Business Asset Disposal Relief (BADR), formerly Entrepreneurs’ Relief, can reduce Capital Gains Tax when you sell or dispose of a qualifying business, shares, or business assets. From 6 April 2026, qualifying gains are taxed at 18%, subject to eligibility rules and a £1 million lifetime limit.
What Is Business Asset Disposal Relief?
Business Asset Disposal Relief is a UK Capital Gains Tax relief available on certain qualifying business disposals. Instead of simply exempting the gain from CGT, BADR applies a specific reduced CGT rate to qualifying gains within the taxpayer’s remaining lifetime allowance.
As of the 2026/27 tax year, qualifying gains from disposals made on or after 6 April 2026 are taxed at 18%. By comparison, gains that do not qualify for BADR may be subject to the normal CGT rates. For example, a higher or additional rate taxpayer generally pays 24% on other gains.
BADR has existed in its current lineage since 2008. It was previously called Entrepreneurs’ Relief and was renamed Business Asset Disposal Relief from 6 April 2020.
The following table shows how the BADR rate has recently changed:
| Date of qualifying disposal | BADR rate |
| On or before 5 April 2025 | 10% |
| 6 April 2025 to 5 April 2026 | 14% |
| On or after 6 April 2026 | 18% |
These dates matter because the tax saving available from BADR now depends significantly on when the disposal occurred.
Who Qualifies for Business Asset Disposal Relief?
BADR is not available simply because an asset has been used for business purposes. The eligibility conditions depend on what you are disposing of and your relationship with the business.
The relief can potentially apply when:
- a sole trader sells all or part of their business;
- a partner disposes of all or part of their partnership interest;
- an individual sells qualifying shares or securities in a company;
- qualifying business assets are sold following the cessation of a business;
- an individual makes certain disposals of assets associated with withdrawing from a business;
- qualifying Enterprise Management Incentive (EMI) shares are sold; or
- trustees make certain qualifying disposals.
The conditions can differ considerably between these situations. For that reason, someone selling shares should not assume that the rules applying to a sole trader selling a business are the same.
Selling all or part of a business
For a sole trader or business partner selling all or part of a business, HMRC states that you generally need to have been a sole trader or business partner and to have owned the business for at least two years up to the disposal date.
The disposal must represent a qualifying business disposal rather than simply the sale of an isolated asset that does not meet the relevant BADR requirements.
For example, imagine a sole trader has operated a manufacturing business for eight years and sells the business as a going concern. The ownership period would exceed the two-year requirement, although the other BADR conditions would still need to be checked before calculating the relief.
Business Asset Disposal Relief When Closing a Business
BADR can also be relevant when a business stops trading rather than being sold as an ongoing operation.
HMRC states that where a qualifying business has ceased, the business assets generally need to be disposed of within three years of the business closing for BADR to remain available. The relevant qualifying conditions must also have been satisfied.
This creates an important distinction between the date the business stops trading and the date its assets are eventually sold.
For instance, a business owner might close a business but retain premises temporarily while looking for a buyer. A later sale does not automatically prevent BADR, but the three-year deadline and the other qualifying conditions need to be considered.
Business Asset Disposal Relief on Shares
Company shareholders face additional requirements.
For at least two years up to the disposal of the shares, the individual generally needs to be an employee or office holder of the company, or of another company within the same group. The company must also be a trading company, or the holding company of a trading group.
For shares that are not qualifying EMI shares, the company normally must also be the shareholder’s personal company throughout the relevant two-year period.
Broadly, this means the shareholder must have at least:
- 5% of the ordinary share capital; and
- 5% of the voting rights.
There is an additional economic-interest test. The shareholder must generally be entitled to at least 5% of either the profits available for distribution and assets available to equity holders on a winding up, or 5% of the proceeds that would be available if the company were sold.
These rules make checking BADR before a company sale particularly important. A shareholder can own a meaningful stake in a company without necessarily satisfying every part of the statutory personal-company requirements.
Example of the 5% requirement
Suppose a founder owns 20% of the ordinary shares in a trading company, holds 20% of its voting rights, satisfies the relevant economic entitlement test, and has served as a director for several years.
Those facts may satisfy several of the principal BADR conditions. However, the company’s trading status and the precise rights attached to the shares still need to be considered.
By contrast, someone owning 4% of an otherwise qualifying company would not normally satisfy the standard 5% personal-company test for non-EMI shares.
What Happens if Your Shareholding Is Diluted Below 5%?
A shareholder can satisfy the BADR requirements for years and then fall below the 5% threshold because the company issues additional shares.
Specific rules can potentially preserve BADR in this situation.
HMRC explains that an individual may elect to be treated as having disposed of and immediately reacquired their shares just before the dilution occurs. This can crystallise a gain at the point when the BADR conditions are still satisfied. A further election can potentially postpone payment of tax on that gain until the shares are eventually sold.
This is a technical area where the timing and form of an election can have significant tax consequences, so professional advice can be appropriate before a fundraising round or other share issue changes an owner’s percentage interest.
How Do EMI Shares Qualify for BADR?
