Last updated: 16 October 2026
What is Business Asset Disposal Relief?
Business Asset Disposal Relief (BADR), formerly called Entrepreneurs’ Relief, reduces the capital gains tax (CGT) rate when you sell all or part of a business or shares in your trading company. The lifetime limit is £1 million of gains. The BADR rate was 10% until April 2025, 14% for 2025/26 and is 18% from 6 April 2026. The standard higher-rate CGT rate is 24%.
HMRC’s warnings about incorrect claims
HMRC has written to taxpayers whose BADR claims look wrong. Common problems include claiming on assets that do not qualify, going over the lifetime limit, or not meeting the two-year ownership period. HMRC compares claims with Companies House, payroll and earlier tax returns.
Who qualifies
| Type of disposal | Main conditions for two years before the sale |
| Shares in a trading company | You are an officer or employee, hold at least 5% of the shares and votes, and are entitled to 5% of profits and assets on a winding up or sale |
| Sole trader or partnership business | You owned the business for two years and sell all or a distinct part of it |
| Assets after a business ceases | The business qualified and the assets are sold within three years of ceasing |
| Associated disposals | Personal assets used by your company or partnership, sold alongside a qualifying disposal |
Common errors
- Selling individual business assets, like a van or a single property, without selling the business or part of it
- Holding shares through a holding company that is not a trading group
- The company having substantial non-trading activities, such as investment property or large surplus cash (more than about 20% is a warning sign)
- Not being an officer or employee for the full two years
- Assuming the relief applies to furnished holiday lets sold after April 2025, when that regime ended
Worked example
Zara sells her shares in her design company in 2026/27 for a gain of £800,000. She has owned 50% for 12 years and is a director. Her gain qualifies for BADR at 18%, so CGT is £144,000 (ignoring the annual exempt amount). Without BADR, at 24% it would be £192,000. She saves £48,000 and uses £800,000 of her £1 million lifetime limit.
How to claim
Claim BADR on your Self Assessment return for the year of disposal, or separately. The deadline is the first anniversary of 31 January following the end of the tax year of disposal. For a sale in 2026/27, that is 31 January 2029.
Investors’ Relief
Investors’ Relief is a similar relief for outside investors in unlisted trading companies who are not employees. Its lifetime limit was cut to £1 million from 30 October 2024, and its rate follows the BADR rate.
Frequently asked questions
Do gains on goodwill on incorporation qualify?
In some cases, but incorporation to a related company can restrict relief.
Does my spouse have a separate £1 million limit?
Yes. Each person has their own limit, if they qualify in their own right.
Can I use BADR on a liquidation?
Yes, if conditions are met and anti-avoidance rules on phoenixism do not apply.
Is BADR available on EMI shares?
EMI shares have relaxed conditions: no 5% test, and the two years run from the option grant.
Related: BADR on the sale of a property, tax changes on selling a business and QCB loan notes on a sale.
Talk to Accotax
Want this handled for you? Our team at Accotax can help with Business Asset Disposal Relief claims. See our small business accountants service, or contact us for a free, no-obligation quote.
This page is general guidance based on HMRC rules for the 2026/27 tax year, checked against gov.uk on 16 October 2026. It is not personal advice, so speak to an accountant about your own situation.
