st 2025
- 2021-2022 tax year: January 31st 2024
- 2020-2021 tax year: January 31st 2023
The lifetime allowance of £1 million came into effect for all qualifying disposables made on, or after, March 11th, 2020. After your gains exceed that amount, whether from one sale or multiple disposables, you’ll need to pay the standard rate of Capital Gains Tax.
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