Business Asset Disposal Relief: selling your business for less tax

What is Business Asset Disposal Relief?

Business Asset Disposal Relief (BADR) reduces the Capital Gains Tax you pay when you sell or give away all or part of your business, or shares in your own trading company. It is the new name for Entrepreneurs' Relief. The rules are largely the same, but the lifetime limit was cut from £10 million to £1 million for disposals on or after 11 March 2020.

Can you claim BADR more than once? Yes. There is no limit on the number of claims, but the total gains on which you can claim over your lifetime is £1 million. Gains above that are taxed at the normal Capital Gains Tax rates. The 18% rate applies whatever your income, but qualifying gains use up any unused basic rate band first, so your other gains are more likely to be taxed at 24%.

Investors' Relief is a separate relief for outside investors in unlisted trading companies. It has its own conditions and lifetime limit, and the same 18% rate from 6 April 2026. Gift Hold-Over Relief is different again: it postpones the gain when business assets are given away, rather than reducing the rate.

When does BADR apply?

• Shares in your trading company (or holding company of a trading group), if the conditions below are met for 2 years before the sale.
• All or part of your business as a sole trader or partner, owned for at least 2 years.
• Assets used in the business after it ceases, if sold within 3 years.
• Shares in a company that has stopped trading, if sold within 3 years of trading stopping. See closing a company.
• Assets you own personally and let your company or partnership use, in some cases, together with a qualifying sale of shares or a partnership share. See property you let to your business.

The conditions for company shares

Does BADR apply to limited companies?

Not to the company itself. A company that sells a business or assets pays Corporation Tax on its gains. BADR is for individuals, and some trustees, who sell shares in a trading company or the holding company of a trading group. The shareholder must meet the conditions above for the 2 years before the sale.

Who can claim BADR?

The names below are illustrative examples, not real clients.

EMI shares. Shares acquired by exercising an Enterprise Management Incentive option can qualify even if you hold less than 5%: the 5% tests do not apply. The option must have been granted at least 2 years before the sale. For those 2 years you must have been an officer or employee of the company or its group, and the company must have been trading. If the company has stopped trading, the 2 years run to that date and the shares must be sold within 3 years of it.

Can trustees claim BADR? Trustees can claim on shares, or on business assets, held in the trust where a beneficiary has an interest in possession (not for a fixed term). For shares, the company must be the beneficiary's own personal company and a trading company, and the beneficiary must be an officer or employee, throughout a 2-year period ending within the 3 years before the trustees' sale. The trustees and the beneficiary claim jointly, and the gain uses up the beneficiary's £1 million lifetime limit.

Part of a business, or just assets?

Selling part of a business qualifies only if that part could work as a business on its own. Selling a van, a machine or premises while you keep trading is just a sale of assets.

These examples are illustrative.

BADR for farmers

Farming is a trade, so a farmer can claim BADR on selling the whole farming business or a distinct part of it, for example a complete dairy unit with its buildings, herd and equipment. Selling a field or some farmland while the farm carries on largely as before is usually a sale of an asset, not of part of the business, and does not qualify. Each case depends on its facts.

Property or assets you let to your business

An asset you own personally and let your partnership or personal company use can qualify. This is called an associated disposal. The conditions:

• It is sold as part of your withdrawal from the business.
• At the same time you dispose of at least a 5% share of the partnership, or at least 5% of the company's shares.
• The business used the asset for the 2 years before that disposal, or before the business stopped.
• If you acquired it on or after 13 June 2016, you owned it for at least 3 years.

If you charged rent after 5 April 2008, only a just and reasonable part of the gain qualifies. Charging rent is the most common reason the relief is cut.

Can landlords or furnished holiday lets claim BADR?

Letting property is an investment, so landlords generally cannot claim BADR when they sell a rental property. Ordinary buy-to-let property does not qualify.

Furnished holiday lets used to be treated as a trade, but that special regime ended on 6 April 2025 (1 April 2025 for companies), and holiday lets are now treated like other lettings. BADR may still apply where a furnished holiday letting business that met the old conditions stopped before 6 April 2025, and the property is sold within 3 years of it stopping.

Closing your company: BADR on liquidation

If your company stops trading, you can still claim BADR on your shares if you dispose of them within 3 years of the date trading stopped. This includes receiving capital distributions in a formal winding up. The conditions must have been met for the 2 years up to the date trading stopped.

