For eligible business owners currently in the process of selling their business or disposing of business assets, Business Asset Disposal Relief (BADR) can be an important financial consideration. So, it’s vital to understand the impact of any potential changes in the upcoming budget.
What Is Business Asset Disposal Relief?
Formerly known as Entrepreneurs’ Relief, BADR is a key tax relief measure that reduces the rate of Capital Gains Tax (CGT) from the standard 20% to 14% (as of April 2025) on qualifying business disposals.
This relief applies to the sale of all or part of a business and is available to sole traders, business partners and certain shareholders who meet the qualifying criteria. The lifetime allowance remains capped at £1 million, meaning up to £1 million of gains can benefit from the reduced tax rate over the course of an individual’s lifetime.
Why Does BADR Matter Right Now?
In a time of rising government spending, increased borrowing, and economic recovery efforts, all tax reliefs – especially those seen as benefiting higher earners – are under scrutiny.
BADR has already faced considerable reform in recent years. Prior to 2020, the lifetime limit was £10 million. That was slashed to £1 million with very little notice, blindsiding many sellers in the middle of transactions.
Qualifying for Business Asset Disposal Relief
To be eligible for relief, both of the following conditions must be met for at least two years prior to the sale of your business:
- You must be a sole trader or a partner in the business.
- You must have owned the business for a minimum of two years.
What Are The Changes You Need To Be Aware Of For 2026?
In April 2026, BADR is to be changed to 18%.
What Can You Do To Mitigate Any Loss?
If you are a business owner currently in the process of selling your business – look at ways to expedite the process. Last time the Chancellor brought in changes to BADR, the lifetime limit was reduced from £10m to £1m – a considerable reduction. This amendment was swiftly made, giving those affected little time to react.
If at all possible, work with your purchaser and your professional advisers to get the deal over the line as quickly as possible and hopefully receive the full benefit of Business Asset Disposal Relief.
