Business Asset Disposal Relief: Complete UK Guide 2026/27
Reduce the capital gains tax on qualifying business disposals.
This guide explains who can claim BADR, what counts as a qualifying disposal, how the lifetime limit works, key rule changes, practical planning tips, and includes an interactive calculator to estimate your potential tax.
Business Asset Disposal Relief (BADR)
Business Asset Disposal Relief (BADR) can reduce the Capital Gains Tax payable when you sell or dispose of a qualifying business, part of a business or shares in a qualifying company.
Formerly known as Entrepreneurs’ Relief, Business Asset Disposal Relief is particularly important for business owners, company directors, shareholders, sole traders and partners who are planning to sell or retire from a business.
For qualifying disposals made from 6 April 2026, Business Asset Disposal Relief applies a Capital Gains Tax rate of 18% to qualifying gains, subject to the individual’s available £1 million lifetime limit.
However, owning a business or shares in a company does not automatically mean that you qualify. BADR has detailed eligibility conditions and, in many cases, those conditions must have been satisfied for at least two years before the disposal.
This makes tax planning before a business sale particularly important.
| Disposal date | BADR rate | 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* |
*The current lifetime limit is £1 million. Different historical limits can be relevant to earlier disposals.
Business Asset Disposal Relief Calculator
Estimate the Capital Gains Tax due when selling a qualifying business or business asset.
- Disposal proceeds
- £0.00
- Allowable costs
- −£0.00
- Gain before losses
- £0.00
- Losses and exemption
- −£0.00
- Chargeable gain
- £0.00
- Gain eligible for BADR
- £0.00
- Gain above lifetime limit
- £0.00
- Remaining BADR lifetime limit
- £0.00
- Net proceeds after costs and CGT
- £0.00
This calculator is an illustrative 2026/27 estimate for an individual and assumes the entered gain is the only gain being modelled. It does not determine eligibility, account for deferred consideration, share reorganisations, earn-outs, trusts, connected-party rules, mixed qualifying gains or every possible relief. Obtain professional advice before completing a disposal or making a BADR claim.
Calculations supplied by theonlineaccountants.uk
What is Business Asset Disposal Relief?
Business Asset Disposal Relief is a Capital Gains Tax relief available when certain qualifying business assets are disposed of.
Depending on the circumstances, it can apply when you:
sell all or part of a business;
sell shares in your personal trading company;
close a business and subsequently dispose of its assets;
dispose of certain assets used by your company or partnership when withdrawing from the business; or
dispose of qualifying shares acquired through an Enterprise Management Incentive (EMI) scheme.
BADR does not normally eliminate Capital Gains Tax. Instead, qualifying gains within your remaining lifetime allowance are taxed at the special BADR rate.
For disposals made from 6 April 2026, that rate is 18%.
Business Asset Disposal Relief Rate
The BADR tax rate has changed significantly in recent years.
For disposals made:
up to 5 April 2025: qualifying gains were generally taxed at 10%;
6 April 2025 to 5 April 2026: qualifying gains were generally taxed at 14%;
from 6 April 2026: qualifying gains are generally taxed at 18%.
The date on which a disposal takes place can therefore make a significant difference to the tax calculation.
For many business sales, identifying the correct disposal date is not simply a matter of looking at when the money arrived in your bank account. The terms and timing of the contract can be important.
How Much Business Asset Disposal Relief Can You Claim?
The current BADR lifetime limit is £1 million of qualifying gains per individual.
This is a lifetime allowance rather than an annual allowance.
You can make more than one BADR claim during your lifetime, but qualifying gains on previous disposals can reduce the amount of the £1 million limit remaining.
For example, if you have previously claimed BADR on £300,000 of qualifying gains, you would normally have £700,000 of the current lifetime limit remaining.
The limit applies to the qualifying gains, not the sale price of the business.
This distinction is important.
Selling a company for £1.5 million does not necessarily mean you have exceeded the BADR lifetime limit. Your Capital Gains Tax calculation is based on the gain arising from the disposal rather than simply the gross amount received.
Is the £1 Million BADR Limit Per Person?
Yes.
The £1 million Business Asset Disposal Relief lifetime limit applies to each qualifying individual separately.
