HMRC targeting suspected BADR limit breaches
From December 2025, HMRC began issuing One to Many (OtM) letters to individuals they believe have exceeded their lifetime allowance for Business Asset Disposal Relief (BADR), formerly known as Entrepreneurs’ Relief.
What is BADR?
Business Asset Disposal Relief (BADR) is a valuable tax relief designed to reduce the rate of Capital Gains Tax (CGT) when individuals dispose of qualifying business assets. When BADR applies, gains are taxed at 10% instead of the standard CGT rates, up to a lifetime limit of £1 million.
BADR typically applies when you:
- Sell all or part of your business
- Dispose of shares in a company where you hold at least 5% of shares and voting rights
- Close your business and dispose of its assets
This relief is intended to support entrepreneurs and business owners when they exit or restructure their businesses.
What is HMRC targeting?
HMRC will be looking to identify taxpayers whose records suggest they have claimed more than the £1 million lifetime limit for BADR. This follows claims made on 2024/25 tax returns, where individuals have either already exceeded the limit or have now done so with their latest claim.
Identified taxpayers will receive a letter asking them to:
- Check their return
- Amend it if necessary, or
- Email HMRC to confirm that no amendment is required
Why is this important?
Exceeding the BADR lifetime limit can lead to incorrect tax relief claims and potential compliance issues. HMRC is taking proactive steps to ensure accuracy and prevent underpayment of tax.
Actions to take
If you receive an OtM letter:
- Review your BADR claims carefully
- Confirm whether your lifetime limit has been exceeded
- Take action promptly to amend your return or respond to HMRC
We’re here to help
If you’re unsure on your position or how to respond, our tax specialists can help you:
- Check where you stand in relation to BADR
- Review previous claims
- Ensure compliance and avoid penalties
Contact us today via the form below to discuss your circumstances and get expert guidance.