Business Asset Disposal Relief: Complete UK Guide 2026/27
Business Asset Disposal Relief (BADR): Complete UK Guide 2026/27
Business Asset Disposal Relief can reduce Capital Gains Tax when you sell a qualifying business or company shares. From 6 April 2026 the BADR rate is 18% , subject to an individual's available £1 million lifetime limit.
Business Asset Disposal Relief (BADR), formerly known as Entrepreneurs' Relief, can reduce Capital Gains Tax when an individual sells or disposes of a qualifying business, part of a business or shares in a qualifying trading company. For qualifying disposals from 6 April 2026, the BADR rate is 18%, subject to the individual's available £1 million lifetime limit.
Business Asset Disposal Relief can be one of the most important tax considerations when selling a UK business. However, BADR is not automatic. The qualifying conditions depend on what is being sold and, in many cases, must have been satisfied throughout a qualifying period before the disposal.
Use our Business Asset Disposal Relief calculator below for an indicative 2026/27 calculation, then read the guide to understand the conditions that may apply to your disposal.
Business Asset Disposal Relief Calculator
Estimate the Capital Gains Tax on a qualifying business or share disposal and see how much of your gain may fall within your remaining £1 million BADR lifetime limit.
Estimated saving on the BADR-taxed portion compared with that same amount being taxed at the 24% higher CGT rate:
£0
What Is Business Asset Disposal Relief?
Business Asset Disposal Relief is a Capital Gains Tax relief for certain qualifying business disposals. It allows qualifying gains within an individual's available lifetime limit to be taxed at the special BADR rate rather than the normal Capital Gains Tax rate that might otherwise apply.
BADR was previously known as Entrepreneurs' Relief. The name changed in April 2020, but the former name is still commonly encountered in older tax guidance and business-sale documentation.
Depending on your circumstances, BADR may potentially apply when you:
What Is the BADR Rate in 2026/27?
For qualifying disposals made from 6 April 2026, the Business Asset Disposal Relief rate is 18% on qualifying gains falling within the individual's available lifetime limit.
| Disposal period | BADR rate | Current lifetime limit |
|---|---|---|
| Up to 5 April 2025 | 10% | £1 million* |
| 6 April 2025 – 5 April 2026 | 14% | £1 million* |
| From 6 April 2026 | 18% | £1 million* |
*Historical lifetime limits were higher during certain earlier periods, so previous Entrepreneurs' Relief and BADR claims should be checked when establishing how much lifetime limit remains.
Who Qualifies for Business Asset Disposal Relief?
There is no single BADR test covering every disposal. The conditions depend upon the type of business asset being sold.
| Disposal | BADR potentially available? | Important consideration |
|---|---|---|
| Shares in a trading company | Yes | Personal company, employment or office-holder and trading conditions normally apply. |
| Sole trader business | Yes | The whole or a qualifying part of the business must normally be disposed of. |
| Partnership interest | Yes | The individual partner must satisfy the relevant conditions. |
| Qualifying EMI shares | Yes | Special BADR rules can apply. |
| Personally owned asset used by a company | Potentially | The associated disposal rules need to be considered. |
| Shares in an investment company | Usually no | The normal company-share rules require a trading company or holding company of a trading group. |
| One business asset sold while the business continues | Usually no | Selling an isolated asset is not normally the disposal of a business or part of a business. |
BADR When Selling Shares in a Limited Company
An owner-manager selling shares in a trading company may qualify for BADR if the relevant conditions have generally been satisfied throughout the required two-year qualifying period.
For an ordinary share disposal outside the special EMI rules, you will normally need to consider whether:
Owning more than 5% of a company's shares does not, by itself, guarantee Business Asset Disposal Relief.
What Is the 5% Rule for Business Asset Disposal Relief?
For a normal BADR claim on company shares, simply owning 5% of the shares may not be sufficient. The shareholder generally needs at least 5% of the ordinary share capital and 5% of the voting rights, together with the relevant economic entitlement.
The economic conditions broadly consider the shareholder's entitlement to profits and assets or, alternatively, the proceeds that would arise from a hypothetical sale of the company's ordinary share capital.
Do you have to be a director to claim BADR?
No. For the normal company-share rules you generally need to be an officer or employee of the company or relevant group company. A director is an office holder, but a qualifying employee may potentially claim BADR without being a director.
Being a director does not itself guarantee relief.
Does the Company Have to Be a Trading Company?
For the usual BADR claim on company shares, the company must generally be a trading company or the holding company of a trading group.
