Selling a business and Business Asset Disposal Relief
Business Asset Disposal Relief (BADR) reduces the Capital Gains Tax rate on qualifying business sales to 18% from 6 April 2026, up to a £1 million lifetime limit. To qualify you generally need to meet ownership, role and trading conditions for at least two years before the sale. Check your eligibility with an accountant before you agree terms, since deal structure can affect whether you still qualify.
By the bizflip team · Published 29 August 2026 · Facts checked 29 August 2026 · Sources listed below
Business Asset Disposal Relief (BADR) lowers the rate of Capital Gains Tax you pay on qualifying gains when you sell a business, sell shares in your own trading company, or sell certain assets you lent to it. From 6 April 2026 the BADR rate is 18%, charged on gains up to a £1 million lifetime limit. You only qualify if you meet ownership, role and trading conditions for at least two years before the sale, so it is worth checking your position with an accountant well before you agree terms.
What Business Asset Disposal Relief covers
BADR is not an exemption. It is a reduced rate that applies to part of your Capital Gains Tax bill, up to a cap, once you have met the qualifying conditions. Before 6 April 2020 it was called Entrepreneurs' Relief — HMRC's claim form still carries that name in its reference, HS275.
According to gov.uk, the relief can apply in three situations: selling all or part of a business you run as a sole trader or business partner; selling shares or securities in a company where you are an officer or employee; and selling assets you personally owned but let the business use, sold alongside your interest in that business.
The current rate, and why it has changed twice
The BADR rate has increased in two steps since the October 2024 Budget. HMRC's internal manual sets out the effective dates precisely.
| Disposal date | BADR rate |
|---|---|
| On or before 5 April 2025 | 10% |
| 6 April 2025 to 5 April 2026 | 14% |
| From 6 April 2026 onwards | 18% |
This matters for timing: which rate applies is fixed by the date of disposal, not the date you started planning the sale or the date any contract was first discussed.
How BADR compares with the standard Capital Gains Tax rates
Since 30 October 2024, standard Capital Gains Tax on shares, business assets and most other chargeable assets has been 18% on gains within your basic Income Tax band and 24% on gains above it. Because BADR is now also 18%, its benefit is narrower than it used to be — but for a higher-rate taxpayer it still saves 6 percentage points on every qualifying pound.
| Business Asset Disposal Relief | Standard CGT (current rate, since 30 October 2024) | |
|---|---|---|
| Rate | 18% flat, on qualifying gains | 18% within your basic Income Tax band; 24% above it |
| Cap | £1 million, cumulative over your lifetime | No cap — applies to all chargeable gains |
In practice, if the whole of your gain would fall within your basic Income Tax band anyway, a successful BADR claim may not reduce the tax you pay on it — you would already be paying 18%. BADR still matters most for the portion of a gain that would otherwise sit in the higher or additional rate band and be taxed at 24%. Everyone also keeps their annual exempt amount, £3,000 for 2026 to 2027, before any of these rates apply. Because the arithmetic depends on your total income and gains for the year, get your accountant to run the actual numbers rather than relying on the headline rate.
The £1 million lifetime limit
You can claim a total of £1 million in Business Asset Disposal Relief over your lifetime, not per sale and not per year. Once you have used it, through one disposal or several, it is gone.
- The limit is cumulative across every qualifying disposal you have made since 11 March 2020, added together.
- Each spouse or civil partner has their own separate £1 million limit — it is not pooled.
- If you sold qualifying assets before 11 March 2020, an older and higher limit may apply to that earlier disposal; HMRC can confirm how much of your current limit remains.
- Gains above your remaining limit are taxed at the standard CGT rates shown above, not at the BADR rate.
Who qualifies: the two-year tests
The conditions differ depending on whether you are selling a business you run directly or shares in a company, but both require you to have met the relevant tests continuously for at least two years before the sale (or before the business stopped trading, if you are closing it down).
Selling all or part of a business you run as a sole trader or partner. Both of these must apply for at least two years before the sale:
- You are a sole trader or business partner in the business being sold.
- You have owned the business for at least two years.
Selling shares or securities in a company. Both of these must apply for at least two years before the sale:
- You are an officer or employee of the company (or of another company in the same trading group).
- The company's main activities are trading activities, rather than non-trading activities such as investment — it must be a trading company or the holding company of a trading group.
There is also a shareholding test, sometimes called the personal company test. For at least two years before the sale you must hold at least 5% of the ordinary share capital and 5% of the voting rights, and you must be entitled to at least 5% of either the profits available for distribution and assets on a winding up, or the proceeds if the company itself is sold. Shares acquired through an Enterprise Management Incentive (EMI) scheme have a different rule: the two-year period runs from the date the option was granted, and the 5% test does not apply.
If you close a business, or a company stops trading, rather than selling it as a going concern, you generally have three years from cessation to dispose of the remaining assets and still qualify.
Claiming BADR, and why to check before you sign anything
A BADR claim is not automatic. You make it through the Capital Gains section of your Self Assessment tax return, or by completing Section A of the Business Asset Disposal Relief helpsheet if you do not otherwise file a return. The deadline is the first anniversary of the 31 January following the end of the tax year in which you disposed of the asset — for example, a disposal in the 2025 to 2026 tax year must be claimed by 31 January 2028.
Because the qualifying tests are checked as at the date of sale and for the two years before it, decisions made during deal negotiation can affect eligibility — for example, when you formally step down as a director, how a share sale is structured, whether you accept an earn-out or a share exchange instead of cash, or whether new shares are issued that dilute you below 5% before completion. These are exactly the kind of details that are hard to unwind after signing. Ask your accountant or tax adviser to check your BADR position before you agree heads of terms, not after exchange of contracts.
This article explains the general rules as published by HMRC and gov.uk. It is not personal tax advice. Whether BADR applies to your specific sale depends on your circumstances, your company's history and how the deal is structured, so confirm eligibility with your accountant or tax adviser before you sell. Listing a business for sale on bizflip is free.
Sources
Every load-bearing claim in this guide, and where it comes from:
- BADR rate is 10% for disposals on or before 5 April 2025, 14% from 6 April 2025 to 5 April 2026, and 18% from 6 April 2026 — HMRC (gov.uk)
- Overview of what Business Asset Disposal Relief applies to and current rate — gov.uk
- Two-year qualifying conditions for selling a business (sole trader/partnership) and for selling shares, including the 5% shareholding/voting rights test, officer/employee requirement, trading company requirement, EMI share rules, and the 3-year cessation rule — gov.uk
- £1 million lifetime limit on BADR claims, and how to claim including the deadline (first anniversary of 31 January following the tax year of disposal) — gov.uk
- Standard Capital Gains Tax rates from 6 April 2026 are 18% within the basic Income Tax band and 24% above it, and the annual exempt amount is £3,000 for 2026 to 2027 — gov.uk
- Business Asset Disposal Relief was formerly named Entrepreneurs' Relief before 6 April 2020, and the £1 million lifetime limit applies to disposals made on or after 11 March 2020 — gov.uk / HMRC helpsheet HS275
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