Business Asset Disposal Relief (BADR) can help reduce your capital gains tax bill if you sell your business.
It is available to anyone eligible, including sole traders selling their business and limited company shareholders disposing of shares.
Before 2020, it was known as Entrepreneurs’ Relief.
In the 2026/27 tax year, you can claim 18% BADR up to a lifetime limit of £1m, although this limit has changed several times since the scheme was first introduced in 2008.
Here’s a guide for business owners explaining BADR, including how to qualify for and claim the relief.
Background to BADR (Entrepreneur’s Relief)
Entrepreneur’s Relief was first introduced in 2008. The 2008 Budget abolished the taper relief rules on business disposals and introduced a new flat rate of Capital Gains Tax at 10%.
These measures meant that business owners who had built a business over many years, sometimes their lifetimes, would have to pay a much higher rate of Capital Gains Tax when they sold their business.
As this could discourage entrepreneurs from building businesses, generating employment, and creating wealth, the government introduced Entrepreneurs’ Relief.
This new relief was designed to compensate business owners who would have paid a lower Capital Gains Tax (CGT) rate under the previous taper relief rules.
The BADR has increased in stages
The reduced BADR capital gains tax rate was 10% until April 2025.
The rate is now 18% (from April 2026), having risen from 10% in 24/25 and 14% in 25/26, following an announcement in the Autumn 2024 Budget. Investors’ Relief (IR) will also increase by the same amounts (see below).
Summary of BADR and Investors’ Relief rates
| Tax year | BADR rate | Investors’ Relief rate |
|---|---|---|
| Up to 5 April 2025 | 10% | 10% |
| From 6 April 2025 | 14% | 14% |
| From 6 April 2026 | 18% | 18% |
Note: For Investors’ Relief, the lifetime limit was reduced to £1m for disposals on or after 30 October 2024 (previously £10m).
The lifetime allowance has changed over time
The relief allowed business owners to pay an effective 10% capital gains tax rate on business disposals up to a lifetime ‘allowance’ of £1m. In the first 2010 Budget, Alistair Darling raised the lifetime limit to £2m.
This was extended to £5m in the 2010 ‘Emergency Budget’, effective 23rd June 2010, and to £10m in the 2011 Budget, effective April 6, 2011.
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The lifetime limit was reduced to £1m for disposals made after April 6th 2020.
Individuals can claim ER as often as they like, subject to the prevailing lifetime limit.
Entrepreneur’s Relief (BADR) – Qualifying as a business owner
To claim BADR, several conditions must be met during a 24-month ‘qualifying period’ before you sell the business.
- During the qualifying period, you were either a sole trader or an officer (director/secretary), or an employee of a limited company.
- During the qualifying period, you owned at least 5% of the capital and voting rights of the company, if the disposal relates to a company.
- You can claim relief on proceeds from a partial or full sale of a business, shares in a company, or on the value of any business assets remaining after the company has ceased trading, as long as you were either a business partner in a company or the exclusive business owner (if you were a sole trader).
- If the business ceased trading, it must have done so no more than three years before the sale date.
- If you’re selling a ‘going concern’, the business must be financially viable at the time of sale.
- You cannot claim BADR for the disposal of non-commercial property.
- You can claim as many times as you like, subject to a lifetime allowance. From April 6, 2020, the lifetime allowance for entrepreneurs’ relief is £1m. You will pay the standard CGT rate on any proceeds beyond this limit.
- If the business is owned by a couple (spouse or civil partner), each person can apply for ER if they meet the eligibility criteria listed above.
- Further rules apply for the disposal of business assets following business cessation, shares/securities and goodwill.
Investors’ Relief – lifetime limit reduced to £1m
Although Investors’ Relief is similar to BADR, it is a separate relief for individuals investing in early-stage companies.
It applies to investors for qualifying disposals made after 6th April 2019.
To meet the eligibility criteria as an investor, the following have to apply:
- You must have held the shares for at least three years before the disposal.
- You must have held the shares continuously for this period.
- The investment must be in a trading company or the holding company of a trading group.
- Investors’ Relief is available only to investors who are not involved in running the business.
- The shares must not be listed on a major stock exchange; however, those listed on AIM are permitted. This is intended to encourage investment in smaller companies, rather than established ones.
- The shares must be newly issued, not acquired from another individual.
Important update: For qualifying disposals made on or after 30 October 2024, the lifetime limit for Investors’ Relief was reduced from £10m to £1m, bringing it into line with BADR.
Like BADR, the Investors’ Relief rate was 10%, then 14%, and is now 18%.
Read the official guidance here.
How do you calculate your BADR liability?
- Calculate your total CGT liability relating to the disposal.
- Take off your annual CGT allowance, if you’re eligible (£3,000 in 2026/27).
- Your BADR liability is calculated at the reduced rate: 18% for disposals made in 2026/27.
- Any CGT owed beyond the £1m lifetime limit is charged at the standard CGT rates. From 6 April 2025, these are 18% (within the basic Income Tax band) and 24% (above the basic band).
What is the deadline for paying your BADR liability?
- To pay the tax: You must pay HMRC by 31 January 2028.
- To claim the relief: You must submit your BADR claim by 31 January 2029.
How do you pay your BADR liability?
You should complete the supplementary capital gains section of your annual self assessment form.
If you cannot do this, make a claim directly with HMRC in writing or by filling in Section A of the HS275: Business Asset Disposal Relief helpsheet.
The rules are complex, and you must meet specific qualifying conditions to claim the Relief. For obvious reasons, we recommend reading the official guidance and talking to your accountant before making a claim.
