What is Business Asset Disposal Relief (BADR)?

BADR (formerly Entrepreneurs' Relief) reduces the CGT rate to 10% on qualifying business disposals, up to a lifetime limit of £1 million. The rate increases to 14% from April 2025 and 18% from April 2026. Business Asset Disposal Relief (BADR) — formerly known as Entrepreneurs' Relief — is a CGT relief that