Did you know that Business Asset Disposal Relief (formerly Entrepreneurs' Relief) can reduce your Capital Gains Tax (CGT) rate to just 10% on qualifying business disposals? This valuable relief has helped thousands of UK business owners retain more of their profits when selling or disposing of their business assets.
| Feature | 2026/26 Tax Year Figures |
|---|---|
| Reduced Capital Gains Tax rate | 10% |
| Lifetime limit on qualifying gains | £1 million |
| Standard Capital Gains Tax rate (higher rate taxpayers) | 20% |
| CGT Annual Exempt Amount | £6,000 |
| Maximum claim period | Disposals from 6 April 2019 onwards |
What is Business Asset Disposal Relief?
Business Asset Disposal Relief (BADR), previously known as Entrepreneurs' Relief, is a UK tax relief designed to encourage entrepreneurship by reducing the Capital Gains Tax (CGT) payable when you sell or dispose of all or part of your business. Instead of paying the standard CGT rate of 20% (for higher-rate taxpayers), qualifying gains are taxed at a reduced rate of 10%.
This relief can apply to the sale of a business, shares in a ‘personal company’, or certain business assets. It aims to reward business owners who have invested time and effort into building their company.
Eligibility Criteria
To qualify for Business Asset Disposal Relief, you must meet specific conditions set out by HMRC. These conditions ensure the relief supports genuine business disposals rather than casual asset sales.
Key eligibility conditions include:
- You must be a sole trader, business partner, or shareholding director of a ‘personal company’.
- You need to have owned the business or shares for at least two years prior to disposal.
- The business must be a trading business, not an investment company, at the time of disposal.
- You must be an employee or hold office in the company when selling shares.
Definition of a ‘Personal Company’ for BADR
A ‘personal company’ is a company where you hold at least 5% of the shares and at least 5% of the voting rights. This ensures the relief applies to owners with significant control or influence over the company.
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What Qualifies for the Relief?
Business Asset Disposal Relief can apply to various types of disposals connected with your business, including:
- Sale of a sole trader business or business partnership interest.
- Sale of shares in a personal company (where you meet the 5% share and voting rights condition).
- Sale of business assets on cessation of a sole trader business or partnership.
- Disposals of assets used in your business, such as goodwill or land and buildings.
However, not all disposals qualify. For example, selling shares in a company where you don’t meet the ‘personal company’ criteria or disposing of non-business assets won’t qualify for BADR.
Lifetime Limit and Tax Rates
One of the main features of Business Asset Disposal Relief is the lifetime limit on qualifying gains. You can claim the 10% CGT rate on gains up to £1 million over your lifetime. This limit applies to disposals from 6 April 2019 onwards and replaces the previous £10 million lifetime allowance.
Any gains above this £1 million threshold will be taxed at the usual Capital Gains Tax rates — 10% for basic-rate taxpayers and 20% for higher or additional-rate taxpayers on most assets.
| CGT Rate | Applicable To |
|---|---|
| 10% | Qualifying gains under BADR up to £1 million lifetime limit |
| 10% or 20% | Other gains depending on income tax band |
How to Claim Business Asset Disposal Relief
Claiming Business Asset Disposal Relief requires submitting a claim to HMRC, typically through your Self Assessment tax return. You cannot claim the relief automatically — you must actively inform HMRC that you want to apply it to your gains.
Here are the practical steps to claim BADR:
- Calculate your chargeable gain on the disposal of your business or shares.
- Check that you meet all the eligibility criteria, including the two-year ownership period.
- Complete your Self Assessment tax return for the relevant tax year.
- Use the Capital Gains section of the return to claim Business Asset Disposal Relief.
- If not filing a tax return, claim by writing to HMRC within four years of the end of the tax year in which you disposed of the asset.
HMRC provides detailed guidance on how to claim on their GOV.UK page. It’s important to keep thorough records of your business ownership and disposals to support your claim.
Important Considerations and Limitations
While Business Asset Disposal Relief offers significant tax savings, there are some key points to consider:
- Two-year qualifying period: The relief only applies if you have owned the business or shares for at least two years before disposal.
- Lifetime limit: The £1 million lifetime limit means once you have used up your allowance, further disposals won’t benefit from the 10% rate.
- Trading business requirement: The business must be trading, not mainly involved in investment activities.
- Restriction on multiple disposals: If you make multiple disposals in the same tax year, the relief applies cumulatively up to the lifetime limit.
It’s also worth noting that Business Asset Disposal Relief is separate from other reliefs such as Investors’ Relief or Gift Hold-Over Relief, which have different conditions and tax benefits.
- Business Asset Disposal Relief reduces CGT on qualifying business disposals to 10%.
- The relief has a £1 million lifetime limit for gains from 6 April 2019 onwards.
- Eligibility requires owning a trading business or shares in a personal company for at least two years.
- You must claim the relief via your Self Assessment tax return or by notifying HMRC.
- Careful planning and record-keeping can maximise your tax savings on business disposals.
Further Resources
For more detailed information, visit HMRC’s official guidance on Business Asset Disposal Relief. If you’re considering whether to operate as a sole trader or limited company, check our guide on Sole Trader vs Limited Company.
For help on other tax matters, see our comprehensive Corporation Tax Guide.
Who qualifies for Business Asset Disposal Relief?
You qualify if you are a sole trader, business partner, or hold at least 5% of shares and voting rights in a personal company, and you have owned the business or shares for at least two years before disposal.
What is the lifetime limit for Business Asset Disposal Relief?
The lifetime limit is £1 million of qualifying gains from disposals made on or after 6 April 2019. Gains above this are subject to standard Capital Gains Tax rates.
How do I claim Business Asset Disposal Relief?
You claim BADR by completing the Capital Gains section of your Self Assessment tax return for the relevant tax year, or by writing to HMRC if you do not normally file a return, within four years of the end of that tax year.
Official Sources
* GOV.UK: Set up a business · * HMRC: Income Tax rates · * HMRC: Corporation Tax · * HMRC: VAT registration