Do you want to know how much you can save from business asset disposal relief? If yes, this guide is for you. Business Asset Disposal Relief is a type of tax relief that helps business owners, directors and partners save tax when selling or closing all or part of a qualifying business.
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The UK government introduced this allowance to support business owners in starting a business, growing it and rewarding them for their hard work if they wish to sell or dispose of it. They can gain up to £1 million in lifetime limit rather than paying capital gains tax.
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TAJ Accountants brings this guide to help you know everything about Business Asset Disposal Relief, including how it works and who is eligible. Let’s start reading.
What is Business Asset Disposal Relief?
Business Asset Disposal Relief, formerly known as Entrepreneurs’ Relief. It reduces the amount of Capital Gains Tax (CGT) on a disposal of qualifying business assets. It allows you to pay Capital Gains Tax at just 18% on the profits you have made over the lifespan of a business.
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You can’t claim relief in your lifetime of up to £1 million. If you wish, you can claim as many times as you like; the limit is fixed at £1 million.
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You have to meet the qualifying conditions throughout a 2-year qualifying period, either up to the date of disposal or the date the business ceased.
Is Entrepreneurs’ Relief Cancelled?
In March 2020, the UK government announced that there would be changes to Entrepreneurs’ Relief. But it was a change, not a dump. It was renamed Business Asset Disposal Relief by a change instead of being scrapped.
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The main change was that the previous £10 million in lifetime gains was reduced to £1 million. So, Entrepreneurs’ Relief was changed, not removed altogether.
Who is Eligible for Business Asset Disposal Relief?
According to HMRC, to gain Business Asset Disposal Relief eligibility, you have to sell all or part of your business. Also, you have to meet the following criteria for at least the last 2 years up to the date you are selling the business:
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- you’re a sole trader or business partner
- must dispose of your business assets within 3 years.
- you’ve owned the business for at least 2 years
- must have  held 5% or more of the share capital and 5% of the voting share capital  for at least 12 months before claiming
There are some differences depending on whether you are selling shares or disposing of your company. These are-
- Selling Company:Â If you are selling all or part of your business, you have to own the business for at least 2 years as a sole trader or a partner. Also, business assets have to be disposed of within 3 years.
- Selling Shares: You’re an employee or office holder of the company and hold the shares for at least 2 years. The company’s main activities are in trading, or it’s the holding company of a trading group and has traded within the last 2 years.
Different rules are applicable depending on whether the shares are from an Enterprise Management Incentive (EMI).
If the shares are from an EMI, you must have bought them after 5 April 2013 and had the option to buy them at least 2 years before selling them.
How Does Business Asset Disposal Relief Work?
When selling a qualifying business or shares, Business Asset Disposal Relief (BADR) reduces the Capital Gains Tax (CGT) you pay. For the 2026/27 tax year, qualifying gains are taxed at 18%, up to a lifetime limit of £1 million.
Without BADR, qualifying gains are taxed at the standard CGT rate, which is currently up to 24% for higher-rate taxpayers. The BADR rate has increased in recent years, rising from 10% before April 2025 to 14% between April 2025 and April 2026. From 6 April 2026, it increased to 18%. The £1 million lifetime limit has remained unchanged throughout.
How to calculate Business Asset Disposal Relief
To calculate Business Asset Disposal Relief (BADR), first work out your chargeable gain. This is the difference between the sale price and the original purchase price, after deducting any allowable costs, such as legal or disposal fees.
From 6 April 2026, qualifying gains up to your £1 million lifetime limit are taxed at 18% under BADR. Any gains above that limit are taxed at the standard Capital Gains Tax (CGT) rate of up to 24%.
For example, a £500,000 qualifying gain would result in a £90,000 CGT bill under BADR. Without the relief, the same gain taxed at 24% would produce a tax bill of £120,000, a saving of £30,000.
If you have previously claimed BADR, your previous claims reduce the amount of your remaining £1 million lifetime limit. You claim the relief through your Self Assessment tax return for the tax year in which the disposal takes place.
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How to Claim Business Asset Disposal Relief?
You can claim Business Asset Disposal Relief (BADR) through your Self Assessment tax return for the tax year in which the disposal took place. The relief is not applied automatically, so you must submit a claim before the deadline.
The claim deadline is the first anniversary of 31 January following the end of the relevant tax year. For disposals made during the 2026/27 tax year, you must claim by 31 January 2029.
Before submitting your claim, make sure you have accurate records of the disposal. This includes the sale price, original purchase cost, allowable expenses, and the disposal date. If you are claiming relief on shares, you should also confirm that you met the qualifying conditions throughout the required two-year ownership period.
If you use an accountant, they can include the claim as part of your Self Assessment return. As the tax savings can be significant, it is worth checking your eligibility and calculations carefully before submitting your claim.
Conclusion
Business Asset Disposal Relief (BADR) can still make a meaningful difference when you sell a qualifying business or shares, even at the revised 18% rate. On a £1 million qualifying gain, the difference between paying BADR and the standard Capital Gains Tax (CGT) rate is £60,000. That is money that stays in your business rather than going to HMRC.
The relief is not applied automatically, and the qualifying conditions are strict. You must meet the ownership period, shareholding requirements, and other eligibility rules well before the sale. Planning is essential, as mistakes can prevent you from claiming the relief.
TAJ Accountants is a small business accountants firm helping business owners across London structure their exits correctly and claim every relief they are entitled to. Contact TAJ Accountants to find out where you stand before making any major decisions.
Frequently Asked Questions
From 6 April 2026, the Business Asset Disposal Relief (BADR) rate is 18% on qualifying gains, up to the £1 million lifetime limit. The rate was 14% during the 2025/26 tax year and 10% before April 2025. Any gains above the lifetime limit are taxed at the standard Capital Gains Tax (CGT) rate, currently up to 24% for higher-rate taxpayers.
Business Asset Disposal Relief (BADR) was previously known as Entrepreneurs’ Relief. Although the name changed, it remains the same relief. If you claimed Entrepreneurs’ Relief in the past, those gains count towards your £1 million lifetime BADR limit. The lifetime limit was reduced from £10 million to £1 million in 2020 and has remained unchanged since.
You must meet the qualifying conditions for at least two years before the disposal. This includes owning at least 5% of the company’s ordinary share capital and voting rights, while also being an employee or officer of the company. Selling before the two-year qualifying period ends means you cannot claim the relief.
Yes. You may still qualify if you dispose of business assets after the business has closed. To be eligible, you must have owned the business for at least two years before it ceased trading, and the assets must be disposed of within three years of the business closing.
If your shareholding falls below the required 5% threshold before the disposal, you may lose your eligibility for BADR. This often happens after investment or fundraising rounds. Reviewing the impact on your eligibility before issuing new shares can help protect your entitlement to the relief.
Yes. Even at the 18% rate, BADR can provide significant tax savings. On a £1 million qualifying gain, BADR results in a £180,000 tax bill. Without the relief, the same gain taxed at 24% would result in £240,000 of CGT, saving £60,000. Although the relief is less generous than in previous years, it still offers valuable tax savings for qualifying business owners.
