Selling your business is a significant milestone, often the culmination of years of hard work, growth, and financial investment. Whether you’re a sole trader, a partner, or a shareholder in a trading company, you want to ensure the value you’ve built isn’t eroded by unnecessary tax liabilities. In 2025, Business Asset Disposal Relief (BADR) continues to offer qualifying business owners a powerful way to reduce Capital Gains Tax (CGT) liability on business disposals. Previously known as Entrepreneurs’ Relief, BADR can reduce your CGT rate to just 10% on qualifying gains up to £1 million.
At Capital Gains Tax Expert, we work with individuals across the UK to make sure they can navigate and apply BADR efficiently. With changes coming to the relief in April 2025, including an increase in the tax rate, strategic planning is now more important than ever. In this guide, we explore who qualifies for BADR, what business assets are eligible, what updates are on the horizon, and how our firm can support you every step of the way.
What is Business Asset Disposal Relief (BADR)?
BADR is a tax relief scheme offered by HMRC that allows individuals to pay a reduced CGT rate when disposing of qualifying business assets. The aim is to reward entrepreneurship and business risk-taking by allowing individuals to retain more of the gains made from the sale of businesses or business interests. The relief reduces the CGT rate from 20% (or more) to 10% on qualifying gains, up to a lifetime cap of £1 million. This cap applies to all qualifying disposals an individual makes in their lifetime.
At Capital Gains Tax Expert, we help clients not only determine if they qualify for BADR but also plan the timing and structure of disposals to fully leverage the relief while minimising risk. As of April 2025, the CGT rate for BADR is set to increase to 14%, with further increases to 18% by 2026. These changes are encouraging many business owners to consider accelerating their exit strategies before the less favourable rates take effect.
To make the most of these opportunities, it’s essential to consult a trusted capital gains tax specialist near me who understands how to structure your sale effectively.
Who Qualifies for BADR in 2025?
To qualify for BADR, the disposal must be made by an individual, not a company or trust. The most common categories of individuals who may qualify include sole traders, business partners, and shareholders in a personal trading company. The qualifying conditions vary slightly depending on the structure of the business or asset being disposed of.
Sole traders and business partners must have owned the business or their share in it for at least two years before the disposal date. Additionally, they must have been actively involved in the business during that period. BADR is intended for those who have had a meaningful stake and operational role in their business.
For shareholders, the company must qualify as a “personal trading company.” This means the individual must:
- Be an officer or employee of the company (or a company within the trading group);
- Hold at least 5% of the company’s ordinary share capital and voting rights;
- Be entitled to at least 5% of the distributable profits and net assets on winding up;
- Meet these criteria for at least two years before the share disposal.
Meeting these tests can sometimes be more complex than they seem, especially when dealing with reorganisations, group structures, or external investment. That’s why we offer bespoke reviews to assess each client’s eligibility accurately.
What Business Assets Qualify for BADR?
BADR can apply to several types of business disposals. The most common are:
- The sale of the whole or part of a sole trader business;
- The disposal of a business partner’s interest;
- The disposal of shares in a personal trading company;
- Assets used in the business and sold after the business has ceased (within three years).
Shares in companies must meet the trading status test, meaning the company must exist to carry on trading activities rather than investment or property holding. Likewise, the assets must have been used in the course of business and not for private purposes. For assets sold post-cessation, it’s essential that the individual owned them at the time the business was operating and that they were genuinely used for business purposes.
Our team frequently assists clients in evaluating whether mixed-use properties, leased assets, or assets with partial personal use can still fall within the BADR framework with appropriate planning.
To explore complex share arrangements and cross-eligibility, we recommend working with experienced accountants specialising in capital gains tax who can provide clarity and assurance.
2025 Changes: Rate Increases & Lifetime Limit
While the £1 million lifetime limit for BADR remains unchanged in 2025, the applicable tax rates are scheduled to increase. As of 6 April 2025, the CGT rate on gains qualifying for BADR will increase from 10% to 14%. A further increase to 18% is planned for 6 April 2026. These changes significantly reduce the tax savings available under the relief, making the timing of disposals critically important.
With this in mind, many business owners are considering whether to accelerate planned exits or internal restructuring before April 2025 to take advantage of the 10% rate while it’s still available. Our firm has already supported numerous clients in preparing business valuations, optimising ownership structures, and drafting pre-sale agreements to facilitate this.
Given the volatility of tax legislation, there’s no guarantee that the rules won’t change again. Working with experienced advisors ensures you’re prepared for current and future scenarios.
