Accountant For A Limited Company

Entrepreneurs relief: selling shares

Business Asset Disposal Relief, formerly Entrepreneurs' Relief, reduces the Capital Gains Tax rate on qualifying business disposals to 18% from 6 April 2026, down from the standard CGT rates of 18% or 24%. Each individual has a lifetime limit of £1 million of qualifying gains, and the relief applies to sole trader disposals, partnership shares, and qualifying shares in a personal trading company held for at least two years.

By Jordan Macey MAAT Reviewed by Noor Fiaz Updated 16 Apr 2026 5

Key takeaways

Business Asset Disposal Relief charges 18% Capital Gains Tax on qualifying disposals from 6 April 2026, up from 14% in 2025/26 and 10% for disposals on or before 5 April 2025.
The lifetime limit for Business Asset Disposal Relief is £1 million of qualifying gains per individual, reduced from £10 million in the March 2020 Budget.
Shareholders selling a personal company must hold at least 5% of ordinary share capital and voting rights for at least two years before the disposal to qualify.
Sole traders and business partners can claim BADR on the sale of all or part of their business or their share of partnership assets, subject to the two-year trading rule.
BADR claims must be made by the first 31 January that falls more than 12 months after the end of the tax year of disposal, using the self-assessment return.

What is Business Asset Disposal Relief?

If you are selling shares in all or part of your business, you might qualify for a Capital Gains tax relief called Business Asset Disposal Relief (BADR), previously referred to as 'Entrepreneurs' Relief'.

Below, you'll find a short guide providing a quick overview of the essentials - including how Business Asset Disposal Relief works, whether you're eligible for a claim and how you can make a claim. Keep in mind that this is a general guide, and we highly recommend speaking with an accountant before you make a claim.

Business Asset Disposal Relief is a scheme that reduces the amount of Capital Gains Tax payable when you dispose of (sell) shares in your business. Instead of the usual rates, you pay a reduced tax rate of 10% on the first £1 million of gains. This is much lower than the capital gains tax rates that would apply at a rate of up to 28%. There isn't a limit to the number of times you can claim.

Where does BADR apply and when is it available?

BADR applies to disposals of:

Shares in a company you own
A sole trade and its assets
Joint venture interests
Partnership interests and assets
Business assets held by a trust

When is it available?

BADR is available to CGT disposals made by individuals and trustees and qualifying disposals of business assets
BADR does NOT apply to disposals by companies, the disposal of investment or non-business assets

The limits of BADR

BADR reduces the rate of Capital Gains Tax (CGT) payable on qualifying disposals to 10%
BADR can be claimed up to a lifetime limit of qualifying capital gains4

How does Business Asset Disposal Relief save you money?

If you qualify for the relief, you will pay a tax rate of 10% on the first £1 million of gains you make. Gains above the first £1 million are taxed at the usual rate.

If you are a higher or additional rate taxpayer, this means that you will be paying about half the usual rate (which is either 20% or 28%). This amounts to tax savings of up to £100,000.

There is a lifetime allowance of £1 million of gains that can be taxed at the reduced rate. This applies to each individual, and not for each business that is sold.

Example:

Let’s say you decide to close down your contracting business. After settling your liabilities, there’s £100,000 in the company business bank account. And selling off your equipment brings in another £50,000.

This leaves you with a profit of £150,000.

Similar to income tax, there is a year tax-free Capital Gains threshold, which currently sits at £12,300. Therefore leaving you with a taxable amount of £137,700. This would ordinarily be taxed at a rate between 18-28% depending on certain criteria (for this example, we will assume the standard 20% Capital Gains Tax).

This would leave you to pay a sizable amount of £27,540.

However, with Business Asset Disposal Relief, you will be required to pay only 10% Capital Gains Tax under BADR rules. This would leave a tax bill of £13,770, creating a saving of £13,770.

How was BADR changed in the 2020 Budget

At Budget 2020 the Chancellor of the Exchequer announced that the lifetime limit of Entrepreneurs’ Relief would be reduced from £10 million to £1 million for Entrepreneurs’ Relief qualifying disposals made on or after 11 March 2020. At the same time Entrepreneurs'' Relief was renamed to Business Asset Disposal Relief.

The current legislation can be found here HS275 Business Asset Disposal Relief (2021).

