Business Asset Disposal Relief 2026/27: 18% CGT Rate for Business Sales
When you sell your business, shares or qualifying assets, Business Asset Disposal Relief (BADR) can reduce your Capital Gains Tax rate to 18% — saving thousands compared to the standard 24% CGT rate. This guide explains who qualifies, what the £1 million lifetime limit means in practice, and how to plan your disposal to maximise the relief in 2026/27.
BADR Key Figures 2026/27
BADR CGT rate
18%
Flat rate on qualifying gains
Lifetime limit per person
£1,000,000
Cumulative across all BADR claims
Annual Exempt Amount
£3,000
Tax-free gains each year
Qualifying period
2 years
Continuous ownership/employment
Standard CGT rate (higher-rate)
24%
Non-BADR gains above basic band
Minimum shareholding
5%
Ordinary shares plus voting rights
1. What is Business Asset Disposal Relief?
Business Asset Disposal Relief (BADR) is a UK tax relief that reduces the Capital Gains Tax (CGT) rate you pay on profits from selling or disposing of qualifying business assets. It was introduced in April 2008 as Entrepreneurs Relief and renamed BADR in April 2020. The relief targets business owners, company shareholders and partners who have built up genuine business interests and want to exit.
Rather than paying the standard 18% to 24% CGT rate, qualifying sellers pay a flat 18% rate on up to £1 million of gains over their lifetime. BADR is one of the most valuable CGT reliefs available to UK business owners. On a £500,000 gain, a higher-rate taxpayer saves £30,000 compared to the 24% standard rate. On the full £1 million lifetime limit the saving reaches £60,000.
Important: BADR rate changes since 2024
The Autumn Budget 2024 increased the BADR rate from 10% to 14% from April 2025, and then to 18% from April 2026. The current 2026/27 rate is therefore 18%. If you disposed of qualifying assets before April 2026 you may have paid a lower rate on those gains. The £1 million lifetime limit has not changed since April 2020.
BADR cannot be claimed on the same disposal as Investors Relief, but the two reliefs can apply to different assets held by the same person. The relief must be actively claimed on your Self Assessment return — it is not applied automatically by HMRC.
2. CGT rates in 2026/27 and how BADR compares
In 2026/27 the CGT rate depends on asset type and your income tax band. The basic-rate band runs from £12,571 to £50,270 of taxable income. If your total income plus gains falls within this band, the lower rate applies to gains in that range:
| Asset type | Basic-rate band | Higher/additional-rate |
|---|---|---|
| Residential property | 18% | 24% |
| Other assets (shares, business assets) | 18% | 24% |
| Qualifying BADR gains | 18% | 18% |
| Carried interest | 18% | 24% |
The key benefit of BADR in 2026/27 is that higher and additional-rate taxpayers pay 18% rather than 24% on qualifying business gains — a 6 percentage point saving. For basic-rate taxpayers whose gains fall entirely within the remaining basic-rate band, BADR offers no additional saving since the standard rate is also 18%. However, if your employment income already uses most of the basic-rate band, the BADR flat rate prevents the higher 24% rate from applying to the overflow.
Annual Exempt Amount (AEA) 2026/27: The first £3,000 of net gains each tax year is exempt. Deduct the AEA before calculating tax. HMRC allocates it in the most beneficial order — against the highest-rate gains first — so you save the maximum possible.
3. Who qualifies for BADR?
BADR is available to individuals only — not companies or trusts. You must meet a two-year qualifying period ending on the date of disposal (or the date the business ceased, if within the previous three years). The conditions differ depending on your relationship with the business:
Sole traders and business partners
You must have been carrying on a qualifying trade — or a share of a qualifying partnership trade — for at least two years before the disposal. The business must be a genuine trading business: property letting, investment management and similar activities do not qualify. If you are selling business assets after ceasing trade, you must dispose of them within three years of the date the business stopped.
Company shareholders
To claim BADR on shares in a personal company you must, throughout the two years before disposal:
- Hold at least 5% of the ordinary share capital of the company
- Exercise at least 5% of the voting rights
- Be entitled to at least 5% of distributable profits
- Be entitled to at least 5% of net assets on a winding-up
- Be an employee or officer (for example a director) of the company
- The company must be a trading company or holding company of a trading group
If you have been diluted below 5% by new share issues — for example after an EIS or SEIS funding round — you may be able to elect to treat your gain as crystallising at the point of dilution, using the anti-dilution election introduced in 2019.
EMI option holders
Employees holding Enterprise Management Incentive (EMI) options do not need to meet the 5% shareholding test for BADR, provided the option was granted at least two years before disposal and the company was a qualifying trading company throughout. This makes EMI schemes an effective way for key employees to access the 18% BADR rate without a large shareholding.
