In recent years, Business Asset Disposal Relief (BADR) has represented one of the most tax efficient ways for businesses to liquidise assets. Formerly known as Entrepreneur’s Relief, the incentive offered a 50% reduction in the main rate of Capital Gains Tax (CGT) due on proceeds from the sale of qualifying business assets.
In the 2024/25 tax year, before the CGT rate payable under the relief increased from 10% to 14% in April 2025, Xeinadin Group saw a 50% increase in the number of BADR claims we handled, with more than £15m in assets distributed.
However, with the applicable rate set to rise again in April 2026, the window of opportunity to reduce your CGT liability on business disposals is fast running out. In the next tax year, the BADR rate will increase to 18%, effectively abolishing the benefit for basic rate CGT payers. It will continue to offer some benefit to those liable for the higher rate of CGT (24%).
How does BADR work?
BADR is available if you decide to sell all or part of your business. To qualify, you must be a sole trader or business partner, and you must have owned the business for two years. You can claim BADR if you decide to close your business down, too, as long as you look to dispose of the assets within three years of closure.
The relief is also available on proceeds from the sale of shares and securities in a limited company. In this case, you must have been an employee or an office holder for at least two years prior to disposal. This relief isn’t available for shares and securities in businesses whose main activities are non-trading, such as investment.
There are additional eligibility rules relating to the disposal of shares held under the Enterprise Management Incentive, such as the stipulation that you must hold at least 5% of the shares and the voting rights to qualify, and also be entitled to at least 5% of disposal proceeds and assets if the company should be wound up or sold.
To make a claim for BADR, you must report gains from the disposal on either your self-assessment tax return or a HS275 form. To claim relief for 2025/26, you must submit these returns by 31st January 2027.
Why claim now?
If you are planning to sell your stake in a business, or you are wondering whether it’s time to call time on a still solvent concern, careful thought should go into when to act. Bringing disposal forward before April 2026 will give you a minimum 4% tax benefit on any proceeds, 8% if you pay CGT at the higher rate. This will have to be weighed against the possibility of the value of your assets increasing.
To help you with these decisions, our Corporate Recovery team would be delighted to talk you through your options. We specialise in all forms of business disposal, including Members’ Voluntary Liquidations (MVLs) for solvent businesses. We recommend getting in touch as soon as possible to avoid missing out on any benefit BADR may bring.
