From 6 April 2025, the Business Asset Disposal Relief (BADR) rate increased from 10% to 14%, marking the first of two scheduled rises. A further increase to 18% is due from 6 April 2026.
While the £1 million lifetime limit for qualifying gains has been retained, the increase in the Capital Gains Tax (CGT) rate under BADR significantly affects the net proceeds that business owners can retain when selling.
For anyone who missed the pre-April deadline, all is not lost – but these changes do make forward planning more important than ever. At Slater Heelis, we’re working closely with clients to assess their options and adjust their timelines.
A Quick Recap: What is Business Asset Disposal Relief?
Business Asset Disposal Relief (previously known as Entrepreneurs’ Relief) is a tax relief that allows individuals to pay a reduced CGT rate when selling all or part of a qualifying business. It can apply to:
- Sole traders and partners selling all or part of their business
- Shareholders selling shares in a trading company or group
Historically, BADR has provided a reduced CGT rate of 10% on the first £1 million of qualifying lifetime gains – a valuable incentive for business owners exiting after years of hard work.
What’s Changed?
As confirmed in the Autumn 2024 Budget, the Chancellor opted not to scrap BADR entirely, but instead to increase the CGT rate applied to qualifying disposals:
- From 6 April 2025, the rate rose from 10% to 14%
- From 6 April 2026, it will rise again to 18%
The £1 million lifetime limit on BADR remains unchanged.
Who Can Claim BADR?
To be eligible for BADR, certain conditions must have been met for at least two years prior to the date of sale.
If you’re selling your business:
- You must have been a sole trader or partner
- You must have owned the business for at least two years
If you’re selling shares:
- The company must be a trading company (not an investment company) or the holding company of a trading group
- You must be an employee or office holder
- You must own at least 5% of ordinary shares and voting rights
- You must be entitled to at least 5% of profits available for distribution or sale proceeds
Further rules apply if your shares were acquired through an Enterprise Management Incentive (EMI) scheme, so tailored tax advice is essential.
What if You Missed the April 2025 Deadline?
Many business owners hoped to complete their exit before the April 2025 deadline to benefit from the lower 10% rate. But even if that window has passed, there is still value in taking action now.
In particular, preparing for the second rate rise in April 2026 could offer significant tax savings. If your business plans to sell or transfer ownership within the next 12 months, now is the time to revisit your plans.
Talk to our team
If you’re considering selling your business, speak to our team to discuss your options by filling out our online contact form or call 03301 732 339.