Shares acquired through a qualifying Enterprise Management Incentive option are subject to different BADR rules.
According to HMRC’s current eligibility guidance, you must have:
- acquired the shares after 5 April 2013; and
- received the option to purchase them at least two years before the shares are sold.
The normal 5% shareholding requirements applying to non-EMI shares therefore should not simply be assumed to apply in the same way to qualifying EMI shares.
For employees and founders with EMI options, checking the option grant date can consequently be just as important as checking the eventual exercise and sale dates.
Can BADR Apply if a Company Stops Trading?
A company losing its trading status does not necessarily mean BADR disappears immediately.
HMRC states that a shareholder can potentially still qualify if the company stops being a trading company and the qualifying shares are sold within three years.
The historical qualifying conditions still matter, so the facts and dates surrounding cessation should be documented carefully.
This rule can be particularly relevant during company wind-downs. Waiting too long to complete the relevant disposal can change the tax position.
BADR on Assets Personally Owned but Used by the Business
Some business owners personally own an asset, such as business premises, while allowing their partnership or personal company to use it.
BADR can potentially apply to an associated disposal of such an asset when it accompanies a qualifying withdrawal from the business.
HMRC’s general guidance states that, among other requirements, the individual must have disposed of at least 5% of their partnership interest or shares in their personal company. The personally owned asset must also generally have been used by the partnership or personal company for at least one year up to the relevant disposal or cessation date.
Associated disposals contain additional technical rules, so selling a personally owned property that has been occupied by your company should not automatically be treated as a BADR disposal.
What Is the Business Asset Disposal Relief Lifetime Limit?
The current BADR lifetime limit is £1 million of qualifying gains per individual. It is a lifetime allowance, not an allowance that resets each tax year or each time you sell a business.
The historical lifetime limits have changed substantially:
| Qualifying disposal date | Lifetime limit applicable at that time |
| 6 April 2008 to 5 April 2010 | £1 million |
| 6 April 2010 to 22 June 2010 | £2 million |
| 23 June 2010 to 5 April 2011 | £5 million |
| 6 April 2011 to 10 March 2020 | £10 million |
| On or after 11 March 2020 | £1 million |
Previous claims matter when determining how much of the current lifetime limit remains available. HMRC confirms that the £1 million limit introduced from 11 March 2020 takes previous qualifying claims into account.
For example, if an individual has already used £650,000 of their relevant lifetime BADR limit, only £350,000 would remain available under a £1 million lifetime cap. A later qualifying gain does not create a fresh £1 million allowance.
Spouses and civil partners are treated separately. HMRC’s guidance confirms that each can have their own lifetime limit, provided each individual independently meets the conditions for relief.
How Much Tax Can Business Asset Disposal Relief Save?
For disposals from 6 April 2026, BADR taxes qualifying gains at 18%. The normal CGT rate on other gains can be 24% for higher and additional rate taxpayers.
That can create a maximum rate difference of six percentage points where the comparison is between an 18% BADR rate and a 24% normal rate.
Consider a simplified hypothetical example involving a £500,000 taxable gain that fully qualifies for BADR and is within the individual’s remaining lifetime allowance.
At 18%, the tax attributable to that £500,000 would be:
£500,000 × 18% = £90,000
At a 24% rate, the equivalent calculation would be:
£500,000 × 24% = £120,000
The difference is £30,000.
This example is deliberately simplified. Actual CGT calculations can involve acquisition costs, enhancement expenditure, transaction costs, allowable losses, the Annual Exempt Amount, other gains and the taxpayer’s circumstances.
It also illustrates an important change in BADR’s value. Before 6 April 2025 the relief rate was 10%, whereas it is 18% for qualifying disposals from 6 April 2026. BADR can therefore still reduce tax, but the rate advantage over ordinary CGT is smaller than it once was.
How Is Business Asset Disposal Relief Calculated?
The starting point is the gain arising from the qualifying disposal rather than simply the amount of cash received.
HMRC’s process broadly involves calculating gains on the qualifying assets, deducting qualifying losses, applying the available tax-free allowance where appropriate, and then applying the BADR rate to the amount eligible for relief.
If gains exceed the individual’s remaining lifetime BADR limit, only the portion within the available limit benefits from BADR. The excess is subject to the applicable normal CGT treatment.
HMRC provides an example in its 2025/26 helpsheet of an individual who previously used £600,000 of their lifetime limit. When that person later makes a £750,000 qualifying gain, only £400,000 remains within the £1 million lifetime allowance, leaving the balance outside BADR.
That is why previous Entrepreneurs’ Relief and BADR claims should be checked before estimating the tax due on a new business sale.
How to Claim Business Asset Disposal Relief
BADR is a relief that needs to be claimed. HMRC states that individuals can generally claim it through their Self Assessment tax return or by completing the relevant section of the Business Asset Disposal Relief claim documentation.
There is no fixed limit on the number of claims you can make. Instead, the restriction is the cumulative lifetime amount of qualifying gains that can benefit from BADR.
