Business Asset Disposal Relief (BADR) Calculator 2025/26

What is Business Asset Disposal Relief?

Business Asset Disposal Relief (BADR) is a UK Capital Gains Tax relief that allows qualifying business owners to pay a reduced rate of CGT when they sell or dispose of all or part of their business. The relief was introduced in 2002 as Entrepreneurs' Relief and was renamed Business Asset Disposal Relief in April 2020, though many accountants and business owners still use both names interchangeably.

Without BADR, higher and additional rate taxpayers selling a business would pay 24% CGT on the gains (the 2024/25 rate after the Autumn Budget). With BADR, qualifying gains up to the £1 million lifetime limit are taxed at just 10% (pre-April 2025), 14% (April 2025 to April 2026), or 18% (from April 2026). This can represent a significant saving — on a £1 million qualifying gain, BADR at 14% saves £100,000 compared to the standard 24% rate.

The £1 Million Lifetime Limit

The lifetime limit for BADR is £1 million of qualifying gains. This is a cumulative lifetime limit — every BADR claim you make across your lifetime counts towards it. If you claimed BADR on £400,000 of gains when you sold a previous business, you only have £600,000 of BADR remaining.

Note that the lifetime limit was significantly reduced from £10 million to £1 million in March 2020. Gains above the £1 million limit are subject to standard CGT rates: 18% for basic rate taxpayers and 24% for higher and additional rate taxpayers on residential property, or 18%/24% on other assets.

Who Qualifies for BADR?

To qualify for BADR, you must meet specific conditions during a continuous period of at least 2 years ending on the date of disposal (or the date the business ceased if it closed first):

• You must be a sole trader or business partner disposing of all or part of your business, or
• You must hold at least 5% of the ordinary share capital and 5% of voting rights in a personal company (a qualifying trading company where you own 5%+ shares)
• You must be an employee or officer of the personal company (e.g. a director)
• You must be entitled to at least 5% of the profits available for distribution and 5% of assets on a winding up
• The company must be a qualifying trading company — not an investment or property investment company

What Qualifies for BADR?

• Disposing of all or part of a sole trader or partnership business that you have run for 2+ years
• Selling shares in your personal company (at least 5% shareholding, employee/officer for 2+ years)
• Selling assets used in your business when you close the business
• Selling business assets after the business ceases (within 3 years of cessation)

What Does NOT Qualify for BADR?

• Investment companies — companies whose main activity is holding investments
• Property letting companies — buy-to-let portfolios or furnished holiday lettings do not qualify as trading
• Shares held for less than 2 years before disposal
• Holdings below 5% of ordinary share capital
• Companies where you are not an employee or officer
• Gains already used up under the £1 million lifetime limit

BADR vs Investors' Relief

Investors' Relief (IR) is a separate CGT relief with its own distinct £10 million lifetime limit (before April 2025). Unlike BADR, IR is designed for external investors rather than business owners. To qualify for IR, you must:

• Subscribe for new ordinary shares in an unlisted qualifying trading company
• Hold those shares for a minimum of 3 years
• Not be an officer or employee of the company (other than an unpaid director)

Crucially, BADR and IR have separate lifetime limits — using up your £1M BADR allowance does not affect the IR lifetime limit, and vice versa. This means an entrepreneur who both runs a business and invests externally can potentially benefit from both reliefs.

How to Claim BADR on Your Tax Return

BADR must be claimed through your Self Assessment tax return. You complete the Capital Gains summary pages (SA108) for the year of disposal, and tick the box to confirm you are claiming Business Asset Disposal Relief. You need to provide details of the disposal — the asset sold, acquisition cost, disposal proceeds, and the resulting gain.

The claim deadline is the first anniversary of 31 January following the end of the tax year in which the disposal occurred. For a disposal in tax year 2025/26 (ending 5 April 2026), you have until 31 January 2028 to claim. Late claims cannot be made after this deadline.

It is strongly advisable to consult a qualified accountant or tax adviser before completing a BADR claim — particularly where multiple disposals are involved, the qualifying conditions need verification, or where the disposal involves associated disposals of personally owned assets used by the business.

Worked Examples: BADR Calculator 2025/26