Business Asset Disposal Relief UK 2026/27: 18% CGT Rate on Business Sales

Business Asset Disposal Relief (BADR) -- formerly known as Entrepreneurs Relief until April 2020 -- is a CGT relief that reduces the tax rate on qualifying business disposals. From 6 April 2026, the BADR rate increased from 14% to 18%, aligning it with the lower residential property CGT rate. Despite the rate rise, BADR remains one of the most valuable tax reliefs available to business owners planning an exit.

The BADR Rate Change: From 14% to 18%

BADR has seen a series of rate changes in recent years:

• Before 30 October 2024: 10% (the long-standing Entrepreneurs Relief rate)
• 30 October 2024 to 5 April 2025: 14% (following the Autumn Budget 2024)
• From 6 April 2026: 18%

The standard CGT rates in 2026/27 are 18% (basic rate taxpayers) and 24% (higher and additional rate taxpayers) on most assets. The BADR rate of 18% is therefore equivalent to the lower CGT rate -- it does not matter whether you are a basic or higher rate taxpayer. BADR locks in the lower rate for qualifying disposals up to the GBP 1 million lifetime limit.

What Is the Lifetime Limit?

The BADR lifetime limit is GBP 1,000,000 of qualifying gains per individual. This is a cumulative lifetime figure across all qualifying disposals, not a per-disposal or per-year limit. If you used GBP 600,000 of the limit on a previous disposal, only GBP 400,000 remains available on future qualifying gains.

Gains above the lifetime limit are taxed at the standard CGT rates (18% or 24% depending on your income in the year of disposal).

Who Qualifies for BADR?

BADR is available to individuals (not companies) on qualifying business disposals. The main categories are:

1. Sale of a Business or Part of a Business

You must have:

• Owned and operated the business for at least 2 years ending on the date of disposal
• The business must be a trading business (not one that primarily holds investments)

"Part of a business" can qualify, but it must be a distinct and identifiable part that could operate independently -- not simply a reduction in activity.

2. Sale of Shares in a Personal Company

You must have:

• Held at least 5% of the ordinary share capital for at least 2 years
• Been an officer or employee of the company for at least 2 years
• The company must be a trading company (or the holding company of a trading group)
• Your shares must entitle you to at least 5% of the distributable profits and at least 5% of the assets on a winding up

Note the 2-year holding period is strict. Share ownership for 23 months does not qualify. Planning an exit requires factoring this in well in advance.

3. Disposal of Assets Used in a Business

If you hold assets personally that are used in a trading business (for example, a business premises owned personally but used by your company), these may qualify on disposal -- but only if the disposal happens at the same time as a qualifying disposal of the business itself or shares in the company.

What Is a Material Disposal?

A "material disposal" of business assets is the formal trigger for BADR. For share disposals, materiality is measured by the 5% threshold. For business disposals, the entire business (or a genuine part of it) must be sold. Simply selling some business assets while continuing to trade does not constitute a material disposal of the business.

A cessation of trading can also qualify as a disposal for BADR purposes, provided the assets are disposed of within three years of cessation.

The Annual Exempt Amount

The CGT Annual Exempt Amount (AEA) for 2026/27 is GBP 3,000. This is deducted from your total capital gains before calculating tax. On a qualifying BADR disposal, the first GBP 3,000 of gain is effectively tax-free, with the remainder taxed at 18%.

Example:

Business sold for GBP 500,000; original cost GBP 100,000

• Gain: GBP 400,000
• Less AEA: GBP 3,000
• Taxable gain: GBP 397,000
• BADR at 18%: GBP 71,460

Without BADR (higher-rate taxpayer, 24%): GBP 397,000 x 24% = GBP 95,280

Saving from BADR: GBP 23,820

BADR and Reinvestment Relief

BADR and Enterprise Investment Scheme (EIS) deferral relief can be used in combination in some circumstances. A business owner selling qualifying business assets and reinvesting into EIS-qualifying shares can defer the BADR gain, though the interaction is complex. Professional advice is strongly recommended for transactions of this type.

Planning Ahead for BADR

The 2-year qualifying period is the most common reason BADR claims fail. Key planning points:

• Start the clock early. If you anticipate selling shares, ensure you have held the qualifying 5% for at least 2 full years before the expected sale date.
• Review share structures. Dilution can push a director's holding below 5%. Check the position after any investment rounds or option exercises.
• Check trading status. A company with substantial investment assets (cash, investment properties, share portfolios) may not meet the "trading company" definition. HMRC looks at whether investment activities are "substantial" -- broadly more than 20% of activities by reference to time, assets or income.
• Document employee/officer status. You must have been an employee or officer for 2 years. Non-executive directors generally qualify, but ensure the role is genuine and documented.
• Consider timing the disposal. BADR claims are made on your Self Assessment return for the tax year in which the disposal occurs. Timing a sale at the start of a tax year gives maximum time before the payment deadline.

Claim Deadline

BADR must be claimed on your Self Assessment return. The deadline is the first anniversary of the 31 January following the tax year of disposal. For a disposal in 2026/27, the claim deadline is 31 January 2029.

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Use the CalcHub Capital Gains Tax Calculator to calculate your BADR liability and compare it to standard CGT rates on your business disposal.