Last updated: 16 October 2026
What is Business Asset Disposal Relief?
Business Asset Disposal Relief (BADR), formerly Entrepreneurs’ Relief, reduces the capital gains tax on selling all or part of a business. Qualifying gains are taxed at 18% from 6 April 2026 (14% in 2025/26), instead of the normal 24% higher rate, up to a lifetime limit of £1 million of gains. It applies to sole traders and partners selling their business, and to shareholders selling shares in their personal trading company, if they meet the conditions for at least two years before the sale.
Who qualifies?
| Seller | Main conditions for 2 years before sale |
| Sole trader or partner | Owned the business; selling all or a distinct part |
| Company shareholder | At least 5% of shares and votes, plus 5% of profits or proceeds; employee or officer; trading company |
| EMI option holder | Shares from EMI options, held 2 years from grant |
| Business closure | Assets sold within 3 years of closure |
How much can it save?
- Lifetime limit: £1 million of qualifying gains
- Saving compared with 24%: up to £60,000 at 18%
- The rate rose from 10% to 14% in April 2025 and 18% in April 2026
Example
Helen has owned 100% of her design company since 2015 and works full-time in it. She sells her shares in June 2026 for £900,000, with a base cost of £100. The gain is about £900,000. With BADR at 18%, CGT is £162,000 (ignoring the annual exemption). Without it, at 24%, it would be £216,000, so BADR saves £54,000.
Claiming the relief
Claim in your Self Assessment return for the tax year of disposal, or by the first anniversary of 31 January after the end of that year. For a 2026/27 sale, the claim deadline is 31 January 2029.
Associated disposals
If you sell a personally owned asset used by your business, such as a building let to your company, at the same time as leaving the business, it can also qualify, though relief may be reduced if rent was charged.
Trading company test
The company must be a trading company, without substantial non-trading activities. HMRC treats 20% or more non-trading assets, income or management time as an indicator that it may not qualify. Large cash balances can be a problem.
Common mistakes
- Not meeting the 2-year conditions
- Too much cash or investment property in the company
- Missing the claim deadline
- Assuming the £1m limit resets
Records to keep
Keep share registers, employment records, sale agreements and evidence of trading status.
Frequently asked questions
Does BADR apply to rental properties?
No. Furnished holiday lets used to qualify, but that regime ended in April 2025.
Can my spouse also claim?
Yes, if they meet the conditions, with their own £1m limit.
What about Investors’ Relief?
A separate relief for external investors, at the same rate, up to £1m.
Does BADR reduce IHT?
No, it’s a CGT relief.
Planning before a sale
Check the 2-year conditions well before selling, and consider giving shares to a spouse early so both can qualify, provided they also work in the business as an officer or employee.
Related: millionaire business owners and CGT, incorporation and CGT relief and Investors’ Relief.
Talk to Accotax
Want this handled for you? Our team at Accotax can help with business sale tax relief advice. 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.
