Business Asset Disposal Relief (formerly Entrepreneurs' Relief) reduces the capital gains tax on selling all or part of a business, or shares in your own trading company. From 6 April 2026 it taxes qualifying gains at 18%, on up to £1 million of gains over your lifetime.
The Business Asset Disposal Relief rate
| Tax year of disposal | BADR rate | Main CGT rate (higher-rate taxpayers) |
|---|---|---|
| 2024/25 | 10% | 20% (24% from 30 October 2024) |
| 2025/26 | 14% | 24% |
| 2026/27 | 18% | 24% |
At 18%, the relief now matches the basic-rate CGT rate, so its value is the six-point saving against the 24% higher rate: up to £60,000 on a full £1 million of gains. Two years ago the same gain would have cost £80,000 less in tax than it does today.
Who qualifies?
Selling shares in your company. Three conditions must hold throughout the two years before the sale:
- the company is a trading company, or heads a trading group;
- you work for it, or for another company in its group, as an officer or employee; and
- you must hold at least 5% of the ordinary shares and voting rights, and be entitled to at least 5% of either the distributable profits and assets on a winding up, or the proceeds of a sale of the whole company.
Shares acquired through an EMI option qualify without the 5% test, provided the option was granted at least two years before the sale.
Selling a sole trade or partnership share. You must have owned the business for two years before selling all or part of it. If the business has ceased, assets used in it can qualify if sold within three years of cessation.
Associated disposals. A personal asset used in the business, such as a property your company trades from, can qualify if it is sold alongside a qualifying disposal of shares or a business interest, subject to conditions.
Worked example
A director who is a higher-rate taxpayer sells shares in her trading company in 2026/27, making a gain of £1.2 million. She has held 30% of the shares and been a director for eight years.
| With BADR | Without BADR | |
|---|---|---|
| First £1,000,000 at 18% | £180,000 | |
| Remaining £200,000, less £3,000 annual exemption, at 24% | £47,280 | |
| Whole gain less £3,000, at 24% | £287,280 | |
| Capital gains tax | £227,280 | £287,280 |
The relief saves £60,000. The tax still owed falls due on 31 January after the tax year of the sale.
Common traps
- Not a trading company. Surplus cash or investment property can tip a company out of "trading" status. HMRC broadly looks for non-trading activities to be no more than 20% of the business.
- Falling below 5%. A fundraise or new share issue can dilute you under the threshold. An election may protect gains up to that point, but it has to be made.
- Stepping down too early. Resigning as a director or employee before the sale can break the two-year condition.
- Deal structure. Earn-outs, loan notes and share-for-share exchanges can change when, and whether, relief applies. So can the contract date: for capital gains tax a sale normally happens when contracts become unconditional, not at completion.
- Inheritance tax. Selling shares that qualify for business property relief turns them into cash that does not. The estate plan should be reviewed before the sale.
How to claim
Business Asset Disposal Relief is claimed on your Self Assessment return, or separately, by the first anniversary of 31 January following the tax year of the disposal. For a 2026/27 sale, that is 31 January 2029. It does not apply automatically, so the claim, and the evidence behind it, need care.
Plan two years ahead
Most failed claims come down to conditions that were not met for the full two years, rather than to the calculation. If a sale, management buy-out or family succession is on the horizon, check the conditions now.
See how we help business owners, and read our pre-Budget checklist if a sale is already under way. To check the conditions before you sell, book a consultation.
This article is general information about UK tax, based on the law and HMRC practice at the date shown above. It is not advice, and reading it does not make you our client. Tax rules change and their effect depends on your circumstances, so please speak to us before acting on it.