Advanced Taxation (UK) · Capital gains tax: gains and losses on the disposal of shares and securities

Investors' Relief and Share Loss Relief in ATX-UK

Updated 11 October 2026

Investors' relief taxes gains on new, cash-subscribed ordinary shares in unlisted trading companies at 14%, up to a £1,000,000 lifetime limit, if you held them for 3 years and were not an employee or officer. Share loss relief lets a subscriber set a qualifying share loss, including a negligible value claim, against income instead of gains.

Understand Investors' Relief and Share Loss Relief

Investors' relief (IR) rewards outside investors who put new money into unlisted trading companies. It is not for people who work in the business. It cuts the CGT rate on qualifying gains to 14%, instead of the 18% or 24% normal rates. The lifetime limit is £1,000,000 of gains, and it is separate from the business asset disposal relief (BADR) limit.

The main conditions for IR are these:
- The shares are ordinary shares in an unlisted trading company, or the holding company of an unlisted trading group.
- You subscribed for the shares in cash, and they were newly issued to you. Buying existing shares does not qualify.
- You held them continuously for 3 years before disposal, and the 3-year period must start on or after 6 April 2016.
- You are not an employee or officer of the company (or a connected company) at any time in that period. A director is an officer, so a director is excluded from IR whether paid or not. Read the facts carefully for any director role.

BADR is the opposite kind of relief. It suits owners and workers: at least 5% of the ordinary shares and voting rights, employee or officer status, and a qualifying period of 2 years, against 3 years for IR. IR needs no minimum holding, but you must be an outsider and hold for longer. Both reliefs use the 14% rate in your tax tables, and both are claimed on the gain, not on the shares. Always check each limit separately.

Losses work in the opposite direction. A normal capital loss can only be set against gains. First set it against gains of the same year in full, even if that wastes the annual exempt amount. Then carry forward any balance. Carried-forward losses are used only to reduce gains down to the annual exempt amount.

Share loss relief against income is a special extra option. It is available only to an individual who subscribed for the shares, and only where the company is a qualifying unquoted trading company. The loss arises on a disposal at a loss, on liquidation, or when the shares become of negligible value. You can then offset the loss against income of the year of loss and/or the previous year. This often saves tax at 40% or 45% instead of 24%. The relief is within the cap on income tax reliefs, which is the higher of £50,000 or 25% of income.

A negligible value claim is how you realise a loss when you still own worthless shares. You tell HMRC the shares are of negligible value. You are treated as selling and immediately reacquiring them at their negligible value, which creates the loss. The claim date can be backdated in limited cases.

Key rules to remember

Investors' relief rate: Qualifying gain taxed at 14%; Lifetime limit £1,000,000 of gains. Separate from BADR limit. Rate and limit come from the ATX-UK tax tables.
Investors' relief conditions: New ordinary shares + cash subscription + unlisted trading company + held 3 years (period starting on or after 6 April 2016) + not employee or officer; All conditions must be met. Buying existing shares fails.
CGT rates for other gains: 18% (lower) and 24% (higher). Annual exempt amount £3,000; Use these for gains not covered by a relief. Basic rate band is £37,700 of taxable income for 2025/26.
Share loss relief against income: Claim against income of year of loss and/or previous year; Only for individuals who subscribed for shares in a qualifying unquoted trading company. Claim within 12 months of the 31 January following the end of the tax year of loss (31 January 2028 for a 2025/26 loss).
Cap on income tax reliefs: Relief capped at higher of £50,000 or 25% of income; Share loss relief against income falls within the cap. Check it each year.
Negligible value claim: Deemed disposal and reacquisition at negligible value on the claim date; Claim date can be earlier if the shares were already negligible, but not earlier than 2 years before the start of the tax year of claim.
Normal capital loss use: Current-year loss against current-year gains in full. Brought-forward loss only down to the annual exempt amount; Report a loss within 4 years of the end of the tax year of loss.

How to solve Investors' Relief and Share Loss Relief questions

Use this method for a question that asks whether investors' relief applies, or how a share loss can be relieved.