Common disqualifying situations
- Selling shares in an investment or property company
- Holding under 5% of shares without EMI option protection
- Disposing of individual assets without disposing of the business
- Being a passive investor rather than an employee or officer
- Owning the business for less than two continuous years
- Selling goodwill to a company you or a connected person controls
4. Which assets qualify?
BADR can apply to four broad categories of assets:
1. The whole or part of a trading business
If you are a sole trader or partner you can claim BADR when you sell all or a distinct part of your business as a going concern. Selling individual assets in isolation without disposing of the business does not qualify, unless the associated disposal rules apply.
2. Shares in a personal trading company
Gains on ordinary shares in a personal company qualify if all conditions in Section 3 are met throughout the two-year period. Preference shares and loan stock do not qualify. The company must be a trading company or the holding company of a trading group. A company whose main activity is holding investments or property will fail this test.
3. Assets used in the business (associated disposals)
If you personally own assets — such as business premises or equipment — that you let to your company or partnership, you may claim BADR on those assets under the associated disposal rules. The disposal must be made alongside a qualifying disposal of shares or a partnership interest, and you must have used the assets in the business throughout the two-year qualifying period. Any period of non-business use reduces the BADR available.
4. Gains on EMI share options
Gains on Enterprise Management Incentive options qualify for BADR without the normal 5% shareholding test, provided the option grant was at least two years before disposal and the company was a qualifying trading company throughout.
What does not qualify: Goodwill sold to a company you or a connected person controls; shares in a non-trading company; assets disposed of more than three years after the business ceased; residential property even if partly used for business.
5. The £1 million lifetime limit
The maximum qualifying gains that can benefit from BADR over your entire lifetime is £1 million per individual. This limit was reduced from £10 million in April 2020 and remains at £1 million for 2026/27. Every disposal on which you have previously claimed BADR counts towards it cumulatively — there is no annual reset.
Tracking your lifetime limit
HMRC tracks your BADR usage through Self Assessment records. Keep a personal record of each BADR claim you make, including the year and amount used. When you approach the limit, plan disposals carefully — gains above £1 million receive no BADR benefit and are taxed at the standard 18% or 24% rate.
Couples and the lifetime limit
Married couples and civil partners each have their own £1 million limit, so a couple can jointly shelter up to £2 million of business gains at 18%. Where both spouses hold qualifying shares and are both employees or officers, structuring ownership so both meet the conditions can double the available relief. Transfers of assets between spouses are CGT-free, but BADR must be claimed by each individual on their own disposal.
| Qualifying gain | Tax at 18% BADR | Tax at 24% (no BADR) | BADR saving |
|---|---|---|---|
| £100,000 | £18,000 | £24,000 | £6,000 |
| £250,000 | £45,000 | £60,000 | £15,000 |
| £500,000 | £90,000 | £120,000 | £30,000 |
| £1,000,000 (full limit) | £180,000 | £240,000 | £60,000 |
Assumes higher-rate taxpayer, no AEA remaining, all gain qualifies for BADR. For illustration only.
6. Worked examples
Example 1: Sole trader selling their business
Scenario: Sarah has run a consulting business as a sole trader for eight years. She sells the goodwill and assets in June 2026 for £650,000. Her original cost was £50,000. She has employment income of £55,000 in 2026/27 and has not previously claimed BADR.
Sarah uses £597,000 of her £1 million lifetime limit. Remaining allowance: £403,000.
Example 2: Director selling shares in a personal company
Scenario: James is a 40% shareholder and director of a trading company he co-founded five years ago. He sells his shares for £400,000 (original cost £20,000). His salary is £80,000. He has previously claimed BADR on £200,000 of gains.
James has now used £577,000 of his lifetime limit (£200k + £377k). Remaining: £423,000.
Example 3: Gain exceeding the lifetime limit
Scenario: Rachel sells her business for a gain of £1,300,000 after the AEA. She has never previously claimed BADR and is an additional-rate taxpayer.
Without BADR, all £1.3m at 24% would be £312,000. BADR saves Rachel £60,000 — the maximum possible saving at the 18% rate.
7. How to claim BADR
BADR is claimed through your Self Assessment tax return for the tax year in which the disposal takes place. You do not need to notify HMRC before the disposal — the claim is made retrospectively on your annual return.
Step-by-step claim process
- 1
Complete SA108 Capital Gains pages
Report the disposal on the CGT supplementary pages (SA108) of your Self Assessment return. Enter the disposal proceeds, allowable costs and the resulting gain or loss for each asset disposed of.
- 2
Tick the BADR election box
On SA108 there is a specific box to claim Business Asset Disposal Relief. Tick it and enter the amount of gain on which you are claiming BADR. Declare any previous BADR gains used against your lifetime limit in the relevant section.