Distributions in a winding up can be taxed as income instead, under an anti-avoidance rule, if all of these apply: you held at least 5%, the company was a close company, you carry on or are involved in the same or a similar trade within 2 years, and avoiding Income Tax was a main purpose.

Common BADR mistakes

1. 1. "I thought my business was trading"The company, or group, must have no substantial non-trading activities, such as letting property or holding investments or surplus cash. HMRC looks at non-trading income, assets, expenses and staff time, and the company's history. It treats about 20% as a guide, but this is not a strict test: HMRC weighs the indicators together.
2. 2. Selling assets, not a businessA part of the business must be able to operate on its own.
3. 3. Missing documentsShare certificates, partnership agreements and accounts prove ownership dates and trading.
4. 4. "Nearly two years"23 months is not 24. There is no rounding up.
5. 5. Personal property sold separatelyA building you own and let to the business qualifies only with a material disposal of the business or shares, and rent can reduce the relief.
6. 6. Claiming too lateThe deadline is the first anniversary of 31 January after the tax year of sale: 31 January 2029 for a sale in 2026/27.
7. 7. "The £1 million resets each year"It is a lifetime limit, across all your disposals.
8. 8. Confusing reliefsBADR, Investors' Relief and Gift Hold-Over Relief work very differently.
9. 9. Diluted below 5%New share issues can take you below 5% without you noticing. If you would have qualified just before the new issue, you can elect to be treated as selling and buying back your shares at market value at that point. This secures BADR on the gain up to then, and a further election lets you defer the tax until you actually sell. The election is made on the Capital Gains summary pages of your return, or in writing to HMRC if you do not file one.

BADR rates for 2024/25, 2025/26 and 2026/27

The £1 million lifetime limit did not change. On a £1 million gain, BADR at 18% still saves £60,000 compared with the 24% rate. Losing the relief now raises the rate by 6 percentage points at most, and not at all on gains within your basic rate band, which are taxed at 18% anyway.

Contract date or completion? For Capital Gains Tax, the date of disposal is normally the date an unconditional contract is made, not the completion date. However, if an unconditional contract was made on or after 30 October 2024 but before 6 April 2026, and completed on or after 6 April 2026, the 18% rate applies, unless the contract had no tax-avoidance purpose and, between connected persons, was made wholly for commercial reasons. Where the gains on such contracts total more than £100,000, you must claim this. A similar rule applies to contracts made before 6 April 2025 and completed on or after 6 April 2025, where the 14% rate then applies.

How and when to claim BADR

BADR is not given automatically. You claim it on your Self Assessment tax return or, if you do not file a return, on Section A of the claim form in helpsheet HS275. The deadline is the first anniversary of 31 January after the end of the tax year of the sale. That is 31 January 2028 for a sale in 2025/26 and 31 January 2029 for a sale in 2026/27.

BADR calculator

What to prepare

• Share certificates and the register of members
• Your directorship and employment dates
• The company's latest accounts and assets
• Draft heads of terms or sale agreement
• Details of any property you let to the company, and any rent charged
• Any earlier BADR or Entrepreneurs' Relief claims

0 of 6 ready

One piece of advice

Start checking the conditions at least two years before you plan to sell. A small change in structure made in time can save the relief. After the sale, nothing can be changed.

Test yourself

Law and sources

• GOV.UK: Business Asset Disposal ReliefRates, conditions, liquidation and dilution
• GOV.UK: Business Asset Disposal Relief, how to claimClaim and deadline
• HMRC helpsheet HS275 (2026)Conditions, associated disposals, trustees and the claim form
• Taxation of Chargeable Gains Act 1992, sections 169H to 169SThe law on the relief
• HMRC Capital Gains Manual CG63950HMRC guidance on the relief
• HMRC Capital Gains Manual CG64090Trading companies and substantial non-trading activities
• HMRC Capital Gains Manual CG63996Associated disposals
• HMRC Capital Gains Manual CG64020Part of a business or an asset, including farmland
• HMRC Capital Gains Manual CG64052EMI shares
• HMRC Capital Gains Manual CG63985Trustees
• HMRC Capital Gains Manual CG10250Contracts made before a rate change
• HMRC Company Taxation Manual CTM36305Winding-up anti-avoidance rule
• GOV.UK: abolition of the furnished holiday lettings tax regimeHoliday lets from April 2025
• GOV.UK: Capital Gains Tax rates and allowancesRates and the annual exempt amount

This guide explains the rules in general terms as at 9 October 2026. It is not advice for your situation. Rules and rates change.