Business Asset Disposal Relief 2026/27: Rate, Limits and Qualifying Rules

Business Asset Disposal Relief (BADR) -- formerly known as Entrepreneurs Relief -- reduces the Capital Gains Tax rate on qualifying business disposals. The rate has changed significantly in recent years and now stands at 18% from April 2026. If you are planning to sell your business, retire, or transfer shares, understanding the current rules could save you a significant amount of tax.

BADR Rate History

The BADR rate has been increased in stages since October 2024:

For comparison, the standard CGT rates in 2026/27 are 18% for basic-rate taxpayers and 24% for higher-rate and additional-rate taxpayers on most assets. This means that for higher-rate taxpayers, BADR now offers a 6 percentage point saving compared to the standard CGT rate -- compared to the 18 percentage point saving it offered when the rate was 10%.

The GBP 1 Million Lifetime Limit

BADR is subject to a cumulative lifetime limit of GBP 1 million. This limit applies across all qualifying disposals you make during your entire lifetime, not per disposal or per year.

If you previously claimed Entrepreneurs Relief -- the scheme that BADR replaced in April 2020 -- those claims count towards the same GBP 1 million cap.

Example with Previous Claims

James sold a small business in 2019 and claimed Entrepreneurs Relief on a gain of GBP 300,000. His remaining BADR lifetime allowance is GBP 700,000.

When James sells his current business in 2026/27 and makes a gain of GBP 900,000:

• First GBP 700,000 qualifies for BADR at 18% = GBP 126,000
• Remaining GBP 200,000 taxed at standard CGT rate of 24% (assuming higher rate) = GBP 48,000
• Total CGT = GBP 174,000

Without any BADR remaining, the full gain would be taxed at 24% = GBP 216,000, so BADR saves GBP 42,000 in this scenario.

Qualifying for BADR: Sole Traders and Partnerships

For a sole trader or partner, you must meet all of the following conditions throughout the two years ending on the date of disposal:

1. You must have been carrying on a qualifying trade (not an investment activity)
2. The business must have been your business (or you must have been a partner in it)
3. The two-year ownership period must be satisfied

James the Carpenter: Worked Example

James has run a carpentry business as a sole trader for eight years. He sells the business as a going concern in June 2026, realising a gain of GBP 160,000 on the business assets (goodwill, tools, and customer relationships). He has no previous BADR claims.

James should also subtract the annual CGT exempt amount of GBP 3,000 before calculating tax, reducing his taxable gain to GBP 157,000 and his BADR tax bill to GBP 28,260.

Qualifying for BADR: Company Shares

For shares in a personal company, you must meet all of the following conditions throughout the two years ending on the date of disposal:

1. The company must be a trading company (or the holding company of a trading group)
2. You must hold at least 5% of the ordinary share capital
3. That 5% holding must carry at least 5% of the voting rights
4. You must be an officer (director) or employee of the company

Sarah's Share Sale: Worked Example

Sarah owns 10% of the shares in a marketing agency she founded nine years ago. She sells her entire 10% stake in 2026/27 for a gain of GBP 450,000.

Sarah must remain an officer or employee throughout the two years before completion. If she resigns from her director role more than two years before the sale, she would lose her BADR entitlement for the shares held in the period she was not an officer.

Associated Disposals

An associated disposal occurs when you sell an asset that you personally own but that was used in a business carried on by your company or partnership. The most common example is a business owner who personally owns the premises from which the company operates and sells the property at the same time as selling the company shares.

Key rules for associated disposals:

• The disposal must occur in connection with your disposal of your interest in the business or company
• The asset must have been in use for the business throughout the relevant two-year period
• If you charged the company a commercial rent for use of the asset, the relief may be restricted proportionally

What Does Not Qualify for BADR

Tax Planning Before Disposal

If you are approaching a sale, consider the following:

• Two-year clock: make sure you have met all conditions for at least two full years before completion. If you recently crossed the 5% threshold or recently became a director, check your dates carefully.
• 5% shareholding: if dilution from new share issues has taken you below 5%, there are anti-dilution provisions that may preserve your relief in certain circumstances -- take advice early.
• Annual exempt amount: the CGT annual exempt amount is GBP 3,000 in 2026/27. Use this against your gain before calculating BADR tax.
• Timing across tax years: if the sale can be structured so that completion falls in a new tax year, you get a fresh annual exempt amount. On large gains this saves GBP 540 (GBP 3,000 x 18%).
• Valuation: obtaining an independent valuation before disposal can help with negotiations and ensures you are not overstating the gain on your tax return.

Our capital gains tax calculator includes BADR at the 18% 2026/27 rate. Enter your disposal proceeds, cost, and previous BADR claims to see your estimated tax bill with and without relief applied -- and check whether structuring the disposal differently could reduce your liability.