What Is Entrepreneurs' Relief (Business Asset Disposal Relief)?
Business Asset Disposal Relief (BADR) — formerly known as Entrepreneurs' Relief — is a Capital Gains Tax relief that reduces the rate of CGT on qualifying business disposals to 14% for 2025/26 (rising to 18% from April 2026 under announced changes). This compares to the main CGT rates of 18% and 24%, making it a valuable relief for business owners planning to sell or close their business.
Recent Rate Changes
In the October 2024 Autumn Budget, the Chancellor announced that the BADR rate would increase from 10% to 14% for disposals on or after 6 April 2025, and then to 18% from 6 April 2026. This followed years at the lower 10% rate. The lifetime limit remains at £1 million of qualifying gains.
Who Can Claim?
BADR is available to individuals (not companies) who have qualifying disposals of: a business or part of a business that you own as a sole trader or business partner; shares in a personal company where you have been an employee or director and owned at least 5% of shares and 5% of voting rights for at least 2 years; assets previously used in a business that has now ended. The 2-year ownership and 5% shareholding tests must be met throughout the 2 years ending on the date of disposal (or the date the business ceased, if earlier).
The Lifetime Limit
You can use BADR on up to £1 million of qualifying gains across your lifetime. If you have previously claimed Entrepreneurs' Relief (the predecessor to BADR), those gains count against your £1 million limit. Once you have used the full £1 million, any further qualifying gains are taxed at the standard CGT rates.
Associated Disposals
In some circumstances, assets used in a business but owned personally can also qualify for BADR if they are disposed of at the same time as the main business disposal. For example, if you own the premises from which your business operates and you sell both the business and the premises simultaneously, the premises sale may qualify for BADR alongside the business sale.
How to Claim
BADR is claimed through your Self-Assessment tax return for the year of disposal. You indicate the qualifying disposal and the relief claimed in the Capital Gains section. Keep detailed records of your ownership period, shareholding percentage, and the nature of your employment in the company — HMRC may challenge claims if the qualifying conditions cannot be demonstrated.
Investor's Relief
Investor's Relief is a separate relief providing a 14% CGT rate (rising to 18% from April 2026, in line with BADR) on gains from qualifying shares in unquoted trading companies. Unlike BADR, the investor need not be an employee — they simply must have subscribed for the shares (not purchased on the secondary market) and held them for at least 3 years from April 2016. The lifetime limit for Investor's Relief is £10 million.
Planning Considerations
Given the announced rate increases — 14% in 2025/26 rising to 18% in 2026/27 — timing of qualifying disposals may be important. Completing a qualifying business sale before 6 April 2026 means benefiting from the 14% rate rather than 18%. Always take professional advice on the timing and structure of business disposals to maximise available reliefs.