Claim deadlines depend on the tax year of the disposal. For example, HMRC currently specifies the following deadlines:
| Tax year of disposal | BADR claim deadline |
| 2023/24 | 31 January 2026 |
| 2024/25 | 31 January 2027 |
| 2025/26 | 31 January 2028 |
Because a business sale can involve multiple assets and reliefs, records should support the acquisition cost, sale proceeds, allowable expenditure, ownership period, trading status, shareholding rights and any previous BADR or Entrepreneurs’ Relief claims relevant to the calculation.
Common Reasons a BADR Claim Can Become Complicated
Some cases are straightforward, but seemingly small differences in the facts can affect eligibility.
For company shareholders, problems can arise where the shareholder fails one part of the 5% test, has not been an employee or office holder for the required period, or the company’s activities raise questions about whether it qualifies as a trading company.
Timing also matters when a business or company stops trading. The three-year post-cessation window can preserve relief in some circumstances, but it should not be confused with the normal two-year qualifying-period requirements.
Previous BADR or Entrepreneurs’ Relief claims can also reduce or eliminate the remaining lifetime allowance. Someone who previously benefited from the relief when the lifetime ceiling was higher should not assume they automatically have another £1 million available today.
Finally, special rules can affect transactions designed around changes in BADR rates. Finance Act 2025 introduced anti-forestalling provisions relating to the phased increases in the BADR rate. HMRC’s guidance specifically addresses arrangements involving unconditional contracts and other transactions intended to secure an earlier rate.
For a substantial business or company sale, checking BADR only after contracts have been signed may therefore be too late to resolve some eligibility or structuring issues.
BADR Compared With Other Capital Gains Tax Reliefs
Business Asset Disposal Relief is only one of several CGT reliefs that may be relevant to business owners.
Business Asset Rollover Relief, for example, can defer CGT where qualifying business assets are disposed of and replacement business assets are acquired within the required period. Incorporation Relief can defer gains when a business and its assets, other than cash, are transferred to a company in exchange for shares. Gift Hold-Over Relief can defer certain gains when qualifying business assets are given away.
These reliefs serve different purposes. BADR primarily provides a preferential CGT rate on a qualifying disposal, whereas some other reliefs defer when a gain becomes taxable.
The appropriate treatment therefore depends on what is happening economically. A business owner selling up for cash faces a different tax question from someone incorporating a sole trade, replacing business premises, or transferring qualifying assets as a gift.
Planning a Business Disposal With BADR in Mind
Business owners considering a future sale should review BADR eligibility before the transaction reaches its final stages.
For a company shareholder, useful checks include the size and nature of the shareholding, voting rights, economic rights, employment or office-holder status, the company’s trading activities and how long all relevant conditions have been satisfied.
Sole traders and partners should similarly establish when the business was acquired, exactly what is being disposed of and whether the transaction amounts to a qualifying disposal of the whole or part of the business.
Previous BADR and Entrepreneurs’ Relief claims should also be identified. Since the current £1 million lifetime limit is cumulative, historical transactions can materially alter the amount of relief remaining.
Tax rules can also change between planning a transaction and completing it. The recent movement from a 10% BADR rate to 14% and then 18% demonstrates why calculations should use the rules applying to the actual disposal rather than an old assumption about Entrepreneurs’ Relief.
For complex transactions, HMRC itself notes that its BADR helpsheet covers straightforward situations rather than every possible case and points taxpayers toward professional advice and the detailed Capital Gains Tax Manual where necessary.
Conclusion
Business Asset Disposal Relief can reduce Capital Gains Tax when a sole trader, partner, shareholder or other qualifying person disposes of eligible business interests or assets. For disposals from 6 April 2026, qualifying gains are taxed at 18%, subject to the relevant conditions and the individual’s available £1 million lifetime limit.
Eligibility should be checked well before a significant transaction. The two-year qualifying period, 5% tests for many company shareholders, trading status, cessation rules, previous BADR claims and precise disposal date can all affect the result. For substantial or complicated disposals, reviewing the position with a qualified UK tax adviser before finalising the transaction can help establish whether the relief is actually available and how much of the lifetime allowance remains.
FAQ’s
The BADR rate is 18% for qualifying gains on disposals made on or after 6 April 2026. It was 14% for disposals from 6 April 2025 to 5 April 2026 and 10% for qualifying disposals on or before 5 April 2025.
Yes, BADR is the successor name for Entrepreneurs’ Relief. The relief was renamed Business Asset Disposal Relief with effect from 6 April 2020.
The current lifetime limit is £1 million of qualifying gains per individual for disposals on or after 11 March 2020. Previous qualifying claims can use part or all of that lifetime allowance.
For ordinary non-EMI shares, relevant BADR conditions generally need to have been satisfied throughout the two years leading up to the disposal. These include employee or office-holder, trading-company and personal-company requirements. EMI shares have specific rules.
Yes. HMRC states that there is no limit on the number of BADR claims, but the amount of qualifying gains benefiting from the relief is restricted by the lifetime limit.
Potentially. An asset you personally own but allow your partnership or personal company to use can qualify in certain associated-disposal circumstances. Specific conditions apply, so business use of a property by itself does not guarantee BADR.