This can become particularly relevant where spouses or civil partners both own shares in a family company.
Each spouse or civil partner may potentially have their own BADR lifetime limit, but each person must independently satisfy the qualifying conditions.
Simply transferring shares shortly before a sale should not be assumed to secure an additional BADR allowance because the necessary ownership and qualifying conditions generally need to have been satisfied throughout the relevant qualifying period.
Early planning is therefore essential.
Who Qualifies for Business Asset Disposal Relief?
BADR may be available to:
sole traders;
business partners;
company directors and shareholders;
employees who hold qualifying shares;
holders of qualifying EMI shares; and
trustees in certain circumstances.
The exact conditions depend on what is being disposed of.
The rules for selling a sole trader business, for example, are different from the rules applying to the sale of shares in a limited company.
| Type of disposal | Can BADR potentially apply? | Important consideration |
|---|---|---|
| Sale of qualifying company shares | Yes | Personal company, employment/office and trading conditions generally apply. |
| Sale of a sole trader business | Yes | Business generally needs to have been owned for at least two years. |
| Sale of a partnership interest | Yes | Individual partner must satisfy the relevant conditions. |
| Qualifying EMI shares | Yes | Special rules apply and the normal 5% requirement is modified. |
| Personally owned asset used by company | Potentially | Associated disposal rules and possible restrictions need consideration. |
| Shares in an investment company | Usually no | The normal share disposal rules require a trading company or holding company of a trading group. |
| Individual asset sold while business continues | Usually no | BADR normally requires disposal of the whole or a qualifying part of the business. |
Business Asset Disposal Relief on the Sale of a Limited Company
One of the most common BADR claims arises when an owner-manager sells shares in their trading company.
For a typical disposal of ordinary shares outside the EMI rules, several conditions generally need to have been satisfied for at least two years immediately before the disposal.
Broadly, you normally need to:
be an employee or office holder of the company, or another company in the same trading group;
hold at least 5% of the company's ordinary share capital;
hold at least 5% of the voting rights; and
satisfy the required 5% economic interest test.
The company must also normally be a trading company or the holding company of a trading group.
Each condition matters.
A shareholder owning 10% of a company is not automatically entitled to BADR if, for example, the company does not satisfy the trading requirement.
What Does the 5% Rule Mean for BADR?
For shares outside the EMI rules, simply owning 5% of the number of shares issued by a company is not always enough.
Broadly, throughout the required qualifying period you generally need at least:
5% of the ordinary share capital; and
5% of the voting rights.
You must also normally satisfy an economic entitlement condition.
Broadly, this requires an entitlement to at least 5% of either:
the profits available for distribution and the assets available to shareholders on a winding up; or
the proceeds that would be received if the company's ordinary share capital were sold.
The detailed rights attached to different classes of shares can therefore matter.
This is particularly important for companies with:
alphabet shares;
growth shares;
preference shares;
different voting rights;
restricted dividend rights; or
complex shareholder agreements.
Looking only at the percentage shown beside a shareholder's name on a share register may not be sufficient to establish BADR eligibility.
Do I Need to Be a Director to Claim BADR?
Not necessarily.
For a qualifying share disposal you generally need to have been an officer or employee of the company, or another company within the same trading group, throughout the relevant qualifying period.
A company director is normally an office holder, so owner-directors frequently satisfy this requirement.
However, being a director alone is not enough. The shareholding, economic entitlement, trading status and qualifying-period requirements must also be considered.
Equally, an employee who is not a director may potentially qualify if the other relevant conditions are satisfied.
Does the Company Have to Be a Trading Company?
For the usual BADR claim on shares, the company must generally be a trading company or the holding company of a trading group.
This is an area where problems can arise.
A company may carry out a genuine trade while also holding:
substantial cash reserves;
investment properties;
investment portfolios;
loans;
surplus land; or
other investment assets.
The presence of a non-trading asset does not necessarily mean that BADR is lost. The issue is whether the company's activities, viewed as a whole, continue to satisfy the trading-company requirements.
There is no reliable shortcut based solely on one balance-sheet percentage.
Where a company has accumulated significant investments or non-trading activities, its BADR position should ideally be reviewed well before negotiations to sell the company begin.
Can a Property Investment Company Claim BADR?
