Article
Business Asset Disposal Relief – effective tax rate rises to 18%
From 6th April 2026, the effective capital gains tax rate rises from 14% to 18% for those claiming this relief. So, what do business owners need to know?
First published 1 Apr 2026
By Helen Wood, CA 3 min read
Directors' Series
What is Business Asset Disposal Relief (BADR)?
BADR is a reduced rate of capital gains tax (CGT) for people selling their business, business assets or shares in their company. It must be claimed via your self-assessment tax return and is subject to a lifetime limit of £1 million. Find our full guide on BADR here.
| Period | BADR Rate | Notes |
| Before 6th April 2025 | 10% | Historic rate (previously BADR was called Entrepreneurs' Relief) |
| 6th April 2025 – 5th April 2026 | 14% | One tax rate at this rate |
| From 6th April 2026 | 18% | New rate - applies to all qualifying disposals from this date |
BADR was previously known as Entrepreneurs’ Relief and until April 2025 had been set at 10% since its introduction in 2008. It was a replacement for a previous relief, taper relief. Originally the lifetime limit was £10 million but this was reduced to £1 million in 2020.
The BADR rate was increased to 14% for the 2025/26 tax year and from 6th April 2026, the rate will increase again to 18%.
Who qualifies for BADR?
BADR works as a reduced rate of CGT on a qualifying disposal of business assets. You may qualify for BADR if you:
- Are a sole trader selling or closing your business
- A partner in a partnership selling or closing your business
- Sell business assets within three years of your business closing
- Sell shares in a ‘personal company’ i.e. one where you have 5% or more of the voting share capital in a trading company and have held the shares for two years or more
The BADR qualifying conditions are complex and strict so if you think you may qualify you should speak to an accountant.
If BADR does not apply, you will be subject to the standard rates of CGT which are 18% for basic rate taxpayers and 24% for higher and additional rate taxpayers. Scottish taxpayers should use the England, Wales and Northern Ireland tax bands to calculate their CGT rate as they do not align with Scottish income tax bands.
What does the rate increase mean in practice?
For example, let us assume that you are a director and the sole shareholder of a trading company, selling your business for a £1 million gain.
You have not used any of your BADR lifetime allowance previously and you have held the shares for more than two years, so the entire £1 million gain is subject to BADR.
5th April sale
£1,000,000 x 14% = £140,000 CGT to pay
£1,000,000 - £140,000 = £860,000 net gain
6th April sale
£1,000,000 x 18% = £180,000 CGT to pay
£1,000,000 - £180,000 = £820,000 net gain
What are the anti-forestalling rules?
Be careful of any rush to sign contracts for a business or share sale prior to a tax rate change, but only completing the transaction after the rate has changed. HMRC has ‘anti-forestalling’ rules in place to prevent this from happening and they will apply the new, higher tax rate to the sale.
There are limited exceptions to the anti-forestalling rules but the criteria are detailed and strict. You should seek professional advice if you believe this may be the case.
What should business owners do now?
If you are thinking of selling your business or personal company, then speak to an accountant as soon as possible for advice on whether you will qualify for BADR or any steps you can take to ensure you qualify in future.
TaxAssist Accountants can help
Call TaxAssist Accountants on 02039447724 or our online contact form here.
Frequently Asked Questions
Business Asset Disposal Relief (BADR) - formerly known as Entrepreneurs' Relief - is a reduced rate of Capital Gains Tax (CGT) available to individuals who sell qualifying business assets. Instead of paying the standard CGT rate, qualifying gains up to a lifetime limit of £1 million are taxed at a lower rate. The rate is 14% (for disposals from 6th April 2025 to 5th April 2026) and 18% for disposals made on or after 6th April 2026.
From 6th April 2026, the BADR rate increases from 14% to 18%. This applies to all qualifying disposals made on or after that date. The change was announced at the Autumn Budget 2024 and legislated in Finance Act 2025. The £1 million lifetime limit for qualifying gains remains unchanged.
Not necessarily. ‘Anti-forestalling’ rules mean that if you enter into an unconditional contract in the 2025/26 tax year, but the disposal completes on or after 6th April 2026, the date of disposal for BADR rate purposes will generally be the completion date. This means that the 18% rate applies. There is a limited exception for 'excluded contracts' where no tax advantage purpose can be demonstrated, and a small gains exception for total gains under £100,000. This is a complex area of tax law and specialist advice should be taken before entering into any such arrangement.
To qualify for BADR, you must be an individual (not a company) disposing of qualifying business assets. The most common qualifying situations are selling all or part of a business you have owned for at least two years or selling shares in your personal company where you hold at least 5% of ordinary shares and voting rights, are an employee or director, and the company is a trading company for at least two years before disposal. The total qualifying gains eligible for relief across your lifetime are capped at £1 million.
Yes. Even at 18%, BADR still offers a meaningful reduction compared to the standard CGT rate of 24% for higher or additional rate taxpayers (or Scottish equivalent) on business asset gains. For a higher rate taxpayer with £1 million of qualifying gains, BADR at 18% saves £60,000 compared to paying the full 24% rate. The relief remains valuable, but the advantage is less than it was, making it more important than ever to plan disposals carefully and seek professional advice to ensure you meet all qualifying conditions.
First published 1 Apr 2026
This article is intended to inform rather than advise and is based on legislation and practice at the time. Taxpayer’s circumstances do vary and if you feel that the information provided is beneficial it is important that you contact us before implementation. If you take, or do not take action as a result of reading this article, before receiving our written endorsement, we will accept no responsibility for any financial loss incurred.
Helen Wood, CA
Helen is a qualified chartered accountant (CA) and joined TaxAssist in 2025 following three years as a freelance content writer for clients in the tax and accounting publishing sector. Prior to this, She spent 17 years at Big Four and Top 10 accountancy firms. Helen writes clear and helpful articles on tax and accounting for businesses and individuals.
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