This should ideally be reviewed well before a proposed company sale because successful businesses sometimes accumulate assets or activities that are not part of their underlying trade.
Areas that may require particular consideration include:
- large surplus cash balances;
- investment portfolios;
- investment properties;
- surplus land;
- loans and financing activities; and
- other non-trading activities.
Holding a non-trading asset does not automatically prevent BADR. The company's activities need to be considered in the round rather than relying on a single balance-sheet percentage.
Can a property investment company qualify for BADR?
A company whose main activity is holding property to generate rental investment income will generally not satisfy the normal trading-company requirement for BADR on the disposal of its shares.
This should be distinguished from a company carrying on a genuine property-related trade. The facts and activities need to be considered.
Does holding too much cash stop BADR?
Not automatically. Cash retained for genuine working-capital or commercial requirements can be very different from substantial surplus funds retained for investment purposes.
BADR for Sole Traders and Partnerships
Business Asset Disposal Relief is not restricted to limited company shareholders.
A sole trader may potentially claim BADR when disposing of all or a qualifying part of their business, provided the relevant ownership and qualifying-period requirements are met.
A business partner may similarly qualify when disposing of all or part of their interest in a partnership business.
What if I close my business?
BADR may potentially remain available where a business ceases and qualifying business assets are subsequently disposed of. Specific time limits apply, so both the cessation date and disposal date can be important.
What Is the £1 Million BADR Lifetime Limit?
The current Business Asset Disposal Relief lifetime limit is £1 million of qualifying gains per individual. It is a lifetime limit, not an annual allowance.
You can make more than one BADR claim, but previous qualifying gains reduce the amount of the lifetime limit remaining.
The £1 million limit applies to the qualifying gain, not simply the gross selling price.
A company could therefore sell for more than £1 million while the shareholder's actual capital gain remains below £1 million.
Is the BADR limit per person?
Yes. Each qualifying individual has their own BADR lifetime limit.
This can be relevant where spouses or civil partners both own shares in a family company. However, each shareholder must independently satisfy the relevant qualifying conditions.
Business Asset Disposal Relief Calculation Example
Assume an individual makes a £1 million qualifying gain on a disposal after 5 April 2026 and has their full BADR lifetime limit available.
Ignoring other gains and losses for illustration, the calculation before considering any available Annual Exempt Amount would be:
Business Asset Disposal Relief and EMI Shares
Special rules apply to qualifying shares acquired under an Enterprise Management Incentive (EMI) option.
Qualifying EMI shares are not subject to precisely the same shareholding conditions as ordinary company shares, so the EMI option, grant date, exercise date and disposal should be reviewed separately.
BADR and Associated Disposals
BADR can potentially apply where an individual personally owns an asset that has been used by their company or partnership and disposes of that asset in connection with withdrawing from the business.
This is commonly known as an associated disposal. Additional conditions and restrictions apply.
Relief may, for example, be restricted in some circumstances where rent has been charged to the business for using the personally owned asset.
Can BADR Apply When Closing or Liquidating a Company?
Potentially. Distributions received when a company is formally wound up may be treated as capital rather than income, and BADR may potentially apply if the qualifying conditions are satisfied.
However, additional anti-avoidance rules can apply, particularly where the shareholder continues or restarts the same or a similar business activity.
The tax consequences should therefore be considered before the company is liquidated and funds are distributed.
Share Sale vs Asset Sale: Why BADR Can Differ
Selling your company and your company selling its business may sound similar commercially, but they can produce very different tax consequences.
| Share sale | Asset sale |
|---|---|
| The shareholder sells their company shares. | The company sells its business or individual assets. |
| A qualifying shareholder may potentially claim BADR personally. | Tax on asset gains is initially considered at company level. |
| The purchaser acquires the company, including its assets and liabilities. | The purchaser acquires specified business assets or operations. |
| The shareholder receives the share sale consideration directly. | Further tax consequences can arise when proceeds are extracted from the company. |
The proposed transaction structure should therefore ideally be considered before commercial terms become fixed.
How Do You Claim Business Asset Disposal Relief?
Business Asset Disposal Relief must be claimed. It is not automatically applied merely because a disposal satisfies the qualifying conditions.
A claim can generally be made through your Self Assessment tax return or the appropriate BADR claim procedure.
BADR claim deadlines
| Tax year of disposal | Deadline to claim BADR |
|---|---|
| 2024/25 | 31 January 2027 |
| 2025/26 | 31 January 2028 |
| 2026/27 | 31 January 2029 |
The BADR claim deadline should not be confused with the normal deadlines for reporting gains, filing Self Assessment returns or paying tax.