Usually, a company whose main activity is simply holding properties to generate rental investment income will not satisfy the normal trading-company condition required for BADR on a sale of its shares.
This is different from a company carrying on a genuine qualifying trade involving property.
The distinction between trading and investment activity can therefore be critical.
A profitable company with valuable assets is not necessarily a trading company for BADR purposes.
Landlords and owners of property companies should be particularly careful about assuming that BADR will apply when they eventually sell their shares.
What if My Company Holds a Large Amount of Cash?
Holding cash does not automatically prevent a company from qualifying for BADR.
The reason the cash is being held, how it arose and how the company operates are relevant.
For example, working capital required by an active trade is very different from substantial surplus funds that have effectively become part of an investment activity.
This is one reason we recommend reviewing BADR eligibility before a company sale rather than discovering a potential problem after contracts have been signed.
Business Asset Disposal Relief for Sole Traders
BADR is not limited to company shareholders.
A sole trader may potentially claim the relief when disposing of the whole or part of their business.
Broadly, the business must normally have been owned for at least two years before the disposal.
The disposal must involve a genuine business or identifiable part of a business. Selling an individual asset while simply continuing the same business will not necessarily qualify.
Qualifying assets can potentially include business premises and other assets forming part of the business disposal.
Business Asset Disposal Relief for Partnerships
Business partners may also qualify when disposing of all or part of their interest in a trading business, subject to the relevant conditions.
The tax position needs to be considered at partner level because BADR is an individual relief.
This means different partners involved in the same transaction can potentially have different Capital Gains Tax outcomes depending on:
their ownership history;
previous BADR claims;
assets held personally outside the partnership;
the date they joined the partnership; and
whether the relevant conditions have been satisfied.
Selling an Asset Used by Your Company or Partnership
BADR can sometimes extend to an asset that you personally own but which has been used by your company or partnership.
A common example is a business owner personally owning commercial premises from which their company trades.
This is generally known as an associated disposal.
The rules are more restrictive than simply selling an asset that happened to be used by your business.
Broadly, the asset disposal needs to be associated with a qualifying disposal of your interest in the company or partnership and form part of your withdrawal from participation in the business.
Relief can also be restricted in some circumstances, including where rent has been charged to the business for use of the asset.
Associated disposals should therefore be reviewed carefully rather than assumed to qualify automatically.
Business Asset Disposal Relief and EMI Shares
Special rules apply to shares acquired through a qualifying Enterprise Management Incentive (EMI) option.
One important difference is that the normal 5% shareholding requirement does not apply in the same way to qualifying EMI shares.
Broadly, the option normally needs to have been granted at least two years before the eventual disposal of the shares, together with satisfaction of the other relevant requirements.
This can make BADR particularly valuable to employees who have built up significant gains through an EMI share option scheme without owning 5% of the company.
EMI transactions can become complicated where options have been varied, replaced, exercised shortly before a sale or affected by corporate reorganisations. These circumstances should be reviewed individually.
What Happens if My Shareholding Falls Below 5%?
A shareholder can sometimes satisfy all the BADR requirements and then be diluted below the required 5% because the company issues additional shares.
Without special rules, this could result in the shareholder losing BADR because they no longer satisfy the personal-company requirement when the shares are eventually sold.
There are elections that can potentially preserve relief in qualifying dilution situations by effectively crystallising the gain immediately before the dilution and, where appropriate, deferring the tax until the shares are ultimately sold.
The elections have detailed conditions and time limits.
If a company is raising investment and your shareholding could fall below 5%, BADR should therefore be considered before the new shares are issued.
What Happens if the Company Stops Trading?
Stopping trading does not necessarily mean that BADR is immediately lost.
Where the relevant requirements have been satisfied, a disposal can potentially continue to qualify if the shares are sold within three years after the company stops being a trading company.
Similar principles can apply where an individual business ceases and business assets are subsequently disposed of.
The three-year window should not be mistaken for an automatic entitlement to relief. The qualifying conditions applying before cessation still need to have been satisfied.
BADR When Closing or Liquidating a Company
Business Asset Disposal Relief can potentially apply when a qualifying company is closed and capital distributions are made to shareholders.
However, liquidation and company closure involve additional tax considerations.
