Business Asset Disposal Relief: Pay Less CGT When You Sell Your Business

If you’re selling your business — or winding up a company you’ve built — Business Asset Disposal Relief can dramatically cut the Capital Gains Tax you pay. Here’s how it works and how to make sure you qualify.

What is Business Asset Disposal Relief?

Business Asset Disposal Relief (BADR) — which you may still know by its old name, Entrepreneurs’ Relief — is a Capital Gains Tax relief that applies a lower CGT rate when you sell all or part of a qualifying business.

It exists to reward people who’ve built a business, by taxing the gain on its sale more gently than a standard capital gain.

The rate (and why timing matters)

BADR has historically been very generous — a 10% CGT rate on qualifying gains. But that’s changing:

• It rose to 14% from 6 April 2025
• It’s scheduled to rise again to 18% from 6 April 2026

Even at 18% it’s still potentially better than the standard 24% higher rate, but the direction of travel matters — the timing of a sale or company wind-up can make a real difference to the tax. Always confirm the current rate before acting.

The £1 million lifetime limit

Relief applies to qualifying gains up to a £1 million lifetime limit. This is crucial:

• It’s a lifetime allowance, not annual
• Claims across different disposals over your life all count towards the same £1m
• Gains above the limit are taxed at the standard CGT rates

So if you’ve claimed before, you may have less of the £1m left than you think.

Who qualifies?

Broadly, BADR can apply when you sell:

• All or part of a sole trader business or your share of a partnership, or
• Shares in a trading company where you’re an employee or director and hold at least 5% of the ordinary shares and voting rights

You generally need to have met the conditions for at least 2 years before the disposal — which is why planning ahead, well before a sale, matters.

Selling vs winding up

BADR isn’t just for selling to a buyer. When you wind up a solvent company through a Members’ Voluntary Liquidation (MVL), the final distribution can often be treated as a capital gain that qualifies for BADR — taxed far more favourably than taking the money as dividends. We cover this in how to close a limited company.

Plan the disposal — don’t just react to it

With the BADR rate rising, a 2-year qualifying period, a £1m lifetime cap and strict conditions, this is a relief that rewards planning ahead. Getting the structure and timing right — and meeting every condition — can save a significant amount of tax. Our Capital Gains Tax service and tax planning service make sure you qualify, claim correctly, and time the disposal well. For the bigger CGT picture, see Capital Gains Tax explained.