Business Asset Disposal Relief
Make sure the relief you're counting on is actually there.
Business Asset Disposal Relief (BADR) reduces the tax on qualifying gains to 18%, on up to £1 million of gains over your lifetime. For many sellers it's the single most valuable relief available. But the conditions are strict, and they have to be met throughout the two years before the sale. We make sure you qualify, and stay qualified, right up to completion.
At a glance
| Rate | 18% for disposals from 6 April 2026 |
| Lifetime limit | £1 million of qualifying gains |
| Qualifying period | Conditions must be met for 2 years before the sale |
| Normal rate without relief | Up to 24% for higher and additional rate taxpayers |
The conditions
When you sell shares in your company, you'll generally need to meet all of these for the two years leading up to the sale:
- A trading company. The company, or the group it heads, must be trading, without substantial non-trading activities.
- An officer or employee. You must hold a role in the company or a group company.
- Your "personal company". You must hold at least 5% of the ordinary shares and voting rights, plus an economic entitlement of at least 5%.
Different rules apply to shares acquired through EMI options, and to selling assets after a business has ceased.
Where claims go wrong
- Cash and investments build up. Surplus cash or investment property can call into question whether the company is a trading company.
- Shareholdings get diluted. A new investor or share issue can push you below 5% without anyone noticing.
- Roles change. Stepping down as a director or employee too early can break the conditions.
- Share classes are complex. Growth shares, alphabet shares and preference shares can affect the economic entitlement test.
Each of these can usually be fixed if it's spotted early enough. That's why we review the position well before a sale, and again before completion.
How we help
- A BADR health check: confirming whether you qualify today, and what could put it at risk.
- Pre-sale restructuring to protect trading status, for example moving surplus cash or property out of the company.
- Advising on share structures and management incentives, so they don't undermine your claim.
- Structuring the deal so the relief applies to as much of the gain as possible, including earn-outs and deferred payments.
- Making the claim correctly and on time.
Investors' Relief
If you invested in an unlisted trading company but don't work in it, Investors' Relief may apply instead. It uses the same rate and has its own £1 million lifetime limit, but different conditions, including holding newly issued shares for at least three years.
Proof
FAQs
Frequently asked questions
What is the Business Asset Disposal Relief rate?
For disposals on or after 6 April 2026, qualifying gains are taxed at 18%. The rate was 10% until 5 April 2025 and 14% for disposals between 6 April 2025 and 5 April 2026.
How much can I claim?
The relief applies to up to £1 million of qualifying gains over your lifetime. Gains above that are taxed at the normal capital gains tax rates.
Do I need to own at least 5% of the company?
Generally, yes. You need at least 5% of the ordinary share capital and voting rights, plus an entitlement to at least 5% of either the distributable profits and assets on a winding up, or the proceeds if the whole company were sold. You must also be an officer or employee. Different rules apply to shares acquired through EMI options.
Can cash or property in the company stop me qualifying?
It can. The company must be a trading company, which means its non-trading activities must not be substantial. Large cash balances or investment property can put this at risk, which is why we review the position well before a sale.
How do I claim the relief?
It's claimed through your tax return. The deadline is the first anniversary of 31 January following the end of the tax year in which you sold.
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Selling in the next two years?
Now is the time to check your position, while there's still time to fix anything. Book a confidential call.
Or write to taxadvisory@aswatax.co.uk