In particular, anti-avoidance rules can potentially cause amounts that might otherwise appear to be capital distributions to be treated as income where a shareholder continues or restarts the same or a similar trade or activity in certain circumstances.
This is sometimes referred to as the phoenixing issue.
The tax consequences of extracting a large accumulated cash balance through a Members' Voluntary Liquidation should therefore be considered before the liquidation begins.
Business Asset Disposal Relief Example
Consider a company director who founded a trading company several years ago.
They own 100% of the ordinary shares, have continuously been a director and the company has remained a qualifying trading company.
Assume they sell their shares for £800,000 and their allowable cost and qualifying selling costs total £20,000.
The gain before considering any other available reliefs or allowances would be:
£800,000 − £20,000 = £780,000
If the entire £780,000 gain qualifies for BADR, the individual has not previously used any of their lifetime limit and the disposal takes place during 2026/27, the qualifying gain would fall within the £1 million lifetime BADR limit.
The BADR rate applicable from 6 April 2026 is 18%.
The actual Capital Gains Tax calculation can also be affected by matters such as the Annual Exempt Amount, capital losses and other disposals.
This example illustrates why the gain, rather than the business sale price alone, needs to be considered.
What if My Gain Is More Than £1 Million?
BADR does not stop applying simply because the overall gain exceeds £1 million.
Instead, the available lifetime limit restricts how much of the qualifying gain can benefit from the BADR rate.
For example, suppose a shareholder has never previously claimed BADR and realises a qualifying net gain of £1.4 million.
Subject to the detailed calculation:
up to £1 million could potentially fall within the BADR lifetime limit; and
the remaining £400,000 would not benefit from BADR and would instead be taxed under the normal Capital Gains Tax rules.
Previous BADR claims would reduce the available £1 million amount.
Does the Capital Gains Tax Annual Exempt Amount Still Apply?
The Capital Gains Tax Annual Exempt Amount is separate from the BADR lifetime limit.
For 2026/27, the individual Annual Exempt Amount is £3,000.
The interaction between the Annual Exempt Amount, capital losses, BADR gains and other gains should be considered as part of the complete Capital Gains Tax calculation.
Where gains are taxable at different rates, the way allowances and losses are used can affect the overall result.
Can Husband and Wife Both Claim BADR?
Potentially, yes.
Spouses and civil partners are separate individuals for BADR purposes and can each potentially access their own lifetime limit.
However, each person must independently satisfy the relevant qualifying conditions.
For shareholders, this can include the:
minimum shareholding;
voting rights;
economic entitlement;
officer or employee requirement;
two-year qualifying period; and
trading-company requirement.
Giving shares to a spouse immediately before selling the company will therefore not necessarily produce the expected BADR result.
If joint ownership is likely to form part of eventual exit planning, it is generally better to consider the structure well in advance.
Can I Claim BADR More Than Once?
Yes.
There is no requirement to use Business Asset Disposal Relief only once.
You can potentially claim BADR on several qualifying business disposals during your lifetime.
What matters is the cumulative amount of qualifying gains against which relief has previously been claimed.
Once your available lifetime limit has been exhausted, subsequent gains cannot obtain further BADR under the current lifetime limit.
Keeping records of previous claims is therefore important.
How Do You Claim Business Asset Disposal Relief?
BADR is not simply applied because a disposal appears to qualify.
A claim needs to be made.
Individuals can normally claim through their Self Assessment tax return or by making a separate claim to HMRC where appropriate.
The claim should identify the qualifying disposal and the gain for which BADR is being claimed.
Supporting calculations and records should be retained.
These can include:
purchase and subscription documents;
share certificates;
share registers;
company accounts;
employment or directorship records;
shareholder agreements;
option agreements;
sale agreements;
professional fees;
previous BADR claims; and
evidence supporting the company's trading status.
When Is the Deadline for Claiming BADR?
BADR has a statutory claim deadline.
For example, for a qualifying disposal made during the 2025/26 tax year, the normal deadline for making the BADR claim is 31 January 2028.
The deadline is therefore later than the normal filing deadline for the Self Assessment return for that tax year.
Nevertheless, where the position is known, it will usually be preferable to include the claim correctly when preparing the relevant Capital Gains Tax computation and tax return rather than relying on the later claim deadline.
