Business Asset Disposal Relief
Business Asset Disposal Relief cuts capital gains tax to 18% on qualifying gains when you sell or wind up your company, up to a lifetime limit of £1,000,000. It replaced entrepreneurs' relief and the rate has risen in stages.
Also known as: BADR, entrepreneurs' relief
How it works
When you sell shares in your own trading company, or extract reserves through a members' voluntary liquidation, the gain is normally charged at 18% or 24%. Business Asset Disposal Relief reduces the rate to 18% on qualifying gains, subject to a lifetime limit of £1,000,000 across all disposals you ever make.
The conditions are strict and they are tested over the two years ending with the disposal. You must have been an officer or employee of the company, hold at least 5% of the ordinary share capital and voting rights, and be entitled to at least 5% of distributable profits and assets on a winding up. The company must be a trading company or the holding company of a trading group — substantial non-trading activity, such as a large investment property portfolio held alongside the trade, can break that test.
The rate is not fixed history. Qualifying disposals were charged at 10% up to 5 April 2025, 14% for the following year, and 18% from 6 April 2026. That matters when you are planning a sale or a liquidation near a tax year end.
Because the tests run for two years before the disposal, changes to shareholdings, share classes or employment status need planning well ahead. A share reorganisation done a month before a sale rarely rescues a relief claim.
Worked example (2026/27)
£500,000 gain on selling a trading company
| Gain after the annual exempt amount | £497,000 |
|---|---|
| Tax at 18% with relief | £89,460 |
| Tax at 24% without relief | £119,280 |
| Saving | £29,820 |
Illustrative for a higher rate taxpayer with the full lifetime limit available.
Who this affects
- Founders selling shares in a trading company they have run for at least two years
- Directors closing a solvent company through a members' voluntary liquidation
- Shareholders with under 5% of the shares, who do not qualify at all
- Companies holding significant investments alongside a trade, where the trading test is at risk
Common mistakes
- Issuing new shares before a sale and diluting below the 5% threshold
- Resigning as an officer or employee before the disposal completes
- Assuming the old 10% rate still applies
- Overlooking that the £1,000,000 limit is a lifetime figure across all disposals
Frequently asked questions
What is the Business Asset Disposal Relief rate?
18% on qualifying gains for disposals from 6 April 2026, up from 14% in 2025/26 and 10% before 6 April 2025.
How long do I need to hold the shares?
The qualifying conditions must be met throughout the two years ending with the date of disposal.
Does a members' voluntary liquidation qualify?
Distributions in a formal solvent liquidation are usually capital and can qualify, provided the personal conditions are met and the anti-avoidance rules on winding up do not apply.
Is there a limit on how much relief I can claim?
Yes, £1,000,000 of qualifying gains across your lifetime. Gains above the limit are taxed at the standard capital gains rates.
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Reviewed by Waqas Sagar ACA FCCA FMAAT · Last reviewed 13 September 2026 · Figures for 2026/27 · About our practice
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