- 3
Pay CGT due by 31 January
CGT on business asset disposals (other than residential property) is due by 31 January following the end of the tax year. For a disposal in 2026/27 (ending 5 April 2027), the payment deadline is 31 January 2028.
- 4
Keep supporting records for six years
Retain evidence of the disposal (completion statements, share transfer documents), proof of qualifying period (payslips, company accounts, share certificates) and your cost base calculations. Keep records for at least six years after the relevant tax year.
- 5
Amend your return if you missed the claim
You can amend a Self Assessment return within four years of the end of the tax year to which it relates. If you forgot to claim BADR you can correct this by filing an amended return, subject to the time limit.
Professional advice: If you are unsure whether your disposal qualifies for BADR, seek advice from a qualified tax adviser before filing your return. An accountant can review the qualifying conditions, check your lifetime limit position and identify any wider CGT or IHT planning opportunities around a business sale.
8. Tax planning tips
Plan around the two-year qualifying period
BADR requires a continuous two-year qualifying period ending on the disposal date. If you are considering selling a business you have owned for less than two years, delay the disposal to reach the threshold if commercially possible. If you plan to step back from a directorship, remain in post with your qualifying shareholding until the two-year mark to preserve eligibility.
Protect against dilution below 5%
If your company plans a fundraising round that could dilute your holding below 5%, consider making an election to crystallise your gain at the point of dilution before the new shares are issued. This locks in BADR eligibility based on your pre-dilution shareholding. Your accountant must make this election within the Self Assessment filing window for the year the dilution occurs.
Structure ownership across both spouses
Married couples and civil partners each have a £1 million BADR lifetime limit. If both spouses hold qualifying shares and are both employees or officers, structuring ownership so that both meet the qualifying conditions can double the available BADR. Specialist advice is essential before making transfers between spouses, as the recipient takes over the original cost base and both qualifying conditions must be met independently.
Use EMI options to extend BADR access to key staff
EMI option holders can access the 18% BADR rate without the normal 5% shareholding test. If your business is considering an exit in the next few years, granting EMI options to key employees now — with grants at least two years before any anticipated sale — can be a tax-efficient way to incentivise staff while giving them access to BADR on their option gains.
Maximise ISA and pension allowances before a disposal
Before a large business sale, consider maximising ISA contributions (£20,000 allowance in 2026/27) and pension contributions (up to £60,000 Annual Allowance). Pension contributions reduce your adjusted net income, which can help preserve the personal allowance of £12,570 or avoid the tapering of the pension annual allowance above £260,000 adjusted income. On the BADR gain itself the rate is fixed at 18%, but pension planning can reduce tax on other income.
Beware the goodwill trap when incorporating
BADR is specifically denied on goodwill sold to a company that you or a person connected to you controls. If you incorporate your sole trader business by transferring goodwill to a new company you control, the goodwill gain will not attract BADR even if other qualifying conditions are met. This anti-avoidance rule has applied since December 2014. External third-party sales of the whole business as a going concern are unaffected.
Check Investors Relief for external co-investors
Passive investors in unlisted trading companies may qualify for Investors Relief (IR) at the same 18% rate but with a separate £10 million lifetime limit per individual. BADR and IR cannot apply to the same shares simultaneously. In a company with working founders (BADR) and external investors (IR), structuring shareholdings correctly can ensure both groups access the 18% rate on their respective gains.
Consider earn-out structures carefully
When a business sale involves deferred consideration or an earn-out (where part of the price depends on future performance), the CGT and BADR treatment can be complex. Structured correctly, earn-outs may qualify for BADR if the initial conditions are met at the point of disposal. However, the rules are fact-specific and errors can be costly — specialist advice is strongly recommended before agreeing earn-out terms.
Frequently asked questions
Frequently Asked Questions
What is Business Asset Disposal Relief (BADR) in 2026/27?
What CGT rate applies under BADR in 2026/27?
What is the BADR lifetime limit in 2026/27?
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Who qualifies for Business Asset Disposal Relief?
What assets qualify for BADR?
How do I claim BADR on my Self Assessment tax return?
Can I use my Annual Exempt Amount (AEA) alongside BADR?
What are the BADR rules for EMI share options?
How does BADR interact with Investors Relief?
What happens if my shareholding is diluted below 5% before I sell?
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Important disclaimer
This guide is for general information only and reflects UK tax rules for the 2026/27 tax year as understood at the date of publication. Tax legislation changes frequently and individual circumstances vary. Nothing in this guide constitutes professional tax, legal or financial advice. Consult a qualified tax adviser or accountant before making decisions involving significant sums or complex business structures. HMRC guidance at gov.uk is the authoritative source for current rates and rules.