Business asset disposal relief calculator, 2026/27

How this is calculated

Business Asset Disposal Relief (formerly Entrepreneurs' Relief) reduces the capital gains tax rate on qualifying disposals of a trading business or shares in a trading company to 18.0%, compared with the standard higher rate of 24.0%. The relief applies to gains up to a cumulative lifetime limit of £1,000,000, tracked across every BADR claim you have ever made, not just the current disposal.

The annual exempt amount of £3,000 is deducted from the gain before the BADR rate is applied, and any gain in excess of your remaining lifetime limit is taxed at the standard rate instead. Where you have gains that qualify for BADR and gains that do not in the same tax year, the exempt amount and basic rate band are typically allocated in the way that minimises your overall tax first.

To qualify, you generally need to have held at least 5% of the ordinary share capital and voting rights, been entitled to at least 5% of profits and assets on a winding up, and been an officer or employee of the company throughout a two-year qualifying period ending with the disposal.

Common qualifying disposals

The relief covers selling all or part of a sole trader or partnership business, disposing of shares in your personal trading company, and associated disposals of assets used by the business when you retire or reduce your involvement.

It also applies to trustees disposing of business assets on behalf of a beneficiary who meets the personal qualifying conditions, though the rules here are more technical and worth checking individually.

Where BADR often trips people up

The lifetime limit is cumulative, so directors who have used BADR on an earlier business sale may find they have little or none of the £1 million limit left for a subsequent one, which can significantly change the economics of a later sale.

Falling below the 5% shareholding threshold, for example through dilution from new investment rounds, before the two-year qualifying period is complete can disqualify the relief entirely, so timing of fundraising relative to an eventual exit needs care.

Is the BADR lifetime limit per person or per business?

It is per individual, cumulative across every qualifying disposal you make in your lifetime, not a separate limit for each business you have owned or sold.

Do I need to be a full-time director to qualify?

No, but you do need to be an officer or employee of the company (which can include a part-time director role) and meet the 5% shareholding and economic interest tests throughout the two-year qualifying period.

What if my shareholding has been diluted below 5%?

There is a specific relief allowing you to elect to be treated as if you had disposed of and reacquired your shares immediately before the dilution, which can preserve BADR eligibility on the gain accrued up to that point; this needs an election within strict time limits.

Does BADR apply to a company winding up through an MVL?

Yes, distributions made on a members' voluntary liquidation can qualify for BADR if the usual conditions are met, which is one reason MVLs are commonly used to extract retained profits when closing a company.