If you’re considering selling your business, whether in part or in full, or winding up altogether, it’s worth investigating whether you’re eligible for Business Asset Disposal Relief (BADR).
Introduced in 2008 as Entrepreneur’s Relief and renamed as a result of the Finance Act 2020, Business Asset Disposal Relief offers business owners and those holding shares in a business the opportunity to reduce their Capital Gains Tax liability.
While it’s pretty straightforward, there are some important things to be aware of. In this article, we explain what Business Asset Disposal Relief is, as well as the limits that claims are subject to and some of the qualifying criteria.
What is BADR?
Previously known as Entrepreneurs Relief, Business Asset Disposal Relief is a type of tax relief available to those looking to sell their shares or securities, all or part of their business, or on the closure of a company, providing the required criteria are met in each case.
Usually, the sale or disposal of an investment, such as shares, would result in Capital Gains Tax becoming due on the difference between what you originally paid for them to what you sold them for.
Since April 2026 the main rates of Capital Gains Tax have been 18% at the basic rate of tax and 24% at the higher rate of tax, and capital gains are taxed after all income (salary, dividends, sole trade and rental income etc.) has been taxed. For someone whose salary already fully uses their basic rate band then, any capital gains would be taxable at the higher rate.
If, however you are entitled to BADR, you will pay Capital Gains Tax at 18%, regardless of your other income.
The current Business Asset Disposal Relief limit is up to £1m over a lifetime. This can be spread over several disposals, so if you decide (for example) to sell shares or businesses on more than one occasion, you’ll still be eligible up to that limit.
Who is eligible?
Most commonly BADR will be applicable when selling a business or on the closure of a limited company.
If you are selling all or part of your (unincorporated) business, then you must meet the following conditions:
- You must have owned the company for at least two years
- You’re a sole trader or business partner
If you are selling or closing a limited company, then you must meet the first criterion and additionally:
- You must be an employee or officer of the company
- Have held at least 5% of the issued share capital for at least two years
- The company must have been a trading company, and the claim must be made within three years of the cessation of trade or sale of the shares in the company.
If you need more information, it’s worth reading the Business Asset Disposal Relief HMRC manual, which covers very detailed guidance.
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