Further changes to Business Asset Disposal Relief
In April 2025, the tax rate on Business Asset Disposal Relief (BADR) increased from 10% to 14%. Further rises are coming in 2026, so if you’re thinking about selling your business, it’s time to act swiftly or you may be liable to pay thousands more in tax. Here’s what you need to know.
BADR explained
BADR can reduce your Capital Gains Tax (CGT) when selling certain business assets or shares from the standard rate of 24%. Currently, you are liable to pay tax at 14% on all gains on qualifying assets sold since 6 April 2025. If you sold on or before 5 April 2025, you would need to pay tax at 10%. There is a personal cumulative lifetime limit of £1 million for capital gains that can qualify for BADR, potentially providing tax savings of up to £100,000, and any gains above the £1m lifetime limit will be taxed at the full CGT rate of 24%.
Who is eligible?
To be eligible for BADR, there must be a qualifying business disposal, and you must meet certain qualifying criteria in the 24 months before a claim is made. Individual tax advice should be sought in respect of eligibility for BADR.
A quick history of BADR
In 2008, the taper relief rules on business disposals were abolished in favour of a new flat rate of CGT at 10%. This meant that those who had built a business over many years would be faced with far higher rates of CGT when selling. So, to avoid discouraging entrepreneurship, Entrepreneur’s Relief was introduced. The lifetime allowance was initially set at £1 million but rose to £2m and then £5m in 2010, before doubling again to £10m in 2011.
In April 2020, Entrepreneur’s Relief became Business Asset Disposal Relief, and the lifetime limit decreased to £1m for disposals made after 6 April 2020.
Upcoming changes
From 6 April 2026, the tax rate for BADR will rise to 18% meaning that if you sell qualifying assets with a chargeable gain of £1 million you will have to pay an additional £40,000 in tax. This means there is not much time left to get organised if you’re hoping to sell your business before the further tax rises come in to force.
How Attwaters can help
The sooner you start to plan, the greater your chance of avoiding the increased BADR rates. Our knowledgeable Corporate Team can help you explore your options and would welcome the opportunity to work with you, and other professional advisers, to plan your exit.
The Corporate Team works closely with other departments at Attwaters Solicitors, so you can receive the complete legal package. If you’re looking to secure your business legacy, our Private Client team can advise on succession planning and transitioning your business through to the next generation. Plus, we can assist with Wills, Lasting Powers of Attorney and the establishment of Trusts and Family Investment Companies.
The BADR changes are just around the corner, so don’t leave it too late! Contact us today to find out how we can help you prepare for your next step.
