Business Asset Disposal Relief (BADR)
A Capital Gains Tax relief on qualifying business disposals — charged at a flat rate of 10% for 2024/25, 14% for 2025/26, and 18% from April 2026 — up to a £1 million lifetime limit per individual. It applies to sole traders, business partners, and shareholders in personal companies who meet strict ownership and trading conditions (generally a 5% stake held for at least two years). Renamed from Entrepreneurs' Relief in 2020 when the lifetime limit was cut from £10 million to £1 million.
How it works
BADR is not automatic — you must actively claim it, normally by the first anniversary of the 31 January Self Assessment filing deadline for the tax year in which the disposal happened, either on your tax return or by writing to HMRC. Missing the claim window means the disposal falls back to the standard Capital Gains Tax rates instead of the reduced BADR rate, so tracking the deadline matters as much as meeting the qualifying conditions.
The £1 million lifetime limit is cumulative across every BADR claim you ever make, not an annual allowance, so once you have used it against past disposals — including under its old name of Entrepreneurs' Relief — only the remaining balance is available at the reduced rate. Gains above the lifetime limit are taxed at the normal Capital Gains Tax rates that would otherwise apply to the disposal.
BADR gains still use up your Annual Exempt Amount in the normal way before the reduced rate is applied, and the qualifying conditions must be met throughout a two-year period ending on the date of disposal — a shorter holding period or a lower shareholding at any point can disqualify the claim entirely. Sole traders, business partners, and company shareholders each have slightly different qualifying tests, so the detail matters.
Example: BADR on a business sale
You sell your shareholding in your personal trading company for a qualifying gain of £500,000, having met the ownership and trading conditions for at least two years.
From April 2026, that gain is taxed at the BADR rate of 18% rather than the standard Capital Gains Tax rate, giving tax of £90,000 instead of a higher bill under the normal rules.
Frequently asked questions
Is BADR given automatically when I sell a qualifying business?
No. You must actively claim it, normally within about 22 months of the end of the tax year of disposal, or the disposal is taxed at standard Capital Gains Tax rates instead.
Does my BADR lifetime limit reset each year?
No. The £1 million limit is cumulative over your lifetime across every claim you make, including any relief claimed previously under the old Entrepreneurs' Relief name.
How is BADR different from Investors' Relief?
BADR is for people actively involved in the business, such as employees or directors with a qualifying stake, while Investors' Relief is aimed at external investors who are not employees, and each has its own separate £1 million limit.
Related Terms
Capital Gains Tax
A tax on the profit (gain) you make when you sell or dispose of an asset that has increased in value, such as shares, investment property, or business assets.
Annual Exempt Amount
The amount of capital gains you can make in a tax year before Capital Gains Tax becomes due, currently £3,000 for individuals.
Investors' Relief
A Capital Gains Tax relief that applies a reduced flat rate on gains from disposing of shares in unlisted trading companies, aimed at encouraging external investors in small businesses.
Entrepreneurs' Relief
The pre-2020 name for what is now called Business Asset Disposal Relief (BADR).
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