Business Asset Disposal Relief (BADR) — previously known as Entrepreneurs' Relief until March 2020 — is a Capital Gains Tax (CGT) relief that reduces the rate of CGT on qualifying disposals of business assets. It is designed to reward people who have built and sold a business, encouraging entrepreneurship and investment.
Under BADR, qualifying gains are taxed at a preferential CGT rate rather than the standard higher rates that apply to other asset disposals. Following the Autumn 2024 Budget, the BADR rate increased from 10% to 14% from April 2025, and will rise further to 18% from April 2026.
Important: BADR Rate Changes
The Autumn 2024 Budget fundamentally changed BADR. The rate was 10% until 5 April 2025. From 6 April 2025 it is 14%. From 6 April 2026 it will increase to 18% — the same as the lower standard CGT rate for business assets, effectively eliminating the benefit on that comparison. Plan any disposals accordingly.
The lifetime limit remains £1 million — unchanged since it was reduced from £10 million in March 2020. This means over your entire lifetime, the maximum gain on which you can claim BADR is £1 million. At 14%, this represents a maximum saving of £40,000 compared to paying 18% (or £100,000 compared to the old 10% rate vs. 24%).
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BADR is not available to everyone who sells a business. You must meet specific qualifying conditions depending on the type of asset you are disposing of. The rules were tightened in 2019 (increasing the holding period from 1 to 2 years) and the lifetime limit was dramatically cut from £10 million to £1 million in March 2020.
Qualifying Conditions: Shares in a Personal Company
To claim BADR on shares in your own company, all three of the following conditions must be met throughout the 2 years ending on the date of disposal:
5% Shareholding
You must hold at least 5% of the company's ordinary share capital AND 5% of the voting rights.
Officer or Employee
You must be an officer (director, company secretary) or employee of the company or a group company.
2-Year Ownership
You must have held the qualifying shares for at least 2 years continuously before disposal.
Trading Company
The company must be a trading company (or holding company of a trading group) — not mainly an investment company.
Qualifying Conditions: Sole Trader or Partnership Assets
If you are selling your sole trade business or partnership share, you must have:
- Owned the business (or the specific assets) for at least 2 years before the disposal
- Used the assets in the business throughout that 2-year period
- Either ceased trading on the disposal, or disposed of a distinct part of the business
Associated Disposals
BADR can also apply to associated disposals — assets owned personally but used in a business you hold shares in. For example, a building you own personally but rent to your company. The relief on associated disposals is reduced if you charge market rent, and the asset must also be disposed of as part of a qualifying share disposal.
The 5% Dilution Problem
A common pitfall occurs when a company issues new shares (e.g. to investors) and your holding is diluted below 5%. From October 2018, there is a mechanism allowing you to elect to be treated as having made a disposal at the point of dilution, crystallising your BADR entitlement at the current gain before relief is lost.
BADR Rate: 10%
The original BADR rate of 10% applied to all qualifying disposals. This provided a maximum saving of £140,000 on a £1m lifetime gain compared to paying at 24% (the higher CGT rate). The rate had been 10% since Entrepreneurs' Relief was introduced in 2008.
BADR Rate: 14%
The Autumn 2024 Budget announced a phased increase. From 6 April 2025, BADR gains are taxed at 14% — a 40% increase in the rate. The maximum saving compared to the higher 24% CGT rate is now £100,000 on a £1m lifetime gain.
BADR Rate: 18%
From April 2026, BADR will be taxed at 18% — the same as the lower standard CGT rate on business assets for basic rate taxpayers. For basic rate taxpayers, there will be no saving at all. Higher rate taxpayers will still save 6% (24% minus 18%).
Planning Opportunity: Accelerate Disposals Before April 2026
If you are considering selling a qualifying business asset, completing the disposal in the 2025-26 tax year (before 5 April 2026) means the BADR rate is 14% rather than 18%. On a £500,000 gain within the lifetime limit, this saves £20,000 in tax. Professional advice is strongly recommended for any such planning.
What Changed in October 2024?
The Autumn 2024 Budget also raised the standard CGT rates on business assets and shares from 10%/20% to 18%/24% (basic/higher rate) — making both BADR and non-BADR disposals more expensive. The interaction between BADR and the annual exempt amount (£3,000 for 2025-26) remains unchanged — use your exempt amount against non-BADR gains first to maximise benefit.
BADR and Investors' Relief are two separate CGT reliefs that are sometimes confused but target very different types of investors:
| Feature | BADR | Investors' Relief |
|---|---|---|
| Who qualifies? | Must be officer/employee | Must NOT be officer/employee |
| Lifetime limit | £1 million | £10 million |
| Minimum hold | 2 years | 3 years |
| Share type | Any ordinary shares | Newly issued ordinary shares only |
| Min holding | 5% | No minimum % |
| CGT rate (2025-26) | 14% | 14% (same phased increase) |