Business Asset Disposal Relief — The Trade Owner's Guide to Selling Up Tax-Efficiently (2026)

What Is Business Asset Disposal Relief?

Business Asset Disposal Relief reduces the rate of Capital Gains Tax (CGT) you pay when you dispose of all or part of a qualifying business. When you sell a business — or shares in your own company — for more than it cost you, the profit is a capital gain, and CGT is normally due on it. BADR lets qualifying gains be taxed at a reduced rate instead of the standard CGT rates.

If the name doesn't ring a bell, you may know it by its old title. BADR was called Entrepreneurs' Relief until it was renamed in 2020. The rules are broadly the same lineage, but the relief has been steadily tightened — first by a dramatic cut to the lifetime limit, and more recently by a series of rate rises that take it a long way from the original 10% headline.

The Rate Is Rising: 10% → 14% → 18%

This is the single most important thing for any trade owner to understand right now. The BADR rate is no longer a flat 10%. It is on a rising trajectory:

• Up to 5 April 2025: 10% on qualifying gains
• From 6 April 2025: increased to 14%
• From 6 April 2026: set to rise again to 18%

In other words, the cost of selling up has nearly doubled in the space of two tax years. On a gain of £1 million — the maximum the relief covers — the difference between the old 10% rate and the 18% rate from April 2026 is £80,000 in extra tax. That is a substantial sum, and it is the reason timing has become a genuine planning decision rather than an afterthought.

Even at 18%, BADR is still worth having. The standard CGT rate on gains that fall in the higher-rate band is meaningfully above 18%, so qualifying for the relief still saves tax compared with paying the full rate. The point is that the gap has narrowed, and the days of the headline 10% rate are gone.

The £1 Million Lifetime Limit

BADR is capped by a lifetime limit of £1 million of qualifying gains. This is a cumulative figure across your whole life — every time you make a qualifying disposal and claim the relief, the gain counts toward that £1 million. Once you've used it up, any further qualifying gains are taxed at the standard CGT rates.

This limit is far smaller than it used to be. Under the old Entrepreneurs' Relief regime, the lifetime limit was £10 million. In March 2020 it was cut to £1 million — a tenfold reduction that took most large business sales out of the relief's reach overnight. For the typical trade business owner, though, a £1 million lifetime allowance still comfortably covers a single sale, so the relief remains valuable for the kind of disposals most tradespeople actually make.

Who Does BADR Help?

BADR is aimed squarely at people in your position: owners disposing of a trading business they've built. For a tradesperson, the most common situations where it applies are:

• Selling the business on: You sell your plumbing, electrical, building or landscaping business — including its goodwill, customer base, vans and tools — to another operator or to an employee taking over.
• Retiring and winding up: You're stepping back, ceasing to trade, and disposing of the business assets as part of closing down.
• Selling company shares: If you run your trade through a limited company, you sell your shares in that company rather than the underlying assets.

In all of these cases, the relief is about the same thing: you spent years turning labour into a saleable asset, and BADR is what lets you keep more of the proceeds when you finally cash out.

Qualifying Conditions

BADR is not automatic. You have to meet specific conditions, and they differ slightly depending on whether you trade as a sole trader, in a partnership, or through a company.

Sole Traders and Partners

To qualify, you must dispose of all or part of a business that you own as a sole trader or as a partner in a business partnership. A genuine part-disposal can qualify, but selling off individual assets in isolation while continuing to trade generally does not — the relief is designed for the disposal of a business or an identifiable part of one.

Company Shareholders

If you trade through a limited company, you must be selling shares in your personal company. Broadly, that means for at least two years before the sale you must:

• Hold at least 5% of the ordinary shares and the associated voting rights in the company, and
• Be an employee or officer (such as a director) of that company, and
• The company must be a trading company (or the holding company of a trading group).

The Two-Year Qualifying Period

Across all routes, the qualifying conditions must have been met for at least two years before the date of disposal. You can't set up a structure a few months before a sale and expect to qualify — HMRC looks back over the two-year window to check the conditions were satisfied throughout.

Selling Assets After the Business Ceases

If your business stops trading and you then sell off assets that were used in it, those disposals can still qualify for BADR — provided you sell them within three years of the business ceasing. This is useful for a tradesperson who winds down, retains some equipment or premises for a while, and disposes of them afterwards.

How the Annual CGT Exempt Amount Interacts

BADR sits alongside your annual CGT exempt amount — the tax-free slice of capital gains everyone gets each tax year. In practice, the exempt amount is applied first to reduce your taxable gain, and BADR then applies its reduced rate to the qualifying gain that remains above that exemption.

The annual exempt amount has been cut significantly in recent years and is now far smaller than it once was, so it makes only a modest dent in a large business-sale gain. It's still worth using, but for a sizeable disposal the relief itself does the heavy lifting, not the annual exemption. If you have other gains in the same year, the order in which exemptions and reliefs are allocated can affect your bill — another reason to plan a sale with an accountant rather than work it out on the back of an envelope.

How to Claim Business Asset Disposal Relief

You claim BADR through your Self Assessment tax return for the tax year in which the disposal took place. You report the gain in the capital gains section and claim the relief there. There is a deadline for making the claim — broadly by the first anniversary of the 31 January following the tax year of disposal — so don't leave it indefinitely.

Keep thorough records: the completion date of the sale, the proceeds, your original cost base, evidence of your shareholding and officer/employee status if you're a company shareholder, and the dates that establish your two-year qualifying period. A clean set of records makes the claim straightforward and protects you if HMRC asks questions.

Why Planning Ahead Matters More Than Ever

With the rate climbing from 10% to 14% and on to 18%, the timing of a disposal now carries real money. If you're already contemplating selling or retiring, the cost of completing a sale in one tax year versus the next can be tens of thousands of pounds. That doesn't mean rushing a sale you're not ready for — a fire sale to beat a rate change rarely makes sense — but it does mean factoring the rate trajectory into your decision rather than ignoring it.

Planning ahead also protects your eligibility. The two-year qualifying period means structuring decisions — incorporating, bringing in a partner, changing your shareholding — need to be made well in advance of any sale if you want them to count. Leaving it until you have a buyer on the table is often too late to fix a structure that doesn't qualify.

Quick Reference: BADR Rates and Limits

Figures are correct for 2026 and can change at fiscal events such as the Budget. Always confirm the current rate and rules before acting.

The Bottom Line for Trade Owners

BADR remains one of the most valuable reliefs available to a tradesperson selling or winding up their business — but it's a moving target. The 10% rate that made selling up so attractive has gone, replaced by 14% and soon 18%, while the lifetime limit sits at £1 million rather than the old £10 million. Qualifying still requires meeting the conditions for a full two years, so the decisions you make about structure today shape what you'll pay when you eventually exit.

None of this is a substitute for proper advice. A business sale is usually the largest single financial event of a trade owner's career, and the tax outcome depends on the precise facts of your situation. Speak to a qualified accountant or tax adviser well before you sell, so the relief works for you rather than slipping through your fingers.