Business Asset Disposal Relief (BADR): What You Need to Know

It’s important to understand what Business Asset Disposal Relief (BADR) is, how it works, and what role it must play if you’re preparing to close your company. Previously known as Entrepreneurs’ Relief, BADR can significantly reduce the amount of tax you pay on disposals of qualifying business assets. 

In this blog we explore what BADR is, what it does, who qualifies, and how you’re able to claim. We’ll also investigate the upcoming changes in 2026. 

• BADR allows those who are eligible to pay a lower rate of tax at 14% on Capital Gains, up to a lifetime limit of £1 million, for qualifying disposals from 6 April 2025. 

• From 6 April 2026 the 14% rate will increase to 18% for those disposals. 

• To qualify you generally will need to have owned a minimum of 5% of shares and voting rights, for at least 2 years in a trading company. 

• The claim is then made via the Capital Gains supplementary pages within your Self-Assessment Tax Return. 

It’s designed to reduce the Capital Gains Tax (CGT) rate on specific business disposals. It applies to: 

• Lifetime gains up to £1 million when you dispose of qualifying assets. 

• Any gains above the £1 million threshold are taxed at the standard CGT rates. This is due to the basic rate (18%) and the higher rate (24%) of CGT. 

• Note that from 6 April 2026 the BADR rate will increase from 14% to 18%

To be able to claim BADR you must meet several of the following conditions: 

• You must have owned shares within the company for a minimum of 2 years prior to their disposal. 
• You must have at least 5% control of the company’s shares, and 5% of the voting rights during that 2-year period. 
• You must also need to be entitled to at least 5% of either:- 

1. Available profits for distribution and assets on winding up; or 
2. Disposal proceeds if the company is sold. 

• You must also be an office holder or employee of the company (or of a company from within the same group). 
• The company must be a trading company (or the holding company of a trading group), and not just investment activities.  
• Should your shareholding fall below 5% due to further issues of shares, you may still be eligible. Speak to your Client Director for clarification, and to discuss your options. 

You might still be eligible to claim BADR, even if your company ceases to trade, or becomes dormant. You’re able to sell your shares within a 3-year period of the cessation of trading.  

Whilst the process of claiming is relatively easy, it must be followed correctly to qualify: 

• You must claim BADR via the Capital Gains supplementary pages of your Self-Assessment Tax Return. 

• If you sold any assets during the 2024-25 tax year, the deadline to claim is up to January 2027 but the taxes and declaration of the disposal, needs to go on the submission due by 31 January 2026 

• If you decide you want to close your company and distribute its reserves as a ‘capital distribution’ ensure that all eligibility criteria are met to avoid it being taxed as a dividend. 

• Beware of the anti-avoidance rules in place to prevent business owners from gaining unintended tax advantages (ie if you claim BADR when selling your business, and start a new company that’s ‘substantially similar’ to your previous one within a 2-year period, HMRC may treat the distribution as a dividend instead. 

• Make sure you keep clear records of shareholdings, voting rights, trading statues and timings of disposals. All these factors will underpin qualification. 

• Speak to your Client Director to seek specialist advice. BADR rules change and any small changes can affect eligibility, such as the upcoming rate change in 2026. 

When the time comes to sell or shut your business, understanding how BADR works is essential. With the correct planning and support in place, BADR can reduce your tax liability significantly, especially given the upcoming increase in 2026. However, eligibility is conditional on specific criteria around ownership, timing and trading activity.  

BADR is not something you can leave to chance, ensure you discuss your plans with your Client Director for total clarity. If you’re considering closing your company and are ready to take the next step, get in touch to check your eligibility and plan your disposal strategy.