Business Asset Disposal Relief (BADR), once called Entrepreneurs’ Relief, reduces the Capital Gains Tax you pay when you sell all or part of a qualifying business. It applies a lower rate to gains up to a £1 million lifetime limit. That rate is 10% for disposals before 6 April 2025, 14% for disposals on or after 6 April 2025, and 18% for disposals on or after 6 April 2026. You usually need to have met the qualifying conditions for at least two years.

Selling a business you have spent years building is often the largest single financial event of your working life, so the tax treatment matters. BADR was designed to reward people who take the risk of running a business by charging a softer rate of Capital Gains Tax on the profit when they sell up or step away. The relief has become less generous in recent years, but for many owners it still saves a meaningful sum. This guide sits within our wider accountancy and tax guide and explains the rules in plain terms.

What is Business Asset Disposal Relief?

BADR is a Capital Gains Tax relief for individuals who dispose of qualifying business assets. Those assets can be all or part of a business you run as a sole trader, your share of a business partnership, or shares in your own trading company. Trustees can also claim in limited circumstances. It replaced Entrepreneurs’ Relief in name in the March 2020 Budget, when the lifetime limit was also cut sharply, so older articles that still say Entrepreneurs’ Relief are describing the same relief under its previous label.

How much is the £1 million lifetime limit worth?

You can claim BADR on qualifying gains up to a lifetime limit of £1 million. This is a running total across every claim you ever make, not a fresh allowance each time you sell something. If you claimed on £600,000 of gains a few years ago, only £400,000 of the limit remains for future disposals. Any qualifying gains above the limit are taxed at the ordinary Capital Gains Tax rates instead. Because the limit is per person, business partners and spouses who each meet the conditions may each have their own £1 million to use.

What Capital Gains Tax rate does BADR charge?

The BADR rate has risen in stages. For disposals before 6 April 2025 the rate was 10%. For disposals on or after 6 April 2025 it is 14%. For disposals on or after 6 April 2026 it rises again to 18%. The date that counts is normally the date of the contract for the sale, not the date the money reaches you, so timing a disposal around these thresholds can change the bill significantly.

How do BADR rates compare with normal Capital Gains Tax?

Gains that do not qualify for BADR are taxed at the standard rates of 18% for basic rate taxpayers and 24% for higher rate taxpayers. As the BADR rate climbs towards 18%, the gap with the standard rates narrows, so the relief is worth less than it once was. It still helps, but the days of a flat 10% are over. Gains on residential property that is not your main home follow a separate route and a tight deadline, which we cover in our guide to the 60 day property return.

Who qualifies for Business Asset Disposal Relief?

The conditions differ depending on how your business is structured, and whether you trade as a sole trader or through a company affects far more than just this relief, as our comparison of sole trader versus limited company sets out.

Sole traders and business partners

If you are a sole trader or a partner, you must have owned the business for at least two years before the date you sell it. When you sell only part of a business or a single asset, the asset must have been in use for the business. Selling assets after the business has already closed can also qualify if you dispose of them within three years.

Company directors, officers and employees

For a sale of shares, the company must be a trading company (rather than an investment vehicle) and it must be your personal company throughout the two years before the sale. Being your personal company means you hold at least 5% of the ordinary shares and at least 5% of the voting rights, and you are entitled to at least 5% of the profits available for distribution and of the assets on a winding up. You must also be an employee or an officer, such as a director, of the company. If your company also pays Corporation Tax on its profits, our guide to Corporation Tax explains how that fits alongside your personal position.

How do you claim BADR through Self Assessment?

You claim BADR on your Self Assessment tax return. Work out your qualifying gain, then complete the Capital Gains summary pages and the additional information section, ticking the box that applies to the relief. The deadline to claim is the first anniversary of the 31 January following the tax year of the disposal, so a sale in the 2025/26 tax year must be claimed by 31 January 2028. If you do not usually file a return, you can claim by writing to HMRC. Keeping clear records of dates, shareholdings and how the two year test is met makes the claim far smoother.

Large capital gains and reliefs like BADR are exactly the kind of entries HMRC may decide to check, and an enquiry can drag on for months even when your figures are right. A tax investigation insurance policy from Solar Protect covers up to £100,000 of your own accountant’s fees for handling that enquiry, with no excess to pay, so professional defence never becomes a reason to settle early. Get a quote to protect the value of your sale before you file.

Reviewed by Matthew Bartlett, Director, Solar Protect. This guide is general information, not personalised tax or financial advice. Figures are correct for the 2025/26 and 2026/27 UK tax years at the time of writing.