BADR Business Asset Disposal Relief 2026/27: 18% Rate

What Is Business Asset Disposal Relief?

Business Asset Disposal Relief -- previously called Entrepreneurs Relief until March 2020 -- is a Capital Gains Tax relief that applies a reduced rate of tax when you sell or otherwise dispose of qualifying business assets. For 2026/27, the BADR rate is 18%, applied to the first GBP 1 million of qualifying lifetime gains.

The relief was created to reward business builders by reducing the CGT burden when they exit a business they have built and operated. The rationale is that business owners take on significant risk and the tax system should encourage entrepreneurship by offering a preferential rate on genuine business disposals.

It is important to understand that the rate change from 10% to 18% took effect on 6 April 2025. If you disposed of qualifying assets before that date and the disposal was at standard rates at the time, those claims were assessed at the old rate. Any disposal on or after 6 April 2025 uses the 18% rate. This is a significant shift for business owners who had been planning a sale based on the old 10% figure.

How the 18% BADR Rate Compares to Standard CGT

Standard CGT rates for 2026/27 depend on the type of asset and your income:

• Residential property: 18% (basic rate taxpayer) or 24% (higher rate taxpayer)
• Other assets: 18% (basic rate taxpayer) or 24% (higher rate taxpayer)

For a higher rate taxpayer selling shares in their company without BADR, the CGT rate is 24%. With BADR applied, the rate drops to 18% -- a saving of 6 percentage points, or GBP 6,000 per GBP 100,000 of gain.

Before April 2025, BADR was taxed at 10% regardless of income, which made it extremely valuable for higher rate taxpayers who would otherwise have paid 20% on business assets (under the old CGT rates). The increase to 18% has narrowed but not eliminated the benefit.

For a basic rate taxpayer, the position is now neutral -- BADR at 18% equals the standard CGT rate of 18% for gains within the basic rate band. The relief therefore has most value for higher rate and additional rate taxpayers.

The Annual Exempt Amount (AEA) for 2026/27 is GBP 3,000. You can offset this against any gain before calculating CGT, including BADR gains.

Who Qualifies for BADR?

BADR covers three main categories of disposal:

Sole traders and business partners

You can claim BADR when you close or sell all or part of a sole trader business or a partnership share. You must have owned and operated the business for at least two years immediately before the date of disposal. The assets being disposed of must have been used in the business throughout that two-year period, or you must be disposing of the business as a going concern.

Shares in a personal company

This is the most common route for limited company owners. To qualify you must:

• Hold at least 5% of the ordinary share capital and at least 5% of the voting rights
• Be an employee or officer (director) of the company
• Have held those shares for at least two years before the disposal date
• The company must be a trading company or holding company of a trading group -- not an investment company

Assets used in a business (associated disposals)

You can also claim BADR on personal assets you own but which were used in a qualifying business, provided you dispose of them at the same time as your business interest or shares.

The GBP 1 Million Lifetime Limit

The GBP 1 million lifetime limit is a cumulative cap across all BADR claims you make during your lifetime. It also includes any Entrepreneurs Relief you claimed before March 2020 when the limit was reduced from GBP 10 million.

To illustrate: if you sold a partnership share in 2021 and claimed BADR on GBP 400,000 of gains, your remaining lifetime allowance is GBP 600,000. When you later sell your company shares, only the first GBP 600,000 of gain qualifies for the 18% BADR rate. Any gain above that is taxed at standard CGT rates (18% or 24% depending on your income).

There is no mechanism to transfer unused lifetime allowance to a spouse or civil partner. Each individual has their own GBP 1 million allowance. Business owners who are married can sometimes structure a disposal to use both spouses allowances, provided the non-owning spouse genuinely meets the qualifying criteria -- this requires careful professional advice.

Planning a Business Disposal in 2026/27

If you are considering selling your business or exiting your company in 2026/27, there are several planning points to consider.

Timing the disposal

The two-year ownership rule means you need to have held your shares or operated your business for at least two years before you sell. If you are approaching that threshold, it may be worth waiting to ensure you qualify. Conversely, if you were hoping to sell before a future rate increase, the current 18% rate is already in place.

Structuring the consideration

If the total proceeds will generate a gain above your remaining BADR allowance, consider whether any consideration can be deferred or restructured. Earn-outs -- where part of the price is paid based on future performance -- may in some cases allow gains to be recognised across more than one tax year, each with its own AEA of GBP 3,000.

Using both spouses allowances

If your spouse or civil partner holds shares in the company that meet the BADR criteria in their own right, they can each claim up to GBP 1 million of lifetime relief. A disposal that generates GBP 1.5 million of qualifying gain could therefore be split between two individuals, bringing the entire gain within BADR at 18%.

Gift Hold-Over Relief

If you are transferring the business rather than selling it, Gift Hold-Over Relief may allow you to defer any gain into the recipients hands. This is commonly used in family business succession. Note that Hold-Over Relief and BADR are separate reliefs and cannot generally be used on the same disposal.

How to Calculate Your BADR Liability

Here is a worked example for a company director selling shares in 2026/27:

• Sale proceeds: GBP 1,200,000
• Original cost (acquisition): GBP 150,000
• Capital gain before AEA: GBP 1,050,000
• Less AEA: GBP 3,000
• Net gain: GBP 1,047,000
• BADR eligible (remaining lifetime allowance): GBP 800,000
• Tax on BADR portion at 18%: GBP 144,000
• Remaining gain (standard CGT at 24% -- higher rate taxpayer): GBP 247,000 x 24% = GBP 59,280
• Total CGT liability: GBP 203,280

Without BADR, the entire GBP 1,047,000 would be taxed at 24%, giving a liability of GBP 251,280. The relief saves GBP 48,000 in this example.

Use the CalcHub Capital Gains Tax Calculator to model your own figures and see your estimated tax position before you file.

Claiming BADR on Your Self Assessment Return

BADR is claimed through the Capital Gains Tax supplementary pages of your Self Assessment return (SA108). You report each disposal separately and tick the box to indicate that BADR applies. HMRC will apply the 18% rate to the amount you indicate qualifies.

The deadline for paying any CGT due on disposals in 2026/27 is 31 January 2028 -- the same date as your Self Assessment payment deadline. However, if you dispose of UK residential property you must also file a 60-day property CGT return and pay any tax within 60 days of completion.

If your claim is complex -- for example, you have mixed BADR and non-BADR gains, or you are claiming for an associated disposal -- consider working with a chartered accountant or tax adviser. HMRC can and does enquire into BADR claims, particularly where the 5% share ownership threshold is close, or where a disposal follows a share reorganisation or dilution event.

Keep records of your original share purchase, any additional acquisitions, and the two-year qualifying period. HMRC may ask for evidence that you were an employee or director throughout the qualifying period and that the company was genuinely trading throughout.