Business Asset Disposal Relief

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; 

2. Shares of a trading company or holding company of a trading group. The seller of the shares must have been an officer or employee of the company for at least two years prior to the disposal and they must hold at least 5% of the ordinary share capital of the company; 

3. Shares where the company has ceased trading. Providing the conditions above were satisfied throughout the period of two years prior to the company ceasing trading and providing that the trading ceased within the period of three years ending with the date of the disposal; 

4. All or part of a business as a going concern. Providing the individual has owned the business for the period of two years prior to the disposal. Assets which are not used for the purposes of the business will not qualify for BADR; and 

5. Assets which were formally used in a qualifying business. An individual will only benefit from BADR where the assets are sold within three years after the cessation and the individual has owned the business for the period of 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.