Budget 2020: Entrepreneurs’ relief restricted to lifetime gains of £1 million

Entrepreneurs’ relief restricted to lifetime gains

Chancellor reduces the lifetime capital gains limit for Entrepreneurs’ Relief from £10 million to £1 million from 11 March 2020.


Entrepreneurs’ Relief has been limited by reducing the lifetime amount on which claims can be made to £1 million of capital gains with immediate effect.

The changes announced in the Spring Budget 2020 apply to disposals of qualifying business assets on or after 11 March 2020. This harks back to the value of the lifetime limits that applied when Entrepreneurs’ Relief was originally introduced in 2008.

The restriction comes after increasing commentary that the relief has not fully delivered on its original purpose and is not providing an incentive for investment in and the growth of entrepreneurial businesses. It also follows previous restrictions to the gains on which the relief could be claimed since it was introduced in 2008.

The immediate introduction of the new rules will have most impact on shareholders and businesspeople who are in the process of selling their business and who had expected to claim the relief on up to £10 million of gains. The reduction will however impact all shareholders and businesspeople (including partners in partnerships and trustees) who hold business assets worth more than £1 million or have made previous claims to Entrepreneurs’ Relief and had expected to qualify for the 10% Entrepreneurs’ rate on the ultimate sale of their business.

In addition to the headline restriction of Entrepreneurs’ Relief, various anti-forestalling measures have also been introduced which may impact transactions which have exchanged and not completed and which restrict the ability of individuals to bring non-cash consideration into the charge of tax. These ‘anti-avoidance’ measures could impact transactions that occurred between 6 April 2019 and 11 March 2020. 

Any gains that do not qualify for Entrepreneurs’ Relief, or that are in excess of the £1 million lifetime allowance will be subject to main capital gains tax rates of up to 20 percent, which remain unchanged and at an all-time low following the Budget.

Employers who incentivise their workforce with Enterprise Management Incentive options, or who have employee owners who would currently expect to benefit from this relief, should review how these changes might affect their incentive structures.

Alternative reliefs

It would appear, however, that Investors’ Relief, which also allows for a 10 percent rate of capital gains tax on the first £10 million of capital gains, is to continue unchanged.

Investors’ Relief is an alternative to Entrepreneurs’ Relief for investors in qualifying shares of an unlisted trading company or the holding company of a trading group. Unlike Entrepreneurs’ Relief, it is only available to investors who are not employees involved in the running of the business.


Hannah Barraclough

+44 (0)7867 191 450


Craig Rowlands

+44 (0)7824 543 429


© 2023 KPMG LLP a UK limited liability partnership and a member firm of the KPMG global organisation of independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved.

For more detail about the structure of the KPMG global organisation please visit https://kpmg.com/governance.

Connect with us

Save, Curate and Share

Save what resonates, curate a library of information, and share content with your network of contacts.