BADR Planning Before Selling a Business
The best time to establish whether you qualify for BADR is generally well before the business is sold.
Many qualifying conditions need to have been satisfied throughout a two-year period, so a problem discovered shortly before completion may be difficult or impossible to correct in time.
BADR pre-sale checklist
Confirm ordinary share capital and voting rights.
Check dividend, capital and economic rights.
Check employee or office-holder requirements.
Consider investments, surplus cash and non-trading activities.
Establish when all relevant conditions began to be satisfied.
Calculate the remaining lifetime limit.
Understand whether the buyer proposes a share or asset sale.
Establish the relevant tax disposal date before completion.
Common BADR Mistakes to Avoid
| Common assumption | Why it can be wrong |
|---|---|
| “I own more than 5%, so I qualify.” | Voting rights, economic rights, employment status, trading status and the qualifying period can also matter. |
| “I'm a director, therefore I qualify.” | Being an office holder is only one element of the normal share-disposal conditions. |
| “The company trades, so BADR must apply.” | Significant non-trading activities may require closer examination. |
| “My company sold for over £1m, so BADR is unavailable.” | The lifetime limit concerns qualifying gains rather than simply gross sale proceeds. |
| “My spouse can receive shares immediately before the sale.” | Each individual needs to satisfy the relevant qualifying conditions. |
| “HMRC automatically applies BADR.” | Business Asset Disposal Relief must be claimed. |
Business Asset Disposal Relief FAQs
What is Business Asset Disposal Relief?
Business Asset Disposal Relief is a Capital Gains Tax relief for certain qualifying disposals of businesses, business interests and shares in qualifying companies. It was previously called Entrepreneurs' Relief.
What is the BADR rate for 2026/27?
The BADR rate is 18% for qualifying disposals made from 6 April 2026.
What is the BADR lifetime limit?
The current lifetime limit is £1 million of qualifying gains per individual. Previous BADR and relevant Entrepreneurs' Relief claims can reduce the amount remaining.
Is BADR the same as Entrepreneurs' Relief?
Business Asset Disposal Relief is the current name for the tax relief previously known as Entrepreneurs' Relief. The relief was renamed in 2020.
How long do I need to own a business to qualify?
The relevant BADR conditions generally need to have been satisfied throughout a two-year qualifying period, although the precise requirements depend on the type of disposal.
Do I need to own 5% of a company?
For an ordinary company-share disposal outside the special EMI rules, the personal-company requirements generally include at least 5% of the ordinary share capital and voting rights together with the relevant economic entitlement conditions.
Do I have to be a director to claim BADR?
Not necessarily. For the normal company-share rules, an individual generally needs to be an officer or employee of the company or relevant group company. A director is an office holder, but a qualifying employee can potentially qualify without being a director.
Can a property investment company qualify for BADR?
A company primarily holding properties as investments for rental income will generally not satisfy the normal trading-company requirement for BADR on a share disposal. The actual activities and circumstances should be reviewed.
Does cash in a company stop BADR?
Not automatically. The amount of cash, why it is being retained and the company's overall trading and non-trading activities can all be relevant.
Can a sole trader claim BADR?
Yes. A sole trader may potentially qualify when disposing of all or a qualifying part of their business, provided the relevant conditions are satisfied.
Can business partners claim BADR?
Yes. An individual partner may potentially qualify when disposing of a qualifying interest in the partnership business.
Can I claim BADR more than once?
Yes. Multiple claims can be made, but qualifying gains are subject to the individual's available lifetime limit.
Is the £1 million BADR limit per person?
Yes. Each qualifying individual has their own lifetime limit, provided they independently satisfy the relevant conditions.
Does the £1 million limit apply to the business sale price?
No. The limit relates to qualifying capital gains, not simply the gross amount received for the business or shares.
Do I have to claim BADR?
Yes. Business Asset Disposal Relief must be claimed; it is not automatically given simply because the transaction qualifies.
Can BADR apply when closing a limited company?
Potentially. Capital distributions arising on a company winding-up may qualify where the relevant conditions are satisfied, although additional anti-avoidance provisions can apply.
Planning to Sell Your Business?
BADR can materially affect the Capital Gains Tax payable on a business sale, but the qualifying conditions should ideally be checked before contracts are agreed. The Online Accountants can help review your circumstances and identify issues that could affect a Business Asset Disposal Relief claim.
Speak to The Online Accountants →