1Identify the shares: ordinary or not, new or bought, listed or unlisted, and the company's activity (trading or investment).
2Check how the individual got the shares. IR and share loss relief against income both need a cash subscription for new shares.
3For IR, test the 3-year holding period from the issue date to the disposal date, and check the start date is on or after 6 April 2016. Then check the individual was never an employee or officer.
4Compute the gain as normal. Apply the lifetime limit of £1,000,000 and use 14% on the qualifying gain. Deduct the annual exempt amount sensibly and tax any other gains at 18% or 24%.
5For a loss, decide whether there is a disposal, a liquidation, or a negligible value claim. State the claim date and the loss amount.
6Test the share loss relief against income conditions: individual subscribed, qualifying unquoted trading company. If yes, compare income relief with capital loss relief.
7Apply the cap on income tax reliefs, then state which year or years to claim against, and give the claim deadlines.
8Conclude with the tax saved or the planning advice, and flag any assumptions.

Quickest way: Subscribed? Held 3 years? Outsider?

When to use it: Use it at the start of any question that mentions unlisted shares, a subscription, or a worthless investment.

Ask three questions: did the person subscribe for new shares, is the company unlisted and trading, and are they an outsider (not employee or officer)?
If yes, and 3 years have passed, apply 14% on up to £1,000,000 of gains. If the person is an employee or officer with at least 5% and a 2-year qualifying period, consider BADR instead.
If there is a loss, check whether income relief is available. It is worth most when income is taxed at 40% or 45%.
Check the cap, then write down the claim deadline.

Common mistakes in Investors' Relief and Share Loss Relief

Applying IR to shares the individual bought from another shareholder.
Students focus on the unlisted trading company and forget the subscription condition.
Fix: Always write 'new shares subscribed for in cash' as a test before any calculation.
Giving IR to a director or employee.
Students mix up the BADR and IR rules, because both give the same 14% rate.
Fix: Remember that IR is for outsiders and BADR is for insiders. Check the individual's role throughout the period.
Forgetting the 3-year period starts on or after 6 April 2016.
Students count years from the issue date without checking the start date rule.
Fix: Write the issue date and the disposal date, count the years, and confirm both rules are met.
Claiming share loss relief for shares that were purchased, or in a non-qualifying company.
Students assume any share loss can go against income.
Fix: State the two tests: subscribed by the individual, and a qualifying unquoted trading company. Otherwise the loss is a capital loss only.
Ignoring the cap on income tax reliefs.
Students focus on the share rules and treat income relief as unlimited.
Fix: Compute the higher of £50,000 or 25% of income, and limit the relief to it for each year.
Using the annual exempt amount incorrectly with losses.
Students protect the annual exempt amount from current-year losses.
Fix: Set current-year losses against current-year gains in full. Only brought-forward losses stop at the annual exempt amount.

Worked examples

Example 1

Rob subscribed in cash for 40,000 ordinary shares in Zed Ltd, an unlisted trading company, on 1 July 2021 for £150,000. He has never been an employee or officer of Zed Ltd. He sells all the shares on 2 September 2025 for £600,000. He has used none of his lifetime limits and has no other gains. His taxable income is £60,000. Compute his CGT for 2025/26.

Show the solution

Check the conditions. New shares, subscribed in cash, unlisted trading company, not an employee or officer. Held from 1 July 2021 to 2 September 2025, which is more than 3 years and starts after 6 April 2016. IR applies.
Gain = £600,000 − £150,000 = £450,000.
The gain is within the £1,000,000 lifetime limit, so all of it qualifies for 14%.
Deduct the annual exempt amount of £3,000: £450,000 − £3,000 = £447,000.
CGT = £447,000 × 14% = £62,580.
For comparison, at 24% the tax would be £447,000 × 24% = £107,280, so IR saves £107,280 − £62,580 = £44,700.

Answer: CGT payable for 2025/26 is £62,580. IR saves £44,700 compared with the 24% rate.

