Business Asset Disposal Relief (BADR) Explained

Business Asset Disposal Relief ("BADR") (formerly (known as entrepreneurs' relief ("ER") for disposals before 6 April 2019) is available to individuals (and, in certain cases, trustees) who realise qualifying gains. It is a relief from Capital Gains Tax ("CGT") when an individual sells or disposes of all or part of their trading business. 

BADR operates so where qualifying conditions are met, the CGT rate to be applied is 10% to qualifying gains up to a lifetime limit of £1 million for disposals occurring on or after 11 March 2020 and certain other disposals on or after 6 April 2019. For earlier disposals, the limit was £10 million. 

However, the rate is increasing to 14% for disposals made on or after 06 April 2025 and from 14% to 18% for disposals made on or after 06 April 2026. 

To claim BADR, a number of conditions must be satisfied throughout a qualifying period and the qualifying conditions depend on the type of disposal.

Qualifying Capital Gains 

There are several qualifying gains which can benefit from BADR. These include gains arising on disposals by individuals of: 

  1. Personal Assets Used by a Trading Company
  • The individual must have owned the asset(s) for at least three years prior to the date of disposal.
  1. Shares of a Trading Company or Holding Company of a Trading Group
  • The seller must have been an officer or employee of the company for at least two years prior to the disposal.
  • They must also hold at least 5% of the ordinary share capital of the company.
  1. Shares Where the Company Has Ceased Trading
  • The individual must have met the conditions above (officer/employee and 5% shareholding) throughout the two years prior to the company ceasing trading.
  • The trading must have ceased within the three years ending with the date of disposal.
  1. All or Part of a Business as a Going Concern
  • The individual must have owned the business for the two years prior to disposal.
  • Assets not used for business purposes will not qualify for BADR.
  1. Assets Formerly Used in a Qualifying Business
  • The individual must sell the assets within three years after the business has ceased.
  • They must have owned the business for at least two years prior to the disposal.

When to claim

BADR is not automatic and therefore a BADR claim must be made on or before the first anniversary of 31 January after the tax year of the disposal. The most usual way to make a claim is through the tax return. 

Contact our Commercial Law Solicitors

If you are planning on selling your business or would like to find out more about what BADR could mean for you, get in touch with our specialist commercial law solicitors. 

Contact our team by telephone on 0330 123 1229, complete our contact form. or send us an email via info@smithpartnership.co.uk.

Share this article