What Is Entrepreneurs Relief And How Do I Get It?

Capital gains are taxed at either 28% or 20% if you are a higher rate taxpayer, 18% if you are a basic rate taxpayer or 10% if the gain meets certain qualifying conditions and qualifies for Business Asset Disposal Relief.

The tax conditions to qualify are as follows:

• The assets must have been trading assets.
• If they are shares in a limited company it must have been a trading limited company.
• It must have been trading within the last three years (so be careful of leaving a company dormant for three years).
• For a limited company, you must have owned 5% of the ordinary voting shares.
• There is a lifetime limit of £1 million on capital gains. Above that level in a lifetime the tax rate will revert to 20%. This is often the level considered for emigration to avoid Capital Gains Tax.
• Some trades do not qualify; for example property-owning and letting in a limited company does not usually qualify as trading so careful advice needs to be taken beforehand from a suitably qualified professional.
• For companies with assets below £25,000 in reserves, Extra Statutory Concession C16 can be used. This is an informal type of liquidation where you do not need to use a Licensed Insolvency Practitioner and can deal with the distribution and closure of a company by yourself.