What is Business Asset Disposal Relief and how does it work?
What is business asset disposal relief (BADR)?
Business Asset Disposal Relief (BADR), formerly known as Entrepreneurs’ Relief, allows business owners to pay a reduced rate of Capital Gains Tax (CGT) when selling all or part of their business, shares, or qualifying assets.
Qualifying disposals are currently taxed at 14%. From 6 April 2026, the rate will rise further to 18%.
This makes careful planning around disposals more important than ever.
What are the main BADR conditions?
To qualify for business assets disposal relief, several conditions must be met:
- Whole or part of a business sale – the business must have been owned for at least two years before disposal.
- Business assets after cessation – assets disposed of within three years after the business has ceased may qualify.
- Associated disposals – assets used by a partnership or company can qualify if linked to a disposal of partnership assets or company shares that also meet BADR conditions.
- Qualifying shareholding – individuals must hold at least 5% of ordinary share capital and voting rights, and either:
5% of profits and assets on a winding up, or
5% of the sale proceeds if the whole company were sold. - Enterprise Management Incentive (EMI) shares may also qualify if held for at least 24 months.
Can trustees claim BADR?
Trustees may claim Business Asset Disposal Relief on:
- The disposal of shares in a company where a qualifying beneficiary also holds a qualifying interest in their own right, or
- The disposal of assets used in a business carried on by a beneficiary that has since ceased.
Lifetime allowance and how to claim BADR
What is the BADR lifetime limit?
The lifetime limit for BADR is £1 million of qualifying gains across all disposals made on or after 11 March 2020. This replaced the previous £10 million limit under Entrepreneurs’ Relief and was unchanged in the Autumn 2024 Budget.
How to claim business asset disposal relief
A claim must be made on or before the first anniversary of 31 January following the tax year of disposal. For example, a disposal in 2024/25 must be claimed by 31 January 2027. Claims are usually made via the Self Assessment tax return, but may also be made by writing to HMRC.
Succession planning and inheritance tax relief
Sometimes succession, rather than a sale, is the best route. Assets that qualify for BADR may also qualify for Business Relief for inheritance tax. This means that if business assets are gifted during life or passed on death, inheritance tax relief may be available instead.
You can read more about the changes to Business Relief in the Autumn 2024 Budget on our website.
Planning ahead
With rising CGT rates and strict BADR conditions, advance planning is key. Reviewing shareholdings, business structures, and disposal timing can help secure relief before rates increase. Azets advisers can guide you through the process, from calculating potential liabilities to structuring disposals efficiently.
If you are considering selling your business, share disposal, or a succession plan, our team can help you assess eligibility and prepare your claim. Get in touch below or speak to an Azets adviser today.