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Who can claim Business Asset Disposal Relief

Ordinarily, you can claim Business Asset Disposal Relief if you meet the following conditions:

you are an employee or office holder of the company, for at least two years before you sell your shares
the company has been trading for at least two years before you sell your shares
the business must be a 'personal company' for at least two years before you sell your shares. This means that you need to own at least 5% of both the shares and voting rights.
you must be entitled to at least 5% of the company's distributable profits or 5% of the company's net worth at its dissolution

If the company ceases trading, you can still qualify for Business Asset Disposal Relief if:

the conditions above were met for the duration of the 24 month period prior to the company ceasing to trade
disposals are made within three years after a company ceases trading
assets distributed within the company are taxed as capital distribution not as income

If the shares are from an Enterprise Management Incentive (EMI), then further conditions apply:

you must have bought the shares before April 2013
you must have acquired the option to buy the shares at least a year before selling them

The rules surrounding Business Asset Disposal Relief can get complicated, so if there are aspects you are unsure about it is best to consult a qualified accountant.

How to claim Business Asset Disposal Relief

You can claim the relief on your annual Self Assessment tax return, under the 'Capital Gains Summary' section, or by completing Section A of the Business Asset Disposal Relief helpsheet.

It is also possible to claim Business Asset Disposal Relief on the sale of other assets which are not shares. The rules on this are different and it is best to discuss your individual case with a qualified small business accountant.

Deadlines for claiming Business Asset Disposal Relief

For the 2021/22 tax year ending 5th April 2022, the deadline is 31st January 2024
For the 2020/21 tax year ending 5th April 2021, the deadline is 31st January 2023

Frequently asked questions

What is Business Asset Disposal Relief and how does it differ from Entrepreneurs' Relief?

Business Asset Disposal Relief is the current name for what was called Entrepreneurs' Relief until the March 2020 Budget. It reduces the Capital Gains Tax rate on qualifying disposals of a business, shares in a personal trading company, or a partnership share. The relief was rebranded and the lifetime cap was reduced from £10 million to £1 million at the same time, limiting the tax saving available to serial entrepreneurs.

What is the BADR tax rate in 2025/26 and 2026/27?

The Autumn Budget 2024 phased in higher BADR rates over three years. For disposals on or before 5 April 2025 the rate was 10%. For the 2025/26 tax year it is 14%. From 6 April 2026 onwards the rate is 18%, matching the standard lower-band CGT rate. Most post-April 2026 disposals therefore pay the same rate regardless of whether BADR applies, so the relief is less valuable than it used to be.

Who qualifies for Business Asset Disposal Relief?

BADR is available to sole traders selling their business, business partners selling their partnership share, and shareholders in a personal trading company. Shareholders must hold at least 5% of the ordinary share capital, 5% of voting rights, and be entitled to at least 5% of the assets on winding up. They must also be an officer or employee of the company. All the conditions must be met throughout the two years ending with the disposal.

What is the lifetime limit for Business Asset Disposal Relief?

Each individual has a £1 million lifetime limit of qualifying gains on which BADR can be claimed. Once the limit is used, any further qualifying gains are taxed at the standard CGT rates. The £1 million limit applies across a person's entire lifetime and across all qualifying disposals, not per tax year or per business. Joint owners each have their own separate £1 million allowance.

How do I claim BADR on a share disposal?

Claim Business Asset Disposal Relief on your self-assessment tax return for the tax year in which the disposal takes place. Enter the figures on the Capital Gains Summary pages and mark the gain as qualifying for BADR. The deadline to claim is the first 31 January that falls more than 12 months after the end of the tax year of disposal, for example, 31 January 2028 for a disposal in 2025/26. Keep evidence that the qualifying conditions were met.

Can I claim BADR if my company has been trading for less than two years?

No. BADR requires the qualifying conditions, including share ownership, voting rights, entitlement to assets, and officer or employee status, to be met for at least two years ending with the date of disposal. For sole trader and partnership disposals, the business must have been traded throughout those two years. Plans to sell a newer business should usually wait until the two-year threshold is cleared to preserve the relief.

Is it worth planning a disposal around BADR now the rate is 18%?

From 6 April 2026 BADR charges the same 18% rate as the standard lower band of CGT, so the relief matters mainly for higher-rate shareholders who would otherwise pay 24%. A BADR-qualifying disposal can save up to 6 percentage points on gains up to the £1 million lifetime cap. For share sales close to the tax year end, timing around April can be significant because rates have stepped up each April from 10% to 14% to 18%.