Business Asset Disposal Relief (BADR) is a Capital Gains Tax relief that lets you pay a reduced rate of tax when you sell, or otherwise dispose of, all or part of a qualifying business. It used to be called Entrepreneurs' Relief, and you'll still hear it called that.
For disposals in the 2026/27 tax year, BADR cuts the Capital Gains Tax rate on qualifying gains to 18%, against the standard rates of 18% or 24%. There's a £1 million lifetime limit on the gains you can claim it against.
This guide explains what BADR is, who qualifies, what rate applies now, and how to claim it. It's written for sole traders, business partners and company shareholders who are thinking about selling up or winding down.
Getting a disposal right is one of the highest-value pieces of planning we do for clients through our tax advisory services, because the difference between qualifying and not qualifying can be tens of thousands of pounds.
What is Business Asset Disposal Relief?
Business Asset Disposal Relief is a relief that reduces the rate of Capital Gains Tax you pay when you dispose of a business or business assets that meet HMRC's conditions.
A "disposal" is wider than just a cash sale. It includes selling your business, selling shares in your company, giving the business away, or closing it down and distributing the assets. If the disposal produces a chargeable gain, BADR can cut the tax on that gain.
The relief was introduced as Entrepreneurs' Relief and renamed Business Asset Disposal Relief from the 2020/21 tax year. The name changed, but the core idea did not: it rewards people who have built up a trading business and are now exiting it.
BADR sits alongside, not instead of, your annual tax-free allowance. For 2026/27 the Capital Gains Tax Annual Exempt Amount is £3,000, and you can use that against your gains before BADR applies to the rest.
What is the BADR rate for 2026/27?
For disposals on or after 6 April 2026, qualifying gains are taxed at 18% under Business Asset Disposal Relief.
The rate has moved twice in two years, so the date of disposal matters. Here is how it has changed.
| Disposal date | BADR rate | Standard CGT rate (other assets) |
|---|---|---|
| On or before 5 April 2025 | 10% | 18% / 24% |
| 6 April 2025 to 5 April 2026 | 14% | 18% / 24% |
| On or after 6 April 2026 | 18% | 18% / 24% |
For 2026/27, the standard Capital Gains Tax rates on most assets are 18% within your basic rate band and 24% above it. BADR gives a flat 18% on qualifying gains regardless of your income, so the saving is clearest for higher and additional rate taxpayers whose gains would otherwise be taxed at 24%.
The relief is less generous than it was when the rate was 10%, but on a large gain the difference between 18% and 24% on up to £1 million is still worth up to £60,000.
Who qualifies for Business Asset Disposal Relief?
The conditions depend on what you're selling. The common thread is that you must have held a qualifying interest in a genuine trading business for at least 2 years up to the date of disposal.
If you're selling all or part of your business (as a sole trader or business partner), both of these must apply for at least 2 years before the sale:
- you're a sole trader or business partner, and
- you've owned the business for at least 2 years.
If you're selling shares or securities in a company, both of these must apply for at least 2 years before the sale:
- you're an employee or office holder of the company (or a company in the same group), and
- the company's main activities are trading, rather than non-trading activities like investment.
For shares that did not come from an Enterprise Management Incentives (EMI) scheme, there's an extra test. The company must be your "personal company", meaning you hold at least 5% of both the shares and the voting rights for the 2 years before the sale.
If you're selling assets you lent to the business (an associated disposal, for example premises you own personally that the business used), you must have sold at least 5% of your partnership share or company shares, and have owned the assets and let the business use them for at least one year up to the date of disposal.
The 2-year ownership window is the condition we see tripped most often. Selling a few months early, or restructuring shareholdings shortly before a sale, can quietly break it.
What is the BADR lifetime limit?
You can claim Business Asset Disposal Relief on up to £1 million of qualifying gains over your lifetime. This is a cumulative limit, not a per-disposal or per-year limit.
Every qualifying disposal you've ever made counts towards the same £1 million pot. So if you used relief on an earlier business sale, that reduces the headroom left for the next one. Disposals made under the old Entrepreneurs' Relief rules count too.
Once you've used your £1 million, any further qualifying gains are taxed at the standard Capital Gains Tax rates instead, which for 2026/27 means 18% or 24% depending on your other income.
If you're married or in a civil partnership and you each own a qualifying stake in the business, you may each have your own £1 million limit. That's one of the planning points worth checking well before a sale, not on completion day.
How do you claim Business Asset Disposal Relief?
BADR is not automatic. You have to claim it, and there's a deadline.
You claim through the Capital Gains summary pages of your Self Assessment tax return, or by completing Section A of HMRC's helpsheet HS275. If you don't normally file a return, you can claim by writing to HMRC.
The deadline is the first 31 January following the first anniversary of the end of the tax year of disposal. In practice that means a disposal in 2026/27 must be claimed by 31 January 2029. A disposal in the 2025/26 tax year must be claimed by 31 January 2028.
Miss the deadline and you lose the relief, so a qualifying disposal should be flagged in your records the moment it happens, not at the next year end.
Illustrative example: selling a trading company
Illustrative example. Suppose Daniel founded a limited company eight years ago, owns 100% of the shares, is a director, and the company is a genuine trading business. He sells all his shares in July 2026 (the 2026/27 tax year) and makes a chargeable gain of £600,000. He has never claimed BADR before and has no other capital gains in the year.
| Step | Amount |
|---|---|
| Chargeable gain on the share sale | £600,000 |
| Less Annual Exempt Amount (2026/27) | £3,000 |
| Gain taxable under BADR | £597,000 |
| Capital Gains Tax at the BADR rate of 18% | £107,460 |
Daniel's Capital Gains Tax bill is £107,460 (£597,000 x 18%).
Without BADR, and assuming he's a higher rate taxpayer so the gain falls in the 24% band, the same £597,000 would be taxed at 24%, giving £143,280. BADR saves him £35,820 here (£143,280 minus £107,460).
His £600,000 gain also uses £600,000 of his £1 million lifetime limit, leaving £400,000 of headroom for any future qualifying disposal.
These figures are illustrative. Your own outcome depends on your gain, your other income, how much of your lifetime limit you've used, and whether every qualifying condition is met.
Frequently asked questions
What is Business Asset Disposal Relief?
Business Asset Disposal Relief is a Capital Gains Tax relief that reduces the rate of tax you pay on gains when you sell or otherwise dispose of all or part of a qualifying trading business or your shares in it. It was previously called Entrepreneurs' Relief.
What is the Business Asset Disposal Relief rate for 2026/27?
For disposals on or after 6 April 2026, qualifying gains are taxed at 18% under Business Asset Disposal Relief. The rate was 14% for disposals between 6 April 2025 and 5 April 2026, and 10% on or before 5 April 2025.
How much is the BADR lifetime limit?
You can claim Business Asset Disposal Relief on up to £1 million of qualifying gains over your lifetime. It's a cumulative limit, so every qualifying disposal you've ever made, including older Entrepreneurs' Relief claims, counts towards the same £1 million.
How long do I need to have owned the business to qualify for BADR?
You generally need to have met the qualifying conditions for at least 2 years up to the date of disposal. For company shares that aren't from an EMI scheme, you also need to have held at least 5% of the shares and voting rights and been an employee or office holder for those 2 years.
How and when do I claim Business Asset Disposal Relief?
You claim BADR through your Self Assessment tax return or HMRC's HS275 helpsheet. The deadline is the first 31 January following the first anniversary of the end of the tax year of disposal, so a disposal in 2026/27 must be claimed by 31 January 2029.
