Business Asset Disposal Relief (BADR) can help reduce your capital gains tax bill if you sell your business.
It is available to anyone eligible, including sole traders selling their business and limited company shareholders disposing of shares.
Before 2020, it was known as Entrepreneurs’ Relief.
In 2026/27, qualifying gains are taxed at 18% under BADR, subject to a £1 million lifetime limit. From 6 April 2027, that lifetime limit falls to £500,000, following the October 2026 Budget. The 18% BADR rate itself is unchanged.
Here’s how BADR works, including who qualifies, how to claim and how the lower limit may affect a business sale. Read our Budget 2026 report on the £500,000 BADR limit for the announcement and a worked example.
Background to BADR (Entrepreneur’s Relief)
Entrepreneur’s Relief was first introduced in 2008. The 2008 Budget abolished the taper relief rules on business disposals and introduced a new flat rate of Capital Gains Tax at 10%.
These measures meant that business owners who had built a business over many years, sometimes their lifetimes, would have to pay a much higher rate of Capital Gains Tax when they sold their business.
As this could discourage entrepreneurs from building businesses, generating employment, and creating wealth, the government introduced Entrepreneurs’ Relief.
This new relief was designed to compensate business owners who would have paid a lower Capital Gains Tax (CGT) rate under the previous taper relief rules.
The BADR has increased in stages
The reduced BADR capital gains tax rate was 10% until April 2025.
The rate is now 18% (from April 2026), having risen from 10% in 24/25 and 14% in 25/26, following an announcement in the Autumn 2024 Budget. Investors’ Relief (IR) will also increase by the same amounts (see below).
BADR and Investors’ Relief rates
The BADR tax rate stays at 18% from April 2027. It is the lifetime limit, not the rate, that changes. Investors’ Relief has separate rules and limits.
| Tax year | BADR rate | Investors’ Relief rate |
|---|---|---|
| Up to 5 April 2025 | 10% | 10% |
| From 6 April 2025 | 14% | 14% |
| From 6 April 2026 | 18% | 18% |
Note: Investors’ Relief has a separate £1 million lifetime limit for qualifying disposals from 30 October 2024. The BADR limit falls to £500,000 from 6 April 2027; the two limits should not be confused.
How has the BADR lifetime limit changed?
The original relief allowed qualifying gains to be taxed at 10%, subject to a lifetime limit that has changed several times. In the first 2010 Budget, Alistair Darling raised the lifetime limit to £2m.
This was extended to £5m in the 2010 ‘Emergency Budget’, effective 23rd June 2010, and to £10m in the 2011 Budget, effective April 6, 2011.
The limit fell to £1 million from 11 March 2020 and falls again to £500,000 for qualifying disposals from 6 April 2027.
BADR may be claimed on more than one qualifying disposal, but earlier claims count towards the available lifetime limit. The October 2026 Budget Red Book sets out the reduction to £500,000.
Entrepreneur’s Relief (BADR) – Qualifying as a business owner
To claim BADR, several conditions must be met during a 24-month ‘qualifying period’ before you sell the business.
- During the qualifying period, you were either a sole trader or an officer (director/secretary), or an employee of a limited company.
- For a qualifying share disposal, you generally need at least 5% of the company’s ordinary share capital and voting rights, plus the required economic entitlement under the applicable rules; exceptions may apply, including certain enterprise management incentive (EMI) shares.
- You can claim relief on proceeds from a partial or full sale of a business, shares in a company, or on the value of any business assets remaining after the company has ceased trading, as long as you were either a business partner in a company or the exclusive business owner (if you were a sole trader).
- If the business ceased trading, it must have done so no more than three years before the sale date.
- If you’re selling a ‘going concern’, the business must be financially viable at the time of sale.
- You cannot claim BADR for the disposal of non-commercial property.
- You can claim on multiple qualifying disposals, but the lifetime limit is £1 million for 2026/27 and £500,000 from 6 April 2027. Previous BADR claims count towards the limit. Gains above the available limit are taxed at the applicable standard CGT rates.
- If the business is owned by a couple (spouse or civil partner), each person can apply for ER if they meet the eligibility criteria listed above.
- Further rules apply for the disposal of business assets following business cessation, shares/securities and goodwill.
Investors’ Relief – £1 million lifetime limit unchanged in Budget 2026
Although Investors’ Relief is similar to BADR, it is a separate relief for individuals investing in early-stage companies. The October 2026 Budget did not reduce the Investors’ Relief lifetime limit. It remains £1 million, while the BADR lifetime limit falls to £500,000 from 6 April 2027. Both reliefs currently have an 18% CGT rate, but different qualifying conditions.
It applies to investors for qualifying disposals made after 6th April 2019.
To meet the eligibility criteria as an investor, the following have to apply:
- You must have held the shares for at least three years before the disposal.
- You must have held the shares continuously for this period.
- The investment must be in a trading company or the holding company of a trading group.
- Investors’ Relief is available only to investors who are not involved in running the business.
- The shares must not be listed on a major stock exchange; however, those listed on AIM are permitted. This is intended to encourage investment in smaller companies, rather than established ones.
- The shares must be newly issued, not acquired from another individual.
Important update: For qualifying disposals made on or after 30 October 2024, the lifetime limit for Investors’ Relief was reduced from £10m to £1m, which matched BADR’s limit at the time. BADR’s limit falls to £500,000 from 6 April 2027.
Like BADR, the Investors’ Relief rate was 10%, then 14%, and is now 18%.
Read the official guidance here.
How do you calculate your BADR liability?
For example, on a £1 million taxable gain, assuming no previous BADR claims and that gains outside the relief are taxed at 24%, the CGT bill is £180,000 under the current £1 million limit. With a £500,000 limit, the same gain would produce a £210,000 bill – £30,000 more. This simplified comparison assumes the annual CGT exemption and other applicable reliefs have already been accounted for.
- Calculate your total CGT liability relating to the disposal.
- Take off your annual CGT allowance, if you’re eligible (£3,000 in 2026/27).
- Your BADR liability is calculated at the reduced rate: 18% for disposals made in 2026/27.
- Gains above the available BADR lifetime limit (£1 million in 2026/27; £500,000 from 6 April 2027) are charged at the standard CGT rates. From 6 April 2025, these are 18% (within the basic Income Tax band) and 24% (above the basic band).
When do you pay and claim BADR?
The deadlines depend on the tax year of disposal. Tax on a qualifying disposal in 2026/27 is generally due by 31 January 2028 under Self Assessment; the BADR claim deadline for that tax year is generally 31 January 2029. For a disposal in 2027/28, the corresponding dates are usually 31 January 2029 for payment and 31 January 2030 to claim. Check the HMRC claiming rules for your circumstances.
How do you report and claim BADR?
You should complete the supplementary capital gains section of your annual self assessment form.
If you cannot do this, make a claim directly with HMRC in writing or by filling in Section A of the HS275: Business Asset Disposal Relief helpsheet.
The rules are complex, and you must meet specific qualifying conditions to claim the Relief. For obvious reasons, we recommend reading the official guidance and talking to your accountant before making a claim.