Planning to sell a business or step away from a company you have built requires careful tax and financial preparation. With changes to the Capital Gains Tax and business disposal rules, understanding your options before making an exit decision is increasingly important. This guide provides business owners, company directors and sole traders with a clear overview of Business Asset Disposal Relief conditions, its eligibility requirements and the key considerations when planning a business sale.
Business Asset Disposal Relief (BADR) is a UK tax relief that can reduce the Capital Gains Tax (CGT) payable when an individual sells all or part of a qualifying business or disposes of qualifying shares in a personal company. It was previously known as Entrepreneurs’ Relief and was renamed on 6 April 2020.
The relief is intended to support business owners who have built and developed a business and are ready to sell or close it. However, it is not automatic. Individuals must meet specific ownership, employment and trading conditions to qualify.
BADR applies to qualifying disposals by sole traders, business partners and certain company shareholders. The rate and amount of relief available depend on the disposal date and the individual’s previous claims.
The BADR Capital Gains Tax rate has increased in stages. For the 2026/27 tax year, qualifying gains are taxed at 18%.
The 18% rate applies to qualifying gains within the available lifetime limit. Any gains that do not qualify for BADR or exceed the applicable limit may be subject to the standard CGT rates.
For individuals, the standard CGT rates from 6 April 2026 are generally 18% and 24%, depending on taxable income and the amount of the basic rate band available.
The lifetime limit determines the total amount of qualifying gains on which an individual can claim BADR.
The current lifetime limit is £1 million for qualifying disposals made before 6 April 2027. However, following the 2026 Budget, the government has announced that this limit will fall to £500,000 for qualifying disposals made on or after 6 April 2027.
This means that individuals planning to sell a business or qualifying shares should consider the timing of the disposal and any BADR claims they have made previously. The lifetime limit takes account of earlier qualifying gains, so it is not a separate allowance for each sale.
Where the total qualifying gains exceed the applicable lifetime limit, the excess is taxed at the normal CGT rates rather than the BADR rate.
To qualify for BADR, an individual must meet the relevant conditions for the type of business or asset being sold. In most cases, the required conditions must be satisfied for at least two years before the disposal.
These conditions generally need to be met for at least two years up to the date of disposal. Special rules can apply to certain EMI share options and other circumstances, so individual circumstances should be reviewed before a claim is made.
The relief is relevant when an individual disposes of qualifying business interests. These may include:
Not every asset used by a business automatically qualifies. For example, a disposal of an asset owned personally but used by a company may need to meet additional conditions, including rules about its use and the individual’s interest in the business.
It is important to review the ownership of the asset, the nature of the business and the disposal arrangements before assuming that the relief will apply.
Consider a business owner who sells their qualifying trading business during the 2026/27 tax year, making a net qualifying capital gain of £600,000. They have not previously claimed BADR.
Assuming they have their full £3,000 Annual Exempt Amount available and their entire gain would otherwise be taxed at the higher 24% CGT rate, the calculation is as follows.
Step 1: Deduct the Annual Exempt Amount
£600,000 − £3,000 = £597,000 taxable gain
Step 2: Calculate CGT with BADR
The BADR rate for qualifying disposals from 6 April 2026 is 18%.
£597,000 × 18% = £107,460 CGT payable
Step 3: Calculate CGT without BADR
Assuming the entire gain would otherwise be subject to the 24% higher CGT rate:
£597,000 × 24% = £143,280 CGT payable
Step 4: Calculate the potential tax saving
£143,280 − £107,460 = £35,820
In this example, claiming BADR reduces the Capital Gains Tax bill by £35,820. The £600,000 gain is within the £1 million lifetime limit applicable to qualifying disposals made before 6 April 2027.
This is an illustrative calculation. The actual tax payable depends on the individual’s income, other capital gains, available losses, tax allowances and eligibility for the relief.
BADR must be claimed through the individual’s Self Assessment tax return or by completing the relevant section of the HMRC BADR help sheet.
Claims must be made by the applicable deadline. For most disposals, this is 31 January in the second tax year following the tax year in which the disposal took place.
You should keep supporting records, including share ownership documents, business accounts, employment details and evidence of the disposal. These records can help demonstrate that the qualifying conditions have been met.
Selling a business or company shares can have significant tax consequences. Reviewing your eligibility, disposal date and previous BADR claims in advance can help you understand the relief available and plan for the tax due.
Apex Accountants can help review your circumstances, assess potential BADR eligibility and provide guidance on capital gains tax planning.
Contact our team to discuss your business disposal and tax position.
The lifetime limit is £1 million per individual for qualifying disposals made before 6 April 2027. It will reduce to £500,000 for qualifying disposals made on or after 6 April 2027. Previous BADR claims count towards the applicable lifetime limit.
Generally, you must meet the relevant qualifying conditions for at least two years immediately before the disposal. The specific requirements depend on whether you are selling a sole trade, partnership interest or company shares.
Yes. You may qualify if the company is a trading company or the holding company of a trading group, and you meet the personal company, shareholding, voting rights and employment conditions. Generally, you must hold at least 5% of the ordinary share capital and voting rights and satisfy the relevant entitlement test for at least two years before the sale.
The Business Asset Disposal Relief rate is 18% for qualifying disposals made from 6 April 2026. The rate was 14% for disposals between 6 April 2025 and 5 April 2026.
Yes. You can claim BADR on multiple qualifying disposals, provided your total qualifying gains do not exceed the applicable lifetime limit. Previous claims must be taken into account when calculating the remaining allowance.
You can claim through your Self Assessment tax return or by completing the relevant section of HMRC’s BADR help sheet. You must submit the claim by the applicable deadline and retain evidence supporting your eligibility.
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