Example 2

Mia subscribed £80,000 for new ordinary shares in Yo Ltd, a qualifying unquoted trading company, on 1 May 2021. Yo Ltd went into liquidation and the shares have no value. Mia makes a negligible value claim on 10 February 2026. Her income was £150,000 in 2025/26 and £60,000 in 2024/25. She also has a gain of £20,000 in 2025/26 on another asset. Explain the relief available.

Show the solution

The claim date, 10 February 2026, falls in 2025/26. Mia is treated as disposing of the shares at negligible value (taken as nil) on that date, so the loss is £80,000 − £0 = £80,000.
Mia subscribed for the shares and Yo Ltd is a qualifying unquoted trading company. So she can choose share loss relief against income.
Income relief can be claimed against 2025/26 income, 2024/25 income, or both.
The cap in 2025/26 is the higher of £50,000 and 25% × £150,000 = £37,500, so £50,000.
The cap in 2024/25 is the higher of £50,000 and 25% × £60,000 = £15,000, so £50,000.
So Mia can claim £50,000 against 2025/26 income and the remaining £30,000 against 2024/25 income. This uses all of the £80,000 loss. Both claims are within the cap.
The alternative is to treat the loss as a capital loss. A current-year loss is set against current-year gains in full, so the £20,000 gain is reduced to nil. The £3,000 annual exempt amount is wasted.
Without the loss, CGT on the gain would be (£20,000 − £3,000) × 24% = £17,000 × 24% = £4,080. Her income of £150,000 puts her in the higher rate band. With the loss, the taxable gain is nil and CGT is nil. So the immediate CGT saving is £4,080.
The unused loss of £80,000 − £20,000 = £60,000 is carried forward and used only against future gains above the annual exempt amount. Income relief instead saves tax at her income tax rates, which are 40% or 45%, on up to £80,000 of loss straight away, so it is usually better.
The deadline for the income relief claim is 31 January 2028, which is 12 months after the 31 January following the end of 2025/26. A capital loss must be reported by 5 April 2030.

Answer: Mia has a loss of £80,000. She can claim income relief of £50,000 in 2025/26 and £30,000 in 2024/25, subject to the cap, by 31 January 2028. This is usually better than using the loss against her £20,000 gain, which would give an immediate CGT saving of only £4,080 (tax of £4,080 without the loss, nil with it) and leave £60,000 of loss to carry forward.

Exam tips

Write the IR conditions as a short list and tick each one against the facts. Examiners award marks for each condition applied to the scenario.
Always state the claim dates and deadlines for loss relief. These are easy marks that students often leave out.
When a question asks for a comparison, show a tax figure under each option, then conclude with a recommendation.
Use the tax tables for the 14% rate, the £1,000,000 limit, the 18% and 24% rates, and the cap on reliefs. Do not rely on memory.
Mention assumptions clearly, for example that the company is a qualifying trading company, or that no lifetime limit has been used.

Practice questions from Capital gains tax: gains and losses on the disposal of shares and securities

Investors' Relief and Share Loss Relief: frequently asked questions

What are the investors' relief conditions for the 3 year holding period?

You must have subscribed for new ordinary shares in cash in an unlisted trading company. You must have held them for 3 years, with the period starting on or after 6 April 2016. You must not have been an employee or officer of the company.

What is the difference between BADR and investors' relief?

BADR is for owners and workers: at least 5% of the ordinary shares and voting rights, employee or officer status, and a 2-year qualifying period. IR is for outside investors with no minimum holding, but they must have subscribed for new shares and held for 3 years. Both give a 14% rate and each has its own £1,000,000 lifetime limit.

Can I claim share loss relief against income for unquoted shares?

Yes, if you subscribed for the shares and the company is a qualifying unquoted trading company. You can claim against income of the year of loss and/or the previous year, subject to the cap on income tax reliefs.

How do I make a negligible value claim on shares for CGT?

You notify HMRC that the shares you still own are of negligible value. You are treated as selling and reacquiring them at that value, which creates the loss. In an exam, state the claim date and the amount of the loss.