# A Guide to Business Asset Disposal Relief

Learn about UK Business Asset Disposal Relief, including crucial eligibility criteria, the current 18% tax rate, lifetime limits, and how to claim through self-assessment.

**Published:** 2026-07-03  
**Updated:** 2026-07-05  
**Source:** https://aztajournal.com/gb/business-asset-disposal-relief-guide

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> This guide outlines Business Asset Disposal Relief eligibility, lifetime limits, and key tax rates. It explains how UK business sellers can navigate the current rules, complete their self-assessment tax returns, and apply for relief within official government deadlines.

Your business sale is eligible for Business Asset Disposal Relief if you meet specific ownership and role criteria for at least two years prior to disposal. Qualifying transactions allow you to pay a reduced Capital Gains Tax rate on gains up to your lifetime limit. For the 2026/27 tax year, this preferential Business Asset Disposal Relief rate is set at 18%.

## Is your sale eligible for Business Asset Disposal Relief and what is the current rate?

Eligibility for Business Asset Disposal Relief depends on your structure, ownership period, and active involvement in the business. The current preferential rate of Capital Gains Tax is 18% for disposals made on or after 6 April 2026.

To qualify for this relief, you must meet strict conditions outlined by HMRC, including a minimum two-year qualifying period. The tax benefit applies directly to gains made on qualifying business assets up to a fixed lifetime limit of £1 million. Understanding these parameters ensures you can accurately calculate your potential savings before initiating a sale.

## What are the current BADR tax rates?

The tax rates for Business Asset Disposal Relief have gradually increased over recent tax years. The applicable rate is determined by the specific date on which you make the disposal.

The table below details how the tax rates have progressed over time, leading up to the current rate for the 2026/27 tax year and beyond.

| Period of Disposal | BADR Rate on Qualifying Gains |
| --- | --- |
| Before 6 April 2025 | 10% |
| 6 April 2025 to 5 April 2026 | 14% |
| 6 April 2026 onwards | 18% |

## What is Business Asset Disposal Relief (BADR)?

Business Asset Disposal Relief is a UK tax relief that reduces the Capital Gains Tax rate on qualifying business disposals. Formerly known as Entrepreneurs' Relief, it incentivises business growth by lowering tax liabilities on the first £1 million of lifetime qualifying gains.

According to the Taxation of Chargeable Gains Act 1992 Section 169N, the lifetime limit for this relief is capped at £1 million. Any gains realised above this lifetime limit during your lifetime will be taxed at the standard Capital Gains Tax rates of 18% or 24%, depending on your income tax band.

## Am I eligible for BADR if I am a sole trader or partner?

Sole traders and business partners are eligible if they meet ownership duration and post-cessation asset disposal timeframes. You must satisfy every statutory condition to claim the relief.

If you operate as an unincorporated business, you must meet the following statutory requirements to qualify for the relief on your disposal:

1. You must operate as a sole trader or be an active member of a business partnership.
2. You must have owned the business or business partnership share for at least 2 years directly preceding the disposal date.
3. If the business stops trading, you must complete the disposal of your business assets within 3 years of the trading cessation date.

## Am I eligible for BADR if I am selling company shares?

Shareholders are eligible if they hold at least 5% voting and capital rights while working as an employee or office holder. These conditions must be met for a minimum of two years.

To claim relief on the sale of your company shares, you must satisfy the following strict requirements throughout the 2 years leading up to the sale date:

- You must hold at least 5% of the ordinary share capital and 5% of the voting rights in the company.
- You must be entitled to at least 5% of the company's distributable profits or 5% of the net assets upon a winding up.
- You must be an active employee or an officer, such as a director, of the company or another company within the same corporate group.
- Alternatively, if the shares were acquired through an Enterprise Management Incentive scheme, you must meet the specific qualifying criteria for those incentive shares.

## How do I claim BADR and what is the deadline?

You must claim Business Asset Disposal Relief actively as it is not applied automatically by HMRC on business sales. Claims are submitted through your Self Assessment return.

Under the Taxation of Chargeable Gains Act 1992 Section 169M, tax relief must be formally claimed. The deadline for submitting a claim is the first anniversary of 31 January following the tax year when the disposal took place. For a disposal completed during the 2026/27 tax year, you must submit your claim to HMRC by 31 January 2029.

## What are the common pitfalls and planning points when claiming BADR?

Common pitfalls include failing the 5% minimum shareholding test due to share dilution or forgetting the strict claim deadlines. Careful planning is required to maximize tax savings.

With the relief rate now set at 18%, the financial advantage of claiming this relief compared to the standard 24% Capital Gains Tax rate has narrowed. HMRC inspects claims closely, focusing heavily on the 5% personal company ownership test where even minor rounding errors can lead to a rejected claim.

To optimise tax efficiency, married couples and civil partners can utilise their individual allowances. Because each person has an independent £1 million lifetime limit, couples can combine their limits to shield up to £2 million in qualifying gains through structured asset transfers before a sale.

### What is the Business Asset Disposal Relief rate for the 2026/27 tax year?

For all qualifying business disposals made on or after 6 April 2026, the Business Asset Disposal Relief rate is 18%.

### Can couples combine their £1 million Business Asset Disposal Relief lifetime limits?

Yes. Spouses and civil partners each possess their own individual £1 million lifetime limit, meaning structured transfers can allow them to double their combined relief to £2 million.

### How long do I have to submit a BADR claim after selling my business?

You must submit your claim by the first anniversary of 31 January following the tax year of disposal. For the 2026/27 tax year, the final deadline is 31 January 2029.