Some changes came in at the start of this year for Entrepreneur Relief. The changes to Retirement relief came in at the start of 2025. These reliefs are separate Capital Gains Tax reliefs that can save you lots of tax if you qualify. I’ll look at the basics of both and outline the recent changes. For this blog, I will focus on directors who own trading companies. The points to cover will be
- Entrepreneur Relief
- Sell in 2026
- Retirement Relief
- Disposal to a child
Entrepreneur Relief
Entrepreneur relief is a 10% CGT rate rather than the normal 33%. Up to 31 December 2025, it applies to gains of up to €1,000,000. That’s a tax saving of €230,000. The key rules to qualify are that you
- Own 5% or more of the shares in a trading company
- Hold those shares for more than 3 years
- Hold the shares for 3 years in the 5 years up to the disposal date
- Spend more than 50% of your time in a managerial or technical capacity working for that company
Those are the basics, and there are lots of other rules that will either work for or against you qualifying. The rule about holding the shares was that you had to own them for 3 years up to the time of disposal. That has now changed to owning them for a continuous period of 3 years at any time before the disposal.
Mad Mick
Mick Lowry owns 100% of the shares in Mad Mick Ltd, a successful plumbing business. He has owned the shares for 7 years and works full-time in the company. A city rival, Go Flow Ltd, is looking to buy Mick’s shares for €1,200,000. They make this offer in February 2025. Mick is 53 but looks about 73 with all the stress of running a business. He wants to know what he’ll be left with after tax. We’ll assume the cost of his shares is nil.
Mick will qualify for Entrepreneur’s relief as he has met all the conditions.
| Sales Proceeds | €1,200,000 |
| First €1,000,000 X 10% | (€100,000) |
| Balance of €200,000 x 33% | (€66,000) |
| Net Proceeds | €1,034,000 |
Without Entrepreneur’s relief, Mick would pay 33% of the gain, leaving him with a CGT liability of €396,000. So, you’ll see that ER will save him €230,000.
But Mick decides not to sell. He thinks the owner of Go Flow is an arrogant so and so, and he ploughs on working. Deciding not to sell has given him a new lease of life. The business had a great 2025, winning new contracts and increasing profitability.
Sell in 2026
Mick gets another opportunity to sell in 2026. JR Dallas, an out-of-town plumbing contractor, is looking to expand into the area and makes Mick an offer of €1,800,000. Mick meets all the qualifying conditions for ER, and the new 2026 changes are to his advantage. The first €1,500,000 is at 10% and the balance at 33%
| Sales Proceeds | €1,800,000 |
| First €1,500,000 x 10% | (€150,000) |
| Balance of €300,000 x 33% | (€99,000) |
| Net Proceeds | €1,551,000 |
If the new change to the lifetime limit hadn’t come in, Mick’s liability in 2026 would be €364,000, which is €115,000 higher. That’s the same as €500,000 at 23%, I hope!
Earn-out
JR, being a wily old southerner, knows that Mick is key to the business in the area and is a brilliant salesman. He’d like to keep him involved and proposes an earn-out deal. Rather than paying the full €1,800,000 up front, he proposes to pay Mick €1,200,000 now. He’ll pay the balance of €600,000 over 2 years in May 2027 and May 2028. This will be dependent on the company hitting certain financial targets. These will be achievable, and they’d expect to hit those targets.
There are a few downsides for Mick, being
- He doesn’t get all his money upfront
- His tax liability is payable on the full amount even though he doesn’t have all the money
- His future payments are somewhat out of his control
But the positives outweigh the negatives for him
- He’ll continue to work in the business on a good salary
- The company will make pension contributions for him
- The targets are very achievable
- He won’t have the pressure of being a business owner
CGT liability
Mick will pay his full CGT liability of €249,000 on the 15th of December 2026. As the sales proceeds are known at the outset, his CGT liability is on the full amount. If it later transpires that he doesn’t get the full proceeds, then he’d go back to Revenue looking for a refund.
The disposal details will go in his Form 11 Tax return for 2026. He’ll make the claim for Entrepreneur’s Relief in the Capital Gains Tax section of the return. The figures will match the tax paid. The two key points to remember are
- Don’t forget that you must do a CGT return and
- Make sure you submit the CGT return on time
The late filing surcharge can be up to 10% of the liability, so another €25k on top of what he had to pay already.
Retirement Relief
Retirement Relief is another Capital Gains Tax relief on a business disposal. You must be over 55 and meet certain conditions to qualify. While it’s called Retirement Relief, there is no need to retire. Mick couldn’t have got this relief as he was under 55 in 2026. Even if he was over 55, he wouldn’t have met some other conditions.
There are two types of Retirement Relief. The first is on a disposal of business assets to a third party. The second is on the disposal of business assets to a child.
