Business Asset Disposal Relief (BADR) — the reduced Capital Gains Tax rate when you sell all or part of your business — has changed significantly under the Autumn 2024 Budget. For disposals in 2025-26 the rate is 14% (up from 10%), and from 6 April 2026 it rises again to 18%. With the £1 million lifetime limit still in place, founders and owner-managers are facing some of the most significant timing decisions in years.
A Quick History
BADR was previously called Entrepreneurs’ Relief. It has been repeatedly scaled back:
| Year | Lifetime limit | CGT rate |
|---|---|---|
| 2010–2020 | £10m | 10% |
| April 2020 | Cut to £1m | 10% |
| 2024-25 (to 5 Apr 2025) | £1m | 10% |
| 2025-26 (6 Apr 2025 – 5 Apr 2026) | £1m | 14% |
| 2026-27 onwards (from 6 Apr 2026) | £1m | 18% |
The standard Capital Gains Tax rate for higher-rate taxpayers is 24% in 2025-26 (on shares and most assets). So BADR still offers a meaningful saving, just less than it once did.
Who Qualifies in 2025-26?
You can claim BADR when disposing of:
- All or part of a sole-trader business you have owned for at least 2 years.
- Shares in a personal company where, for the 2 years ending with disposal, you:
- Hold at least 5% of ordinary share capital and voting rights
- Are entitled to at least 5% of distributable profits and assets on winding up
- Are an officer or employee of the company
- The company is a trading company (or holding company of a trading group)
- Assets used by your personal company or partnership (“associated disposal”) alongside a qualifying share/partnership disposal.
Property investment companies, furnished holiday lettings (after their tax regime was abolished in April 2025) and most passive investments do not qualify.
The 2-year qualifying period applies to every condition, so recent share issues or appointments as director can reset the clock.
The £1 Million Lifetime Limit
BADR applies to a maximum of £1 million of qualifying gains over your lifetime. Once used, the rate reverts to 24%. The limit is per individual, so a couple who both meet the conditions can shelter up to £2 million together.
Gains relieved under the old 10% regime count towards the same £1m cap, so anyone who already used £600,000 in 2023-24 only has £400,000 left for 2025-26.
Worked Example — 2025-26 vs 2026-27
Rebecca founded a trading company in 2020 and is selling her shares for a £900,000 gain. She has used no BADR before.
Option A: Complete sale on 31 March 2026 (2025-26)
| Step | Amount |
|---|---|
| Gain | £900,000 |
| CGT annual exempt amount | –£3,000 |
| Chargeable gain | £897,000 |
| BADR at 14% | £125,580 |
| Net proceeds after CGT | £774,420 |
Option B: Complete sale on 1 May 2026 (2026-27)
| Step | Amount |
|---|---|
| Gain | £900,000 |
| CGT annual exempt amount | –£3,000 |
| Chargeable gain | £897,000 |
| BADR at 18% | £161,460 |
| Net proceeds after CGT | £738,540 |
Delaying the sale by five weeks costs Rebecca £35,880 — a concrete reason to complete before 6 April 2026 if practicable.
Anti-Forestalling Rules
HMRC has built in anti-forestalling provisions to stop taxpayers re-dating contracts to lock in the old 10% rate. Exchange of contracts before 30 October 2024 that complete after that date are re-characterised as 2025-26 disposals (14%) unless the parties can prove the contract reflected genuine commercial terms and was not driven by the rate change. Similar rules apply to 2025-26 → 2026-27 contracts. Take professional advice before signing.
Interaction With Other CGT Rules
- Annual exempt amount: £3,000 in 2025-26 (unchanged in 2026-27). It applies before BADR, so use it against non-BADR gains first where possible.
- Losses: Capital losses must be set against BADR gains in the most efficient order — generally before applying the 14%/18% rate.
- Investors’ Relief: A separate 10%/14%/18% relief with its own £1m lifetime cap (also rising through 2025-26 and 2026-27) for qualifying unlisted trading-company shares held for 3+ years.
How to Claim
BADR is not automatic — you must claim it on your Self Assessment tax return by the first anniversary of 31 January following the tax year of disposal. For a 2025-26 disposal, the claim deadline is 31 January 2028. The claim can be on form HS275 or within the CGT pages of your return.
If you use HMRC’s real-time CGT service (for non-Self-Assessment taxpayers), you can make an informal claim when you report the gain within 60 days.
Planning Points Before 6 April 2026
- Document commercial rationale for any sale close to year-end, to withstand anti-forestalling challenge.
- Check the 2-year clock on every BADR condition — a promotion within the company or a share top-up from EMI options can reset it.
- Consider MVL timings for solvent company liquidations — HMRC’s TAAR (Targeted Anti-Avoidance Rule) can re-characterise a winding-up distribution as income if you return to similar trade within 2 years.
- Model the sale after losses, annual exempt amount and other 24% gains to see the real effective rate.
Key Takeaways
- BADR rate is 14% in 2025-26 and jumps to 18% from 6 April 2026.
- The £1m lifetime limit is unchanged — plan across multiple disposals carefully.
- On a £900k gain, waiting five weeks into 2026-27 costs roughly £36,000.
- Anti-forestalling rules block simple date manipulation — seek advice.
- Claims must be made on your Self Assessment return within the statutory window.
Model your own disposal with our Business Asset Disposal Relief calculator and compare to standard CGT using the capital gains tax calculator.