Key points
- Business Asset Disposal Relief (formerly Entrepreneurs' Relief) taxes qualifying gains at 18% from 6 April 2026 (14% in 2025/26), instead of up to 24%.
- It applies to up to £1 million of gains over your lifetime.
- For company shares: at least 5% of shares and votes, and an employee or officer of a trading company, for 2 years before the sale.
- You must claim it, within about 22 months of the end of the tax year of sale.
What qualifies
- Shares in your trading company (or holding company of a trading group), if the conditions below are met for 2 years before the sale.
- All or part of your business as a sole trader or partner, owned for at least 2 years.
- Assets used in the business after it ceases, if sold within 3 years.
- Assets you own personally and let to your company, in some cases, together with a qualifying sale of shares.
The conditions for company shares
- At least 5% of the ordinary shares
- At least 5% of the votes
- Entitled to 5% of profits or of assets on a winding up
- An officer or employee of the company
- The company is a trading company
- No large non-trading activities (broadly under 20%)
Miss one condition for one day and the relief can be lost.
Who can claim, with examples
| Who | Example |
|---|---|
| Sole traders and partners selling all or part of the business, owned for 2 years | Jack and Leo have been equal partners in a plumbing business for three years and sell 30% of it to a new partner. Both can claim on their share of the gain. |
| Directors and employees selling shares in their trading company | Albert, a director holding 10% for three years, sells all his shares when the company is bought. He qualifies. Monique, an employee with 6% for five years, sells half her shares. She qualifies too. |
| Not a trading company | Peter is a director with 15% of an investment company for ten years. He does not qualify: the company invests rather than trades. |
| EMI option holders | Shares from EMI options qualify if the option was granted at least 2 years before the sale, even if the shares themselves were held only briefly. |
| Trustees | Where a beneficiary with an interest in possession would qualify personally. The gain counts towards the beneficiary's lifetime limit. |
Ordinary buy-to-let property does not qualify: it is an investment. The special treatment of furnished holiday lets ended in April 2025.
Part of a business, or just assets?
Selling part of a business qualifies only if that part could work as a business on its own. Selling a van, a machine or premises while you keep trading is just a sale of assets.
Qualifies
- Sofia owns two cafés with separate staff, suppliers and accounts. She sells one and keeps the other.
- James sells the whole dairy unit of his farm: land, buildings, herd and equipment, with its own staff.
Does not qualify
- A builder sells his delivery van and keeps trading.
- An owner sells the office building but keeps the business going in rented space.
Nine mistakes that cost the relief
- 1. "I thought my business was trading"Too much rental income or investments can turn a company into an investment business. HMRC's rule of thumb: non-trading activities should not be substantial, broadly no more than 20%.
- 2. Selling assets, not a businessA part of the business must be able to operate on its own.
- 3. Missing documentsShare certificates, partnership agreements and accounts prove ownership dates and trading.
- 4. "Nearly two years"23 months is not 24. There is no rounding up.
- 5. Personal property sold separatelyA building you own and let to the business qualifies only alongside a material disposal of the business or shares.
- 6. Claiming too lateThe claim must be made by the first anniversary of 31 January after the tax year of sale.
- 7. "The £1 million resets each year"It is a lifetime limit, across all your disposals.
- 8. Confusing reliefsBADR, Investors' Relief and Gift Relief work very differently.
- 9. Diluted below 5%New share issues can take you below 5% without you noticing.
The rate is rising
Business Asset Disposal Relief replaced Entrepreneurs' Relief in March 2020, when the lifetime limit was cut from £10 million to £1 million. The rate was 10% until April 2025, 14% in 2025/26, and 18% from 6 April 2026. Still, on a £1 million gain BADR saves £60,000 compared with the 24% rate. For Capital Gains Tax, the date of disposal is normally the date an unconditional contract is made, not the completion date, so the contract date decides which year's rate applies. Special rules can apply where a contract was signed before 30 October 2024 but completed later.
BADR calculator
What to prepare
0 of 5 ready
One piece of advice
Start checking the conditions at least two years before you plan to sell. Most lost reliefs we see could have been saved with a small change in structure made in time.
Test yourself
1. What is the BADR rate for sales from 6 April 2026?
It rose to 18% from 6 April 2026.
2. How long must you meet the conditions before selling shares?
Two years up to the date of sale.
3. What is the lifetime limit?
£1 million of qualifying gains over your lifetime.
4. Is BADR given automatically?
You must claim it on time.
Law and sources
- GOV.UK: Business Asset Disposal ReliefRates, conditions and how to claim
- Taxation of Chargeable Gains Act 1992, sections 169H to 169SThe law on the relief
- HMRC Capital Gains Manual CG63950HMRC guidance on the relief
- GOV.UK: Capital Gains Tax ratesRates and the annual exempt amount
This guide explains the rules in general terms as at 5 October 2026. It is not advice for your situation. Rules and rates change.