Amount of relief
For a person over 55 who meets the conditions there is full relief when the market value doesn’t exceed €750,000. The value of the relief reduces to €500,000 for those aged 70 and over. This €500,000 cap was in place for those aged 66 and over but from 1 January 2025 that age increased to 70.
Marginal Relief
There is marginal relief where the sales proceeds exceed the limits. This relief limits the tax to one half of the excess over the €750,000 or €500,000 limit. See below.
Qualifying assets
Qualifying assets include the following
- Land, buildings and goodwill owned and used for a trade for 10 years continuously
- Plant and machinery owned and used for a trade
- Shares in a family trading company, farming company or holding company of a trading group. The shares have been held for 10 years, and the individual has been a working director of the company for 10 years. Of those 10 years, he or she must have been a full-time working director for at least 5 years.
- Qualifying agricultural land and property
- Assets owned by an individual for 10 years ending on the disposal but used by the family company. This applies where the assets transfer at the same time as the shares in the family company.
For a company to be a family company, you must own at least 25% of the shares or 10% of the shares, and you and your family must own 75%.
Victoria Sponge
Victoria bought her bakery business from the then owner in 2015 for €250,000. She owns 100% of the shares in Moment on the Lips Ltd. Victoria is 59 now and would like to sell the business. She has been working full-time in the business for over 10 years, and hers is a family company. As a result, she’ll meet the conditions for Retirement Relief.
Maggie May owns the other bakery in the town and would be very interested in Victoria’s company. Maggie runs the numbers and makes an opening offer of €740,000, but Victoria wants €800,000. If she accepted the €740,000 offer, there would be no CGT to pay as that is less than €750,000. They split the difference and agree on €770,000. Looking at the gain in 3 ways gives a good understanding of the reliefs and the interaction between ER and RR.
If there was no CGT relief, the tax would be
| Sales proceeds | €770,000 |
| Less cost | (€250,000) |
| Gain | €520,000 |
| Tax Payable x 33% | €171,600 |
With retirement relief, marginal relief comes into play to limit the tax
| Sales proceeds | €770,000 |
| RR threshold | (€750,000) |
| Excess over limit | €20,000 |
| Tax limit 50% of excess | €10,000 |
You’ll see that Victoria also qualifies for ER on this sale as she has met all the conditions.
| Sales proceeds | €770,000 |
| Less cost | (€250,000) |
| Gain | €520,000 |
| Tax Payable 10% | €52,000 |
So, the best outcome for Victoria is to claim Retirement relief, as this gives her the lowest tax liability of €10,000.
Disposal to a child
A €10 million limit applies on a disposal to a child of assets that qualify for Retirement Relief. This is for those aged over 55 and under 70. That limit reduces to €3 million for disposals of qualifying assets to a child when you are 70 or over. If the value of the qualifying assets is over €10 million, there’s an option to defer the excess CGT over €10 million.
Billy Bobb bought Monster Trucks Ltd in January 2015 for €4 million. On the 5th of November 2025, he transfers 100% of the shares in the company to his son John. The company has a value of €12 million at that time. The normal CGT computation of liability would be
| Sales proceeds | €12,000,000 |
| Less Cost | (€4,000,000) |
| Gain | €8,000,000 |
| CGT x 33% | €2,640,000 |
However, Retirement Relief reduces the CGT payable by an amount as if the sales proceeds were €10,000,000
| Sales Proceeds | €10,000,000 |
| Less Cost | (€4,000,000) |
| Gain | €6,000,000 |
| CGT x 33% (Relieved amount) | €1,980,000 |
John options
The CGT liability is €660,000, which is the same as the excess over €10,000,000 x 33%. There is an option to defer this excess CGT liability of €660,000. In his 2025 Tax return, Billy Bobb elects to defer the CGT liability of €660,000. In relation to this, there are two possible outcomes for his son John.
- John disposes of his shares in Monster Trucks Ltd within 12 years of getting them. This is before the 5th of November 2037. In this case, John would pay the CGT of €660,000 that his dad deferred. He would also pay any CGT he is liable for on the uplift in value over €12 million, or
- John doesn’t dispose of the shares within 12 years of getting them. In that case, the CGT deferred is no longer due and payable.
So, Billy Bobb doesn’t pay any CGT on the disposal of his shares to John. Retirement relief reduces his CGT liability of €1,980,000 to nil. And he elects to defer the CGT liability of €660,000 on the excess €2,000,000 over €10,000,000. John now owns 100% of the company, and the base cost of his shares is €12,000,000. If he sells those shares within 12 years, he’ll pay the CGT of €660,000 that his dad elected to defer. And he’ll also be liable to CGT, subject to any reliefs, on the increase in value over €12,000,000.
If you’re thinking of selling your business and need help, start here
