Business Asset Disposal Relief gets the attention: every founder selling up knows the name, and its climb to 18% was widely covered. Its mirror image barely gets written about at all. Investors' Relief charges the same 18% on up to £1 million of qualifying gains, and it was built for precisely the person BADR excludes: the investor who put cash into an unlisted trading company and stayed off the payroll.
For a UK angel that ought to make it a familiar tool. In practice it's obscure, partly because EIS usually does the same job better, and partly because almost nobody explains where it actually fits. Here are the conditions, the BADR contrast, and the situations where the relief earns its keep.
BADR pays the operator inside the company. Investors' Relief pays the investor who stayed outside.
The Carry's reading of HMRC's HS308 guidance is simple: Investors' Relief is now the passive UK angel's answer to BADR, at the same 18% and the same lifetime million, and it goes largely unclaimed.
What is Investors' Relief?
Investors' Relief is a reduced rate of capital gains tax on disposals of qualifying shares in unlisted trading companies. For disposals on or after 6 April 2026 the rate is 18%, applied to a lifetime total of £1 million of qualifying gains, as set out in HMRC's HS308 helpsheet.
The rate has moved in step with BADR's. Disposals before 6 April 2025 paid 10%; the 2025/26 tax year charged 14%; from 6 April 2026 it's 18%. The lifetime limit fell harder. It stood at £10 million for disposals made on or before 29 October 2024, then dropped to £1 million, a cut announced at the October 2024 Budget.
What the relief buys you is the gap to the standard rate. Without it, a higher-rate taxpayer pays 24% on gains above the basic band in 2026/27, so the relief saves six percentage points. Gains within the basic band are charged 18% anyway, which is why its value sits almost entirely with higher and additional rate taxpayers.
Who qualifies for Investors' Relief?
Every condition has to hold, and together they read like a description of the classic angel subscription. The shares must be new ordinary shares that you subscribed for in cash, fully paid up when issued, issued on or after 17 March 2016, in an unlisted trading company (or the holding company of a trading group), and held for at least three years before disposal. The conditions are listed in full in HS308.
Two features do the sorting. First, there's no minimum shareholding. A half-percent stake qualifies exactly as a 20% one does, which is the headline contrast with BADR's 5% floor. Second, neither you nor anyone connected with you can be an officer or employee of the company. This is a relief for outside money. The main exception cuts the way an angel would want: becoming an unpaid, unremunerated director after investing can preserve the relief, and limited further exceptions exist, set out in HMRC's Capital Gains Manual.
One trap to know about. Shares can lose their qualifying status if you receive value from the company during a restricted period around the investment. The arrangements caught are described in the manual at CG63640; if the company has paid you anything beyond a normal commercial return, that page is where to start checking.
How does Investors' Relief differ from BADR?
They're mirror images. Both charge 18% in 2026/27 with a £1 million lifetime limit, but BADR requires broadly a 5% holding and an officer or employee role, while Investors' Relief has no minimum stake and insists you hold no such role. One relief is for running the business; the other is for financing it.
The remaining differences follow from that split. BADR's conditions must be met through a two-year qualifying period; Investors' Relief needs a three-year hold. BADR covers a sale of the business you own and run, including shares you've held from the start; Investors' Relief only ever applies to new shares subscribed in cash on or after 17 March 2016. The table above puts the two side by side, and the operator's half of the story is covered in the BADR rate rise.
For an operator turned angel, the practical upshot is that the two reliefs cover different chapters of the same career. The company you built and sold sits in BADR territory. The passive cheques you write afterwards, where you take no role, sit in Investors' Relief territory instead.
When does Investors' Relief actually matter for an angel?
Mostly as a fallback, because on the same shares EIS usually does more. An EIS investment on which income tax relief was claimed, held for three years, is exempt from capital gains tax entirely, and 0% beats 18% every time. The venture scheme exemptions are explained in a separate piece.
So Investors' Relief matters where EIS fails or was never in play. Three situations recur. The company was too big or too old for EIS when you subscribed: EIS carries company size and age limits, Investors' Relief has no equivalent cap, so a cash subscription for new shares in a large unlisted company can still qualify. You were connected for EIS purposes but still no officer or employee: the EIS door closes while this one stays open (the connection tests are covered in the director rules piece). Or the EIS paperwork never happened: the company didn't apply, or the claim was missed, and the exemption went with it.
None of that is a reason to structure a deal one way rather than another; it's simply how the rules interact. But it does mean a gain you'd mentally filed as fully taxable might carry an 18% rate rather than 24%, provided the conditions were met from the start. The three-year clock and the cash-subscription test can't be fixed after the event.
How do you claim Investors' Relief?
Through Self Assessment. The claim goes in your tax return for the year of the disposal, and HMRC's HS308 helpsheet sets out the process and the time limit, with worked examples. The disposal date sets the rate, 10%, 14% or 18% depending on which side of the April thresholds it falls, which is one reason the timing of a sale is a question for an adviser rather than an afterthought.
A closing note on what this article is and isn't. It's general information about how a relief works, not tax advice, and not a suggestion that any disposal, shareholding or directorship be arranged one way or another. Whether Investors' Relief applies to your shares turns on facts specific to you: what you subscribed, when, what roles you or people connected with you held, and what value came back out. Confirm the current rules in HS308 at GOV.UK and take advice from a qualified tax adviser before relying on the relief in any decision.
Frequently asked questions
What is Investors' Relief?
Investors' Relief is a reduced rate of UK capital gains tax on disposals of qualifying shares in unlisted trading companies. For disposals on or after 6 April 2026 the rate is 18%, on up to £1 million of qualifying gains over your lifetime. Broadly, the shares must be new ordinary shares subscribed for in cash on or after 17 March 2016 and held for at least three years, and neither you nor anyone connected with you can be an officer or employee of the company. The full conditions are in HMRC helpsheet HS308 at GOV.UK.
What is the Investors' Relief lifetime limit?
£1 million of qualifying gains per person. The limit was £10 million for disposals made on or before 29 October 2024; the cut to £1 million was announced at the October 2024 Budget. It is a running lifetime total, so earlier claims use it up, and qualifying gains above the limit are taxed at the standard capital gains tax rate.
Can a director claim Investors' Relief?
Usually not. The relief requires that neither the investor nor anyone connected with them is an officer or employee of the company, and a director is an officer. The main exception is becoming an unpaid, unremunerated director after making the investment, which can preserve the relief. Limited further exceptions exist and HMRC's Capital Gains Manual sets them out. A paid directorship held at the time of subscription points away from qualifying.
Is Investors' Relief better than EIS?
On the same shares, usually not. An EIS investment with income tax relief claimed and a three-year hold is exempt from capital gains tax entirely, which beats Investors' Relief's 18%. Investors' Relief matters where EIS was unavailable or unclaimed: the company was too large for EIS, the investor was connected for EIS purposes without being an officer or employee, or the paperwork was never completed. Which treatment applies depends on your circumstances; this is general information, not advice.
Is this article tax advice?
No. This is general information about how Investors' Relief works, not tax or financial advice, and not a recommendation about how to hold, dispose of or structure anything. The relief depends on your personal circumstances and the rules change with Budgets, as the rate rises and the lifetime-limit cut show. Confirm the current position in HMRC helpsheet HS308 at GOV.UK and take advice from a qualified tax adviser before acting.