Key takeaways
- Business Asset Disposal Relief (BADR), formerly Entrepreneurs' Relief, taxes qualifying gains at 18% from 6 April 2026 (14% in 2025/26, 10% before).
- It is limited to £1 million of qualifying gains over your lifetime.
- For company shares you generally need to have been an officer or employee and held at least 5% of the shares and votes, with economic rights, for two years.
- Sole traders and partners can claim when they sell or close all or part of a business they have owned for two years.
- With the main CGT rates at 18% and 24%, BADR now saves up to 6% on qualifying gains; it must be claimed within about two years of the end of the tax year.
Business Asset Disposal Relief (BADR) reduces the Capital Gains Tax when you sell all or part of a business, or shares in your own trading company. It has become less generous over recent years, but for a business owner selling up it can still save tens of thousands of pounds.
The rate and the lifetime limit
| Disposal date | BADR rate | Lifetime limit |
|---|---|---|
| Before 6 April 2025 | 10% | £1 million |
| 6 April 2025 to 5 April 2026 | 14% | £1 million |
| From 6 April 2026 | 18% | £1 million |
The £1 million limit applies to qualifying gains over your whole lifetime, including gains that qualified for Entrepreneurs’ Relief before 2020. Gains above the limit are taxed at the normal CGT rates.
What it is worth now
Without the relief, a higher rate taxpayer pays 24% on most gains. With BADR at 18%, the saving is 6 percentage points: up to £60,000 on £1 million of qualifying gains. A basic rate taxpayer whose gains fall within the basic rate band would pay 18% anyway, so gets little benefit.
Who qualifies
Selling shares in your company
For a disposal of shares, the following must be true throughout the two years before the sale (or before the company ceased trading, if it stopped within three years before the sale):
- the company is a trading company, or the holding company of a trading group
- you are an officer or employee of the company, or of a company in the same group (this can be part-time)
- the company is your personal company: you hold at least 5% of the ordinary share capital and at least 5% of the voting rights, and you are entitled to at least 5% of the distributable profits and 5% of the assets on a winding up (or 5% of the proceeds on a sale of the whole company)
A company with substantial non-trading activities, such as large cash balances or investment property, may not count as a trading company. HMRC broadly looks for non-trading activities of no more than 20% by indicators such as income, assets and management time.
Shares from EMI options
Shares acquired through Enterprise Management Incentive options can qualify without the 5% test, if the option was granted at least two years before the sale and you are an officer or employee.
Selling your business as a sole trader or partner
You can claim BADR if you sell all or part of a business you have owned for at least two years, or close the business and dispose of its assets within three years of ceasing. Selling individual assets while continuing the business does not qualify. Partners can claim on disposing of all or part of their partnership interest.
Associated disposals
Assets you own personally and let to your company or partnership, such as premises, can qualify when sold alongside a qualifying disposal of shares or a partnership interest, subject to conditions. Relief can be restricted if you charged rent.
Worked example
Hannah sells her 30% shareholding in a trading company she has worked for since 2015, in July 2026, with a gain of £400,000. She is a higher rate taxpayer and has used none of her BADR limit.
| Without BADR | With BADR | |
|---|---|---|
| Gain | £400,000 | £400,000 |
| Annual exempt amount | (£3,000) | (£3,000) |
| Taxable gain | £397,000 | £397,000 |
| Rate | 24% | 18% |
| CGT | £95,280 | £71,460 |
BADR saves £23,820. Hannah has £600,000 of lifetime limit left.
Paying the tax
BADR gains are reported on your Self Assessment return, with tax due by 31 January after the tax year of sale. Where part of the sale price is deferred (an earn-out), the tax can sometimes be paid in instalments; take advice on how earn-outs interact with BADR.
How to claim
Claim on your Self Assessment return, or on a separate form, by the first anniversary of 31 January following the tax year of disposal. For a disposal in 2026/27, the deadline is 31 January 2029. Trustees claim jointly with the qualifying beneficiary.
Alternatives and related reliefs
- Investors’ Relief: an 18% rate on gains from shares in unlisted trading companies subscribed for by external investors who are not employees, held for at least three years, with its own £1 million lifetime limit.
- Gift holdover relief: defers the gain when business assets are given away; see gift holdover relief.
- Rollover relief: defers the gain when proceeds are reinvested in new business assets; see rollover relief.
- Employee Ownership Trusts: relief on sales to an EOT was cut to 50% of the gain from 26 November 2025.
- Members’ voluntary liquidation: distributions on a solvent winding-up can qualify for BADR if conditions are met; see company dissolution.
Frequently asked questions
What is the BADR rate for 2026/27?
18%, for qualifying disposals on or after 6 April 2026. It was 14% in 2025/26 and 10% before 6 April 2025.
What is the lifetime limit for Business Asset Disposal Relief?
£1 million of qualifying gains, including gains that previously qualified for Entrepreneurs’ Relief.
Do I need to work for the company to get BADR?
Yes, for share disposals. You must be an officer or employee, as well as holding at least 5% of the shares, votes and economic rights, for two years before the sale.
Is Entrepreneurs’ Relief the same as Business Asset Disposal Relief?
Yes. Entrepreneurs’ Relief was renamed Business Asset Disposal Relief in April 2020, when the lifetime limit was cut from £10 million to £1 million.
Sources
Rates, thresholds and rules in this guide were checked against HMRC and GOV.UK guidance in October 2026. Tax rules change, so check the current position on GOV.UK or with a qualified adviser before acting. This guide is general information, not personal advice.