Business Asset Disposal Relief Checklist
Before assuming that a business sale qualifies for BADR, ask:
What exactly am I selling?
Shares, a sole trader business, a partnership interest and individually owned business assets can have different rules.
Have I satisfied the conditions for two years?
Many BADR conditions must be met throughout the relevant two-year period.
Is my company genuinely a trading company?
Significant investment or non-trading activity may require further examination.
Do I satisfy the 5% tests?
For ordinary non-EMI shares, check share capital, voting rights and economic entitlement rather than ownership percentage alone.
Am I an officer or employee?
This is generally required for the normal BADR treatment of shares.
Have my shares been diluted?
A fundraising round or new share issue can change the BADR position.
Have I previously claimed BADR?
Previous qualifying gains count towards your lifetime limit.
Do I own business premises personally?
An associated disposal may need to be considered separately.
Has the business already stopped trading?
The three-year post-cessation period could become important.
Is the sale consideration complicated?
Earn-outs, deferred consideration, share exchanges and reorganisations can materially change the tax analysis.
Common BADR Mistakes
Assuming every company sale qualifies
BADR does not apply merely because you founded, own or manage a company.
The statutory qualifying conditions still need to be satisfied.
Checking eligibility immediately before the sale
Discovering a problem a few weeks before completion may be too late where a condition needs to have been satisfied for two years.
Looking only at the percentage of shares owned
Voting rights and economic rights can be just as important as the nominal shareholding.
Ignoring investment activities
A trading company that gradually accumulates substantial investment activities can create a BADR issue.
Forgetting previous claims
The £1 million limit is cumulative over an individual's lifetime.
Assuming all company assets qualify
The tax treatment of selling shares in a company is different from the company itself selling its assets.
Confusing a share sale with an asset sale
If a company sells its trade and assets, the gain generally arises within the company. If the shareholder sells their shares, the gain generally arises personally.
These two exit structures can produce very different tax outcomes.
Share Sale vs Company Asset Sale
This distinction is one of the most important areas of business exit planning.
If you personally sell qualifying shares, BADR may potentially apply to your qualifying capital gain.
If instead your limited company sells its business or assets, the proceeds belong to the company. Corporation Tax consequences can arise within the company, followed by a second tax consideration when the remaining money is eventually extracted by shareholders.
A buyer and seller can therefore have very different preferences over whether a transaction is structured as a share sale or an asset sale.
The headline purchase price should not be considered in isolation from the after-tax amount ultimately retained by the business owner.
BADR and Earn-Outs
Business sales are not always completed for a single fixed cash payment.
The consideration might include:
cash on completion;
deferred cash payments;
performance-related earn-outs;
shares in the acquiring company; or
loan notes.
The Capital Gains Tax treatment of these elements can be complex.
In some circumstances, the tax treatment of deferred or contingent consideration can affect when gains arise and whether BADR is available.
For this reason, tax advice is best obtained while the sale agreement is still being negotiated rather than after the transaction has completed.
BADR and Share-for-Share Exchanges
A buyer may offer its own shares as consideration for acquiring your company.
Share-for-share exchanges and corporate reorganisations can involve rules that defer the immediate recognition of a capital gain.
That sounds beneficial, but deferring a gain can create a separate BADR question because your circumstances may be different when the replacement shares are eventually sold.
Elections can sometimes be relevant.
These transactions require careful consideration of both the immediate tax position and the future disposal of the replacement shares.
Business Asset Disposal Relief Planning Before Selling a Business
The best time to check BADR is often at least two years before the expected sale.
That provides time to identify potential problems with:
shareholding percentages;
voting rights;
share classes;
employment or office-holder status;
non-trading activities;
investment assets;
company restructuring;
spouse or civil-partner ownership;
personally owned business premises; and
previous BADR claims.
A pre-sale review does not guarantee that relief will be available, but it can identify problems while there may still be time to address them legitimately.
BADR should therefore form part of wider business exit planning, rather than being treated simply as a box to tick when preparing the tax return after the sale.
Frequently Asked Questions About Business Asset Disposal Relief
What is Business Asset Disposal Relief?
