Business Asset Disposal Relief
Business Asset Disposal Relief
What is Business Asset Disposal Relief?
Business Asset Disposal Relief (BADR), formerly known as Entrepreneurs' Relief, offers a reduced Capital Gains Tax (CGT) rate on business and asset sales. Instead of the standard 24% rate since 30 October 2024 qualifying disposals were taxed at 10%. The rate rose to 14% from 6 April 2025, followed by a further increase to 18% from 6 April 2026.
Business Asset Disposal Relief eligibility
The main requirement to qualify for BADR is the sale of business assets, but there are additional conditions that also need to be met:
- You must be selling whole or part of a business that has been owned throughout the two-year period up to the date of disposal, or
- Disposing of business assets within three years after the cessation of a business that had been owned throughout the two-year period up to the date of disposal, or
- Disposing of an asset used by a partnership or company, where it is associated with a disposal of partnership assets or company shares which also qualify for BADR, or
- The sale of a qualifying shareholding - which is 5% of the ordinary share capital and voting rights - or qualifying Enterprise Management Incentive shares, in a trading company or the holding company of a trading group. The individual must also be ‘beneficially entitled to’ either:
- 5% of profits (dividends), and assets available for distribution to equity holders on winding up the company, or
- 5% of the sale proceeds had the whole of the ordinary share capital of the company been sold on the day of the disposal.
- You need to have held the shares for at least 24 months before BADR can be claimed
- A disposal of shares in a company where there is a qualifying beneficiary who also holds a qualifying interest in the company in their own right, or
- A disposal of assets used in a business carried on by a beneficiary that has ceased
If you’re not sure whether you’re eligible for BADR, you can get in touch with our tax specialists, who will be happy to help.
Lifetime allowance and BADR claim process
There is a cumulative lifetime limit for qualifying gains of £1 million for disposals on or after 11 March 2020. This was reduced from the previous limit of £10 million for Entrepreneurs' Relief purposes, but has not been changed since.
You must claim BADR on or before the first anniversary of the 31 January following the tax year in which the disposal is made.
Succession rather than a sale
Assets that qualify for BADR may also qualify for Business Relief for inheritance tax. Where a disposal to a third party is not made and the business assets are gifted in life or on death then a claim for Business Relief may be possible.
Where a disposal to a third party is not possible, you may also wish to consider a tax advantaged sale to an employee ownership trust.
Why Business Asset Disposal Relief can be complicated in practice
Claiming BADR should be done carefully. It can involve navigating shareholdings, group structures, and timing your disposals to be able to maximise the reliefs. As detailed above, your shareholdings must meet specific criteria, and group structures can complicate things further, as relief may not apply if assets are transferred within the group.
Timing is equally important – you must have owned the asset for at least two years before disposal. This ensures the relief is used for long-term investments rather than short-term gains. Missing these timing windows can result in losing the relief, leading to higher tax liabilities.
HMRC scrutiny on those claiming reliefs has increased in the past few years, so you must be certain of your position before proceeding. Make sure to plan carefully and consult a specialist – ideally, before the sale takes place.
Need help claiming or calculating BADR?
If you’re unsure whether you’re eligible for BADR, or how much you could claim, then getting specialist advice is the best course of action. You can get in touch with our team of BADR experts, who will be happy to help.
CONTACT A PRIVATE CLIENT TAX SPECIALIST