If you sell your business or your shares in it, Business Asset Disposal Relief can cut a large chunk off your Capital Gains Tax bill, provided you qualify. The relief has become less generous over the past few years, and the rate changed again this year. This guide explains the current rate, who qualifies, and how to claim.
Quick Answer
Business Asset Disposal Relief, formerly Entrepreneurs’ Relief, charges qualifying gains at 18% for disposals made on or after 6 April 2026, up to a lifetime limit of £1 million. Without the relief, the standard Capital Gains Tax rate is 24%, so BADR still saves 6 percentage points on every pound of qualifying gain, up to a maximum saving of £60,000 on a full £1 million gain.
What Is Business Asset Disposal Relief?
Business Asset Disposal Relief reduces the rate of Capital Gains Tax on gains from selling certain business assets or company shares. It is available to individuals, not companies, and in limited circumstances to trustees of some settlements. It was called Entrepreneurs’ Relief until it was renamed on 6 April 2020, though the underlying relief and its core purpose have not changed.
Current Rate and Lifetime Limit
| Tax Year | BADR Rate |
|---|---|
| Up to 5 April 2025 | 10% |
| 2025/26 | 14% |
| 2026/27 onwards | 18% |
The rate applies to qualifying gains up to a cumulative lifetime limit of £1 million. This limit is cumulative across every qualifying disposal you ever make, not an annual allowance and not a per-transaction one. If you have claimed BADR before, any earlier gains count against your £1 million lifetime total.
Gains above the £1 million limit are taxed at the standard Capital Gains Tax rate, which is 18% or 24% for individuals depending on how much of the gain falls within the unused basic rate band.
Who Qualifies for Business Asset Disposal Relief?
The qualifying conditions differ slightly depending on what you are disposing of.
Selling Shares in Your Own Company
To claim BADR on a share sale, three tests must be met throughout the two years ending on the date of disposal:
- You hold at least 5% of the ordinary share capital and voting rights, with a corresponding 5% entitlement to profits and assets, or to sale proceeds
- You are an officer or employee of the company, or of a company in the same group
- The company is a trading company, or the holding company of a trading group, rather than an investment company
Selling the Whole or Part of a Business
If you are a sole trader or in a partnership, you can claim BADR on the disposal of the whole or part of your business, provided you have owned it for at least two years before the sale.
Closing a Company Through Members’ Voluntary Liquidation
BADR is one of the main reasons owners of a company with significant retained profit choose a Members’ Voluntary Liquidation over a simple strike off when closing the business, since it can tax the final distribution as a capital gain rather than as dividend income. Our guide to how to close a limited company in the UK covers this comparison in full, including a worked example of the tax difference.
Timing matters here. BADR applies at the rate in force when the money is actually paid out, not when the closure process starts. A Members’ Voluntary Liquidation begun in one tax year but paid out in the next is taxed at the rate applying on the payment date.
Worked Example
Imagine a director sells their shares for a gain of £500,000, and they meet all the qualifying conditions. Without BADR, at the standard 24% rate, the Capital Gains Tax bill would be £120,000. With BADR at 18% for 2026/27, the bill falls to £90,000, a saving of £30,000. On a full £1 million qualifying gain, the maximum possible saving is £60,000.
The Annual Exempt Amount
Before applying BADR, you can deduct your annual Capital Gains Tax exempt amount from the total gain. For 2026/27, this is £3,000. On a large disposal, this makes only a small difference, but it is worth applying before calculating the BADR liability on the remainder.
How to Calculate Your BADR Liability
- Calculate your total Capital Gains Tax liability relating to the disposal
- Deduct your annual exempt amount, £3,000 for 2026/27, if you have not used it elsewhere
- Apply the 18% BADR rate to the remaining gain, up to your unused lifetime limit
- Apply the standard CGT rate to any gain above the £1 million lifetime limit
How to Claim Business Asset Disposal Relief
You claim BADR through your Self Assessment tax return for the tax year of the disposal. The deadline for claiming is the first anniversary of the 31 January following the tax year of disposal, giving you a reasonably long window, though it is best to claim on the return itself rather than waiting.
Common Reasons BADR Claims Fail
- Not meeting the 5% shareholding and voting rights test throughout the full two-year period
- The company being classed as an investment company rather than a genuine trading company
- Not being an officer or employee of the company at the point of disposal
- Assuming an older, more generous rate applies when the disposal actually completes in a later tax year
- Overlooking that the lifetime limit is cumulative across all previous qualifying disposals
Investors’ Relief: A Related but Separate Relief
Investors’ Relief is a separate relief for external investors in unlisted trading companies who are not officers or employees. Its lifetime limit was reduced from £10 million to £1 million for disposals on or after 30 October 2024, bringing it into line with BADR, and its rate has followed the same path, rising to 18% from 6 April 2026 alongside BADR.
Frequently Asked Questions
What is the current Business Asset Disposal Relief rate?
18% for qualifying disposals made on or after 6 April 2026, up from 14% in 2025/26 and 10% before that.
What is the lifetime limit for Business Asset Disposal Relief?
£1 million in cumulative qualifying gains across every disposal you have ever made using the relief, not an annual allowance.
Is Entrepreneurs’ Relief the same as Business Asset Disposal Relief?
Yes. Entrepreneurs’ Relief was renamed Business Asset Disposal Relief on 6 April 2020. The core relief and qualifying conditions are the same; only the name and the rate have changed.
Do I need to hold shares for a minimum period to qualify?
Yes. You generally need to meet the qualifying conditions, including the 5% shareholding test, throughout the two years ending on the date of disposal.
How do I claim Business Asset Disposal Relief?
Through your Self Assessment tax return for the year of disposal, by the first anniversary of the 31 January following that tax year.
Key Takeaways
- BADR charges qualifying gains at 18% for 2026/27, up from 14% the previous year
- The lifetime limit is £1 million, cumulative across all your qualifying disposals
- You must meet the 5% shareholding, officer or employee, and trading company tests for two years
- The rate that applies is the one in force when proceeds are actually paid, not when a sale or liquidation process begins
- Claim through Self Assessment by the first anniversary of the following 31 January
About the Author
This guide was prepared by the Business Mine editorial team, who research and write practical UK business, tax and finance guides. Information is checked against current HMRC guidance at the time of publication. This article is provided for general information only and does not constitute tax advice; for advice specific to your circumstances, consult a qualified accountant.