Business Asset Disposal Relief is a Capital Gains Tax relief for certain qualifying disposals of businesses, interests in businesses and shares in qualifying trading companies. It was previously known as Entrepreneurs' Relief.
What is the BADR rate in 2026/27?
For qualifying disposals made from 6 April 2026, the Business Asset Disposal Relief Capital Gains Tax rate is 18%.
What is the BADR lifetime limit?
The current lifetime limit is £1 million of qualifying gains per individual. Previous qualifying gains on which BADR has been claimed can reduce the remaining allowance.
Is Business Asset Disposal Relief the same as Entrepreneurs' Relief?
Yes, broadly. Entrepreneurs' Relief was renamed Business Asset Disposal Relief in 2020.
How long do I need to own a business before claiming BADR?
For many disposals, the relevant qualifying conditions must have been satisfied for at least two years before the disposal or relevant cessation date.
Do I need to own 5% of a company to claim BADR?
For a normal disposal of non-EMI shares, a 5% test generally applies to ordinary share capital and voting rights together with an economic entitlement test. Special rules apply to qualifying EMI shares.
Can a director claim Business Asset Disposal Relief?
Yes, a director selling shares may potentially claim BADR where all the relevant requirements are met, including the personal-company, trading-company and qualifying-period conditions.
Can an employee claim BADR?
Potentially. An individual does not necessarily need to be a director. An employee holding qualifying shares can potentially satisfy the officer-or-employee requirement if the other BADR conditions are met.
Can sole traders claim BADR?
Yes. A sole trader disposing of all or a qualifying part of a business can potentially claim BADR where the relevant ownership and qualifying conditions are satisfied.
Can partners claim BADR?
Yes. Individual partners may potentially qualify when disposing of all or part of their interest in a qualifying business.
Does BADR apply to property companies?
A company whose activities mainly consist of holding property as an investment will generally not satisfy the trading-company condition required for the normal BADR treatment of shares.
Does cash in a company prevent BADR?
Not automatically. The amount of cash, why it is held and the company's overall activities need to be considered.
Can I claim BADR if my company has stopped trading?
Potentially. Where the relevant conditions have been satisfied, a disposal within three years after the company ceased to be a trading company can potentially qualify.
Can BADR apply when a company is liquidated?
Potentially, provided the necessary conditions are satisfied. However, distributions on liquidation and anti-avoidance provisions should be considered carefully.
Is BADR automatic?
No. A claim needs to be made and the qualifying conditions must be satisfied.
Can I use BADR more than once?
Yes. Multiple claims can be made, but qualifying gains count towards the individual's lifetime limit.
Does my spouse get a separate BADR allowance?
Yes. Spouses and civil partners are separate individuals for BADR purposes, but each person must independently satisfy the relevant qualifying requirements.
What happens to gains above £1 million?
Once an individual's available BADR lifetime limit has been exhausted, additional gains cannot benefit from BADR under the current limit and are taxed under the normal Capital Gains Tax rules.
Business Asset Disposal Relief Advice
Selling a business is often one of the largest financial transactions a business owner will undertake.
A relatively small issue with share rights, trading status, ownership history or transaction structure can materially alter the Capital Gains Tax position.
At The Online Accountants, we can help business owners understand the tax consequences of selling or closing their business, including:
Business Asset Disposal Relief eligibility;
Capital Gains Tax calculations;
company share disposals;
business disposals;
Members' Voluntary Liquidations;
associated disposals;
pre-sale tax planning;
shareholding and ownership reviews;
deferred consideration and earn-outs; and
reporting qualifying disposals to HMRC.
Where possible, BADR eligibility should be reviewed before you agree the sale, particularly where the transaction is substantial or the company has a complicated share or investment structure.
Check Your Business Asset Disposal Relief
If you are considering selling your business or company shares, do not wait until after completion to establish whether Business Asset Disposal Relief applies.
The key questions are often not simply “How much is my business worth?” but:
Do I qualify for BADR?
How much of my lifetime limit remains?
What will my actual Capital Gains Tax liability be?
And how much will I retain after tax?
Use our Business Asset Disposal Relief Calculator to estimate the potential Capital Gains Tax on your disposal, or speak to The Online Accountants if you would like help reviewing a proposed business sale.