Reliefs

Business Asset Disposal Relief at 18%: what's changed, and is it still worth claiming?

Business Asset Disposal Relief rose from 10% to 14% and now 18%. What the changes mean for business owners selling now, and why the relief still matters.

6 October 2026

Business Asset Disposal Relief (BADR), formerly Entrepreneurs' Relief, has been the main tax relief for business owners selling up. Over the last two years, it's become much less generous. Here's what changed, and why it's still worth protecting.

What changed

Disposals	BADR rate
Up to 5 April 2025	10%
6 April 2025 to 5 April 2026	14%
From 6 April 2026	18%

The lifetime limit stays at £1 million of qualifying gains.

At the same time, the main capital gains tax rates rose from 30 October 2024, to 18% for basic rate taxpayers and 24% for higher and additional rate taxpayers.

What the relief is worth now

For a higher or additional rate taxpayer:

Without the relief: gains taxed at 24%.
With the relief: the first £1 million of qualifying gains taxed at 18%.

That's a 6 percentage point difference, worth up to £60,000 on the full £1 million of lifetime gains. When the rate was 10%, the same relief was worth up to £100,000 or more.

So is it still worth claiming?

Yes. £60,000 per qualifying shareholder is still significant, and a couple who both qualify can each claim their own £1 million limit. Spouses and civil partners who hold shares and work in the business can double the benefit.

But the smaller saving changes the calculation in some situations:

Restructuring purely to protect the relief is harder to justify if it's expensive or risky.
Timing a sale around the relief matters less than it did.
Other reliefs and structures may now be worth more, such as the Substantial Shareholding Exemption on a sale by a holding company, or an Employee Ownership Trust sale.

The conditions haven't changed

To qualify on a sale of shares, you generally need to meet these conditions for the two years before the sale:

the company is a trading company, or the holding company of a trading group, without substantial non-trading activities
you're an officer or employee of the company or a group company
it's your "personal company": at least 5% of the ordinary shares and votes, plus an economic entitlement of at least 5%

Different rules apply to shares acquired through EMI options.

Where claims still go wrong

Cash and investments building up in the company, calling trading status into question.
Dilution pushing a shareholder below 5%.
Family shareholders with small holdings, or spouses without a formal role.
Leaving too early: stepping down as a director before the sale.

These can usually be fixed if they're spotted early enough, but not if they're found during the buyer's due diligence.

What to do now

Check whether each shareholder qualifies today, and will for the two years before a likely sale.
Deal with surplus cash or investments in good time.
Compare the relief with other routes to exit, such as SSE or an EOT.
Claim it correctly: the deadline is the first anniversary of 31 January following the end of the tax year of the sale.

This article is general information, not advice. Tax rules change and their effect depends on your circumstances. Please speak to us before acting.

FAQs

Frequently asked questions

What is the Business Asset Disposal Relief rate now?

18% for disposals on or after 6 April 2026. It was 10% until 5 April 2025, and 14% for disposals between 6 April 2025 and 5 April 2026.

How much does Business Asset Disposal Relief save now?

For a higher or additional rate taxpayer, the relief reduces the rate on qualifying gains from 24% to 18%. On the maximum £1 million of lifetime gains, that's a saving of up to £60,000.

Is the lifetime limit still £1 million?

Yes. 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.

Who qualifies for Business Asset Disposal Relief on a share sale?

Generally, for the two years before the sale, the company must be a trading company or the holding company of a trading group, and you must be an officer or employee. You must also hold at least 5% of the ordinary shares and votes, plus an economic entitlement of at least 5%. Different rules apply to shares from EMI options.

Can my spouse claim Business Asset Disposal Relief too?

Yes, if they qualify in their own right. Each qualifying shareholder has their own £1 million lifetime limit, so spouses or civil partners who both hold shares and work in the business can each claim. A spouse with a small holding or no formal role may not qualify.

Can cash in my company affect Business Asset Disposal Relief?

Yes. Cash and investments building up in the company can call its trading status into question. The relief needs a trading company without substantial non-trading activities, so surplus cash or investments are best dealt with well before a sale.

What if my shareholding drops below 5% before the sale?

You could lose the relief. Dilution, for example from new shares issued to investors or staff, can push a shareholder below 5%. The conditions must be met throughout the two years before the sale, so check the effect of any share issue in advance.

Should I resign as a director before selling?

Not without checking first. You need to be an officer or employee of the company or a group company for the two years before the sale. Stepping down too early is one of the common ways claims go wrong.

What is the deadline for claiming Business Asset Disposal Relief?

The claim must be made by the first anniversary of 31 January following the end of the tax year of the sale. If you miss it, you can lose the relief, so it's worth diarising the date as soon as the sale completes.

Is it still worth restructuring to get Business Asset Disposal Relief?

Sometimes, but it's harder to justify than it was. With a saving of up to £60,000 per person, a restructuring that's expensive or risky may not be worth it purely to protect the relief. Timing a sale around the relief also matters less than it used to.

Are there better options than Business Asset Disposal Relief?

Depending on the deal, other routes may now be worth more. The Substantial Shareholding Exemption can apply on a sale by a holding company, and a sale to an Employee Ownership Trust may also be an option. It's worth comparing them before deciding how to sell.

Related advice

Free guide

Selling your business: the tax playbook

The reliefs, structures and timing decisions that matter most in the two years before a sale, plus the deal terms and what to do afterwards.