What is Business Asset Disposal Relief (BADR) and what rate does it apply?

Business Asset Disposal Relief (BADR), formerly called Entrepreneurs Relief, reduces the Capital Gains Tax rate on qualifying business asset disposals. For disposals from 6 April 2025 to 5 April 2026, the BADR rate is 14% (raised from the previous 10% in the 2024 Autumn Budget). From 6 April 2026 onwards, the BADR rate increases to 18%. This compares favourably to the standard CGT rates on other assets (18% basic rate, 24% higher rate from October 2024). The lifetime allowance of qualifying gains that can benefit from BADR is £1 million — gains above this threshold are taxed at the standard CGT rates.

What qualifies for Business Asset Disposal Relief?

To qualify for BADR, you must dispose of qualifying business assets — most commonly: (1) all or part of a trading business that you have owned for at least 2 years prior to disposal (you must be a sole trader or partner), (2) shares in your own personal trading company where you own at least 5% of shares and voting rights, are an officer or employee, and have held the shares for at least 2 years, or (3) assets used in a trading business that has now closed. Investment businesses do not qualify — only trading companies. Property holding companies generally do not qualify unless property is used in the trade. You must meet all conditions for the entire 2-year qualifying period.

What is the BADR lifetime limit?

The BADR lifetime limit is £1 million of qualifying gains. This is a cumulative limit across all disposals in your lifetime — not per disposal or per business. If you have already claimed BADR on previous disposals, the remaining lifetime allowance is reduced accordingly. For example, if you sold a business in 2020 and claimed BADR on £400,000 of gains, you have £600,000 of lifetime BADR allowance remaining. Gains above the lifetime limit are taxed at standard CGT rates. The limit was reduced from £10 million to £1 million in March 2020, but gains already realised before the reduction were protected.

How do I claim Business Asset Disposal Relief?

You claim BADR by completing a Self Assessment tax return for the tax year in which the disposal occurred. On your Self Assessment return, you report the capital gain and indicate that you are claiming BADR. There is no separate application form — the claim is made within the return. You must also file your claim by the first anniversary of the 31 January filing deadline for the tax year of disposal. For example, for a disposal in 2025-26 (year ending 5 April 2026), you must claim BADR by 31 January 2028. HMRC does not accept late BADR claims, so ensure your return is filed on time.

Business Asset Disposal Relief (BADR) UK 2026 — 10% CGT on Business Sales

Business Asset Disposal Relief (BADR) — formerly known as Entrepreneurs Relief — is a UK Capital Gains Tax relief that reduces the CGT rate on qualifying business asset disposals. Instead of paying the standard CGT rates (18%/24%), qualifying gains are taxed at 14% in 2025-26 (and 18% from April 2026 onwards), up to a £1 million lifetime allowance. BADR is most commonly claimed when a business owner sells their company, a sole trader sells their business, or a partner exits a partnership. It can generate significant tax savings for qualifying disposals.

Quick answer: BADR 2025-26 rate: 14% on qualifying business gains (up from 10%, rising to 18% from April 2026). Standard higher-rate CGT: 24%. Lifetime limit: £1 million of gains. Conditions: own trading business 2+ years, or 5%+ shareholder in own trading company for 2+ years as officer/employee. Claim via Self Assessment. Investment businesses do not qualify.

BADR Rates: 2025-26 and 2026-27

Period	BADR Rate	Standard Higher-Rate CGT	Saving vs Standard
Before 30 Oct 2024	10%	20%	10 percentage points
30 Oct 2024 – 5 Apr 2026	14%	24%	10 percentage points
From 6 Apr 2026	18%	24%	6 percentage points

The 2024 Autumn Budget raised BADR from 10% to 14% immediately, with a further increase to 18% from April 2026. Despite the rate increases, BADR still provides a meaningful saving against standard CGT rates.

Qualifying Conditions

BADR is only available on genuine trading business disposals. The main qualifying categories are:

1. Sole Trader or Partnership Business

You must:

Be disposing of all or part of a trading business (not an investment business)
Have owned and been involved in the business for at least 2 years immediately before disposal
The business must have been trading (not merely holding assets) throughout the 2-year period

You can also claim on assets used in a business that has ceased trading, if disposed of within 3 years of cessation.

