Business Asset Disposal Relief is for people who work in the business and hold at least 5% of a personal company; Investors’ Relief is for outside investors who subscribed for new shares and are not officers or employees. For disposals in 2026 to 2027 both charge qualifying gains at 18%, each with its own £1 million lifetime limit. Very few gains can qualify for both, because the employee condition for one is the exclusion for the other.

How do the two reliefs compare at a glance?

Point Business Asset Disposal Relief Investors’ Relief
Legislation Sections 169H to 169S TCGA 1992 Sections 169VA to 169VY TCGA 1992
Rate for disposals from 6 April 2026 18% 18%
Lifetime limit £1 million (from 11 March 2020) £1 million (from 30 October 2024)
Assets covered Shares, a business or part of it, assets after cessation, associated disposals Ordinary shares only
How shares are acquired Any way, including purchase, gift or EMI option Subscribed for in cash, fully paid, issued on or after 17 March 2016
Minimum holding 5% personal company test No minimum percentage
Holding period Two years ending with the disposal Three years from issue
Working in the company Must be an officer or employee Investor and connected persons must not be
Listed shares No listing condition, but the personal company test applies Company must be unlisted when shares are issued

Who is each relief aimed at?

BADR, introduced as Entrepreneurs’ Relief in 2008 and renamed in 2020 (CG63950), rewards owners and managers who sell their business or shares. Investors’ Relief, in sections 169VA to 169VY, is described in HMRC’s manual at CG63500 as intended to encourage and reward new investment and targeted at external investors. Both are available to individuals and to trustees of certain settlements, by reference to a qualifying beneficiary. More detail on each is at Business Asset Disposal Relief and Investors’ Relief.

What shareholding and holding period does each need?

For BADR on shares, the company must be your personal company throughout the two years ending with the sale: at least 5% of the ordinary share capital, 5% of the votes, and an entitlement to at least 5% of distributable profits and assets on a winding up, or to 5% of the proceeds on a sale of the whole company (CG64050). Shares from an EMI option are an exception: the 5% test does not apply if the option was granted at least two years before the sale (CG63975).

Investors’ Relief has no percentage threshold in its conditions (CG63520). Instead the shares must be ordinary shares, subscribed for by you wholly in cash and fully paid up at issue, issued for genuine commercial reasons and at arm’s length, and held continuously for at least three years from issue. Shares bought from another shareholder never qualify, however long they are held (CG63530).

How does the employee restriction work?

This is the dividing line. BADR requires you to be an officer or employee of the company or a group company throughout the qualifying period, with no minimum hours or pay (CG64110). Investors’ Relief excludes shares if you, or a person connected with you, are a relevant employee: an officer or employee of the company or a connected company at any time in the period from acquisition to disposal (CG63550).

There are two exceptions for Investors’ Relief:

  • an unpaid director who had not previously been involved in carrying on the company’s trade or business; and
  • a person who becomes an employee, but not a director, more than 180 days after subscribing, where there was no real prospect of that at the time.

So a business angel who later takes a paid seat on the board will usually lose Investors’ Relief on those shares, and a founder director will never have it. See connected persons for who counts.

Do both use the same trading company test?

Yes, broadly. Both rely on the definition in section 165A: a company carrying on trading activities whose activities do not include other activities to a substantial extent (CG64055, CG63540). For Investors’ Relief the company must be trading when the shares are issued and throughout the holding period. Investors’ Relief also says expressly that a company is not treated as ceasing to trade merely because it is in administration, receivership or winding up for genuine commercial reasons, while BADR relies on a three year window after the company stops trading. See what counts as a trading company.

What are the rates and limits for 2026 to 2027?

For disposals on or after 6 April 2026 qualifying gains are charged at 18% under both reliefs (section 169N(3) for BADR, section 169VC(2) for Investors’ Relief). The rate was 14% for 2025 to 2026 and 10% before that (CG63955, CG63515).

The lifetime limits are separate. Section 169N(4) counts only earlier gains charged at the BADR rate, and section 169VK counts only earlier gains charged at the Investors’ Relief rate, each against a £1 million cap. Gains above a cap are taxed at the main rates.

Main capital gains tax rates for 2026 to 2027 are 18% within the unused basic rate band and 24% above it (gov.uk). That means the saving from either relief is now six percentage points for gains that would otherwise be taxed at 24%, and nothing for gains that would fall within the basic rate band anyway. For BADR, gov.uk says your basic rate band is used first against BADR gains, which can push other gains into the 24% rate.

Illustration only.

Ana subscribed £50,000 in cash for 3% of an unlisted trading company in 2021 and has never worked for it. Ben founded it, holds 60% and is managing director. Both sell in 2026 to 2027. Ana’s gain of £250,000 qualifies for Investors’ Relief; she does not meet the 5% test for BADR. Ben’s gain of £2 million qualifies for BADR on £1 million at 18% and the rest at 24%; he cannot use Investors’ Relief on any of his shares because he is a director and so a relevant employee.

Can one gain qualify for both, and how are they claimed?

CG63560 says it will be very unusual for a gain to qualify for both reliefs, but where it does HMRC accepts that the gain may be apportioned between them. Both reliefs must be claimed by the first anniversary of 31 January following the tax year of the disposal (CG63970, CG63560); for a 2026 to 2027 disposal that is 31 January 2029. Spouses and civil partners each have their own limits under both reliefs.

What mistakes come up?

  • Claiming Investors’ Relief on shares bought from another shareholder rather than subscribed for.
  • Overlooking that a spouse’s employment with the company can disqualify an investor’s shares.
  • Assuming a 4% holding of a founder qualifies for BADR because the founder works full time in the business.
  • Selling a week before the third anniversary of issue and losing Investors’ Relief.
  • Assuming the two £1 million limits can be pooled for one gain.

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Reviewed by Christine Anderson, Broker, Solar Protect. Last reviewed 19 October 2026. Part of Accountapedia, the Solar Protect guide to UK tax and accounting. This page is general information, not personalised advice.