Last updated: 14 October 2026
Can you claim Business Asset Disposal Relief on ordinary and preference shares?
Yes, if the company is your “personal company” and you meet the other conditions. Business Asset Disposal Relief (BADR, formerly Entrepreneurs’ Relief) applies to a disposal of shares in a trading company where, for at least 2 years before the sale, you were an officer or employee and held at least 5% of the ordinary share capital and voting rights, plus 5% of the profits or assets. Once you meet those tests, gains on all your shares in the company, including preference shares, can qualify. The rate is 18% from 6 April 2026, on up to £1 million of lifetime gains.
The personal company tests
| Test | Requirement |
| Ordinary share capital | At least 5% |
| Voting rights | At least 5% |
| Economic interest | 5% of distributable profits and assets on a winding up, or 5% of sale proceeds |
| Role | Officer or employee of the company or group |
| Period | All conditions met for 2 years up to the sale |
| Company | Trading company or holding company of a trading group |
Preference shares and “ordinary share capital”
For tax, ordinary share capital means all issued share capital except shares with a fixed-rate dividend and no other right to profits. So fixed-rate preference shares usually don’t count towards the 5% test, but participating preference shares may. If you meet the tests using your ordinary shares, the gain on your preference shares can also qualify for BADR.
Example
Tom has owned 20% of the ordinary shares and £50,000 of fixed-rate preference shares in his engineering company for 10 years, and he’s a director. In 2026/27 he sells all his shares. His gain on the ordinary shares is £400,000, and on the preference shares £10,000. As the company is his personal company, the whole £410,000 qualifies for BADR at 18%, giving tax of about £73,260 after the £3,000 annual exempt amount.
BADR rates over time
- Up to 5 April 2025: 10%
- 6 April 2025 to 5 April 2026: 14%
- From 6 April 2026: 18%
The lifetime limit has been £1 million since March 2020.
Watch out for
- Dilution: if new shares take you below 5%, you can elect to crystallise a gain at that point
- Non-trading activities: large cash balances or investments can make the company non-trading (more than 20% is the usual warning sign)
- EMI shares: options can qualify without the 5% test, if held for 2 years
Claiming
BADR must be claimed by the first anniversary of 31 January after the tax year of sale. For a sale in 2026/27, that’s 31 January 2029.
Records to keep
Keep share certificates, the register of members, board minutes, your employment contract or director appointment, and evidence of the company’s trading status for the 2 years before the sale. If the company has cash or investments, an analysis showing they are used in the trade helps support the claim.
Frequently asked questions
Do I need to be a director?
No, being an employee is enough.
Can my spouse also claim?
Yes, if they meet the tests separately.
Does it apply to loan notes?
Sometimes, with a special election.
Is BADR available on a company liquidation?
Yes, if conditions are met and the trade has ceased within 3 years.
Related: Business Asset Disposal Relief update, reliefs to reduce gains on shares and BADR on a property sale.
Talk to Accotax
Want this handled for you? Our team at Accotax can help with selling your company shares. 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 14 October 2026. It is not personal advice, so speak to an accountant about your own situation.