2. Shares in Your Personal Company

You must:

Hold at least 5% of the ordinary share capital and 5% of voting rights
Be an officer or employee of the company (director or paid employee)
Have held the shares for at least 2 years immediately before disposal
The company must be a trading company (or holding company of a trading group) — investment companies do not qualify
The 5% requirement must be met for the full 2-year qualifying period

Common pitfall: If dilution through employee share options reduces your holding below 5% before a sale, you may lose BADR eligibility. Check your shareholding percentage before any equity issuance.

3. Associated Disposal

If you dispose of a personal asset that was used in a business or personal company, you may claim BADR on that asset if you are simultaneously disposing of at least 5% of the business or your company shares. Partial business use may restrict the relief available.

What Does NOT Qualify

Situation	Why It Does Not Qualify
Investment company	Must be trading
Property rental company	Holding property is generally investment, not trading
Below 5% shareholding	Minimum 5% share and voting threshold
Holding shares under 2 years	Minimum 2-year holding period
Non-employee shareholder	Must be officer/employee for company shares
Gains on non-business assets	Only business assets qualify

The £1 Million Lifetime Limit

BADR is subject to a £1 million lifetime limit across all qualifying disposals. The limit is cumulative:

Example: You sold your first business in 2020 and claimed BADR on £700,000 of gains. You are now selling your second business with £500,000 of qualifying gains. Your remaining lifetime BADR allowance is £300,000 (£1 million − £700,000 already claimed).

Tax on the £500,000 disposal:

First £300,000: BADR rate (14% in 2025-26) = £42,000
Remaining £200,000: standard CGT rate (24% higher rate) = £48,000
Total CGT: £90,000 (vs £120,000 at the full 24% rate)

Worked Example: Company Sale

Facts: You own 30% of a trading limited company. You started the company and have been a director since inception. After 8 years, you sell your shares for £750,000 net proceeds. Your cost basis is £50,000. Total gain: £700,000.

Tax calculation (2025-26):

Gain Component	Amount	Rate	Tax
Annual exempt amount	−£3,000	0%	£0
BADR (first £697,000)	£697,000	14%	£97,580
Total CGT			£97,580

Without BADR (at 24% higher rate, net of annual exemption): £697,000 × 24% = £167,280

BADR saving: £69,700

Investors Relief: Similar But Separate

Investors Relief is a separate relief for external investors (not employees or officers) in unquoted trading companies who hold shares for 3+ years. The Investors Relief rate is also being adjusted in line with BADR. The lifetime limit for Investors Relief is separate from the £1 million BADR limit. Investors Relief may apply to angel investors and EIS investors who do not qualify for BADR (because they are not employees/officers).

How to Claim

BADR is claimed on your Self Assessment tax return for the tax year the disposal occurred. Steps:

Report the capital gain in the CGT section of your Self Assessment return
Indicate that BADR applies to the qualifying portion of the gain
File by the relevant deadline (31 January following the end of the tax year)
Deadline for BADR claim: First anniversary of the 31 January filing deadline (e.g., for a 2025-26 disposal, claim by 31 January 2028)

HMRC does not accept late BADR claims — missing the deadline means losing the relief permanently. Keep thorough records of share ownership dates, employment status, and business trading history to support any future claim.

UK Capital Gains Tax Guide — CGT rates, annual exemption, and rules
CGT 60-Day Property Report — residential property CGT reporting deadline
EIS/SEIS Guide — enterprise investment schemes and CGT deferral
UK Self Assessment Guide — how to file your UK tax return
UK Taxes Hub — all UK tax guides for 2026

If you are planning to sell a business or company shares, BADR can significantly reduce your CGT bill — but the 2-year qualifying conditions must be met before disposal. Seek professional advice before any sale to ensure you structure the transaction to preserve eligibility.

Written by WealthVieu

WealthVieu researches and writes data-driven personal finance guides using primary sources including the IRS, Bureau of Labor Statistics, Federal Reserve, and Census Bureau.

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