What is business asset disposal relief?

When it comes to selling all or part of your business, considering the tax implications upfront is essential. Business Asset Disposal Relief (BADR) may help business owners reduce their tax bill when they sell their business assets.

BADR is an important Capital Gains Tax (CGT) relief available to business owners planning their retirement, a sale or exit from their business. If a disposal qualifies for BADR, you will pay a reduced rate of CGT on the gain, up to a lifetime limit of £1 million.

Prior to April 2025, the BADR rate was 10%. For the 2025/26 tax year this increased to 14% and from 6th April 2026, the rate where BADR applies will increase to 18%. 

The relief offers valuable tax relief by reducing the CGT payable on disposal. Making sure you're eligible for relief is a key tax planning opportunity when exiting your business. Therefore, talking to your accountant as soon as possible is essential, as forward planning can be the difference between qualifying for BADR and missing out and paying CGT at the full rates – up to 24% for higher and additional rate taxpayers. 

Learning all you need to know about the relief and how a claim could save you significant amounts of tax. Discover the qualifying conditions and how it all works so you can ask your accountant or tax advisor the right questions. 

How do I qualify you for Business Asset Disposal Relief? 

BADR is available to individuals and some trustees; it is not available to companies. To get relief on qualifying disposals, you and your business assets must meet all the conditions set out below. Always consult your accountant for advice. 

What counts as a qualifying disposal? 

BADR is available on qualifying disposals of business assets. You have to meet the relevant qualifying conditions throughout a qualifying period of two years ending on the date you dispose of the assets, or an interest in the assets. 

A qualifying disposal of business assets includes: 

1. Assets used in a business – on disposal of the whole or part of a business   

If you are a sole trader or business partner, selling or closing your business, and have owned it for at least two years, you may qualify for BADR when paying CGT on the gains you make on disposing of the assets. 

If you are only disposing of part of your business, we recommend you seek expert advice. This will help ensure that the disposal qualifies for relief.  

The disposal of assets must significantly change the nature of the activities of an ongoing business. For example, selling a shop from which the business trades will not qualify for relief if the trading business continues.  

Property businesses are not eligible for BADR, as they are not considered to be ‘trading’. 

2. Assets used in a business disposed of within three years of the business ceasing 

You might be eligible for BADR when disposing of assets after the material disposal of a business. The following conditions must both apply: 

• You have owned the business for at least two years.  
• You sell the business assets within three years of your business ending.  

3. Share or securities in a personal company 

If you are selling shares in a company, you may qualify for BADR if you meet the following conditions for two years up to the date you dispose of your shares: 

• you're an employee or officer (e.g. director) of the company 
• the company must be a trading company, or a holding company of a trading group 
• the company must be your ‘personal company’ 

What is a trading company? 

HMRC considers a trading company to be "a company carrying on trading activities whose activities do not include to a substantial extent activities other than trading activities." 

Substantial is identified as "not more than 20% of indicators should relate to non-trading activities." These indicators may include turnover, balance sheet assets and staff resources. 

What is a personal company? 

A personal company is one where you: 

• hold at least 5% of the ordinary share capital, measured by nominal value,
• the ability to exercise at least 5% of the voting rights, and 
• are entitled to at least 5% of the profits and 5% of the assets on winding up, or 
• be entitled to at least 5% of the proceeds on a 100% share sale of the company 

Assets owned personally and used in a business 

If you have made a material disposal of business assets you may also qualify for BADR on ‘associated disposals’. The associated disposal rules are available if you are a partner in partnership businesses or hold shares in a personal company and dispose of assets you owned personally but were used by the partnership or company for the business. Speak to your accountant about assets which may qualify before you dispose of them..

The relief may be restricted where: 

• the asset was used partly for non-business purposes 
• the asset was not used in the business during the period of ownership 
• the company reimbursed you for using the asset 

What is the Business Asset Disposal Relief limit? 

BADR restricts the maximum gains that may benefit via a lifetime limit. This limit has changed over time and is currently £1 million. You can get relief on more than one qualifying gain until you reach your lifetime limit. After that, gains are liable to tax at regular CGT rates. 

Disposals prior to 11th March 2020 and prior to 22nd June 2010 may be subject to different rules. Calculations are more complex where you have made multiple disposals over your lifetime. We recommend you seek specialist advice. 

How and when can I claim Business Asset Disposal Relief?

To claim BADR, you must either:

• include it on your self-assessment tax return, using supplementary pages SA108, or
• send a separate claim for relief. 

You must make your claim by 31st January following the tax year in which you make the qualifying business disposal. For example, a disposal on 1st February 2026 occurs in the 2025/26 tax year. The deadline for making a claim is 31st January 2028.

How does Capital Gains Tax work without Business Asset Disposal Relief? 

If your disposal does not qualify for Business Asset Disposal Relief, you will pay tax in line with the following Capital Gains Tax rates: 

Tax years 2025/26 and 2026/27

• Carried interest arrangements (if you manage an investment fund) – 32%

• Gains from other chargeable assets including residential property – 18% basic rate and 24% higher and additional rate

• Trustees – 24% 

Don’t forgot about the annual exempt amount – the personal allowance you can use against capital gains each year. It is currently set at £3,000. 

Previous tax years

CGT rates for previous tax years can be found here. 

How can TaxAssist Accountants help you with your CGT?

If you are considering selling all or part of your business or business assets we can help. We can advise you of the tax planning opportunities available before you make your disposal. Call TaxAssist Accountants on 01480 592 002 or contact us using our online contact form. 

Last updated 27 Mar 2026 | First published 27 Nov 2023

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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.

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