What is Business Asset Disposal Relief?
By Joseph Spiers
Read out comprehensive guide to Business Asset Disposal Relief (formerly Entrepreneurs' Relief) in the UK.
When you're preparing to sell a business, the tax bill can have a significant impact on how much of the sale proceeds you ultimately keep.
One of the key tax reliefs business owners may be able to use is Business Asset Disposal Relief (BADR). Formerly known as Entrepreneurs' Relief, BADR can reduce the Capital Gains Tax (CGT) rate on qualifying business disposals.
However, the rules and tax rates have changed in recent years. For the 2026/27 tax year, the BADR rate is 18%, rather than the 10% rate that many business owners may remember from previous years. The lifetime limit for qualifying gains remains £1 million.
So, what is Business Asset Disposal Relief, who can claim it and how could it affect the tax you pay when selling your business?
What is Business Asset Disposal Relief?
Business Asset Disposal Relief is a Capital Gains Tax relief that can reduce the rate of CGT payable when an individual disposes of qualifying business assets. For qualifying disposals made from 6 April 2026, gains eligible for BADR are taxed at 18%. The relief applies to qualifying gains up to a £1 million lifetime limit.
This can be particularly relevant when selling a successful company, sole trader business or partnership where a substantial capital gain has built up over many years.
For example, if you make a £500,000 qualifying gain and have sufficient BADR lifetime allowance remaining, the gain could potentially be taxed at 18% rather than the applicable standard CGT rate.
The actual tax payable will depend on your circumstances, including your available annual exempt amount, income, capital losses and any other gains or reliefs.
Business Asset Disposal Relief 2026/27: Key Details
There are two figures business owners should know for 2026/27:
BADR rate: 18%
Lifetime limit: £1 million of qualifying gains
The 18% rate applies to qualifying disposals made on or after 6 April 2026.
The £1 million limit is a lifetime limit, rather than an annual allowance. This means previous claims for Entrepreneurs' Relief or BADR can reduce the amount of relief available on a future business sale.
For business owners planning an exit, this makes it important to establish how much of your lifetime limit you have already used before assuming that the full £1 million is available.
How does Business Asset Disposal Relief work?
Business Asset Disposal Relief works by reducing the amount of Capital Gains Tax you pay on the sale of qualifying business assets. The eligibility requirements depend on what you're selling.
Selling all or part of your business
If you're selling all or part of a business you operate as a sole trader or business partner, you generally need to have owned the business for at least two years before the disposal.
If you're closing the business rather than selling it, specific rules can also allow BADR to apply to qualifying business assets, provided the relevant conditions are met.
Selling shares in your company
The rules are more specific if you're selling shares in a company.…