Real-World Scenarios and Strategic Planning
Let’s look at a few typical situations where BADR applies and how we help clients take full advantage of the relief.
A client, Sarah, operated a marketing consultancy as a sole trader since 2017. She received an offer to sell her business in early 2025. Because she met the two-year ownership and active involvement requirements, her gains qualified for BADR at the 10% rate. We assisted her with business valuation and liaised with HMRC to document and claim the relief.
In another case, Tom, a director holding 10% of shares in a family-owned tech company, wished to exit in 2025. Our initial review identified that although he met the shareholding test, he had only been an officer for 20 months. We advised delaying the sale until he passed the two-year threshold, thereby qualifying for BADR.
A more complex case involved a husband and wife who each held 5% of shares in a trading company. We restructured their ownership through a share-for-share exchange and ensured that both parties met the qualifying conditions. We also helped them utilise their respective £1 million BADR limits, resulting in combined tax savings of over £200,000.
These examples highlight why BADR planning is not a one-size-fits-all task. At Capital Gains Tax Expert, we tailor our approach to your specific goals, assets, and timelines.
How to Properly Claim BADR
Claiming BADR is typically done via your Self Assessment tax return. Within the return, you’ll need to fill in the relevant sections to declare the disposal, provide details of the asset, and confirm how you meet the qualifying criteria. The claim must be submitted within 12 months of the 31 January following the end of the tax year in which the disposal occurs. For instance, for disposals made during the 2024/25 tax year, the deadline to claim BADR is 31 January 2027.
Accurate record-keeping is vital. HMRC may request documents such as business accounts, share certificates, partnership agreements, or board minutes to substantiate your claim. We guide our clients through every step of the process, including drafting the supporting notes that accompany the claim to pre-empt HMRC queries.
We also conduct pre-disposal checks for clients who have made multiple disposals over time or those who have previously claimed Entrepreneurs’ Relief to ensure they haven’t exceeded the lifetime limit.
When to Consult a Tax Specialist
While BADR may appear straightforward, the reality is that many business owners overlook or misinterpret key eligibility requirements. Errors in timing, misclassification of assets, or changes in business structure can disqualify a claim.
Our firm frequently works with:
- Clients exiting businesses with group structures or joint ventures;
- Individuals with historic Entrepreneurs’ Relief claims needing updated calculations;
- Clients holding assets in personal and business use, requiring allocation and justification;
- Investors with EMI (Enterprise Management Incentives) options needing BADR alignment.
By involving a specialist early, you can structure your business sale for optimal tax efficiency. Our expertise ensures that your disposal aligns with the letter of the tax law, maximising relief and reducing audit risk.
For additional guidance on navigating regional regulations or face-to-face support, we recommend connecting with reliable tax advisors in Manchester to ensure local compliance and insight.
Conclusion
Business Asset Disposal Relief remains one of the most valuable tax reliefs available to UK business owners. With the rate increases scheduled for April 2025 and April 2026, the opportunity to secure significant tax savings is narrowing. The importance of early and accurate planning has never been greater.
At Capital Gains Tax Expert, we are committed to helping our clients navigate these changes confidently. Whether you’re selling your business, exiting a partnership, or transferring shares, our expert team is here to ensure your disposal is structured for maximum tax efficiency.
Ready to get started? Contact us today to book a consultation and find out how much you could save by claiming BADR correctly before the upcoming changes take effect.
Frequently Asked Questions (FAQ)
- What is the difference between Business Asset Disposal Relief and Entrepreneurs’ Relief?
Entrepreneurs’ Relief was renamed to Business Asset Disposal Relief (BADR) in 2020. While the core relief structure remained largely the same, the lifetime limit was reduced from £10 million to £1 million per individual.
- Can a landlord claim BADR on a property business?
Generally, no. BADR applies to trading businesses, not investment activities like property letting. However, if property is used as part of a qualifying trade, there may be exceptions.
- How do I know if my company is a ‘trading company’ for BADR purposes?
A trading company must generate most of its income from trading activities, not investment. HMRC generally considers a company with more than 20% of income or assets from investments to be non-trading.
- What if I’ve already used part of my £1 million BADR lifetime allowance?
You can still claim BADR on future disposals, provided you haven’t exceeded your £1 million cap. Our team can review your previous claims and calculate your remaining allowance.
- Can I claim BADR if I sell assets after my business has closed?
Yes, BADR may still apply if the disposal occurs within three years of business cessation, and the assets were used in the business at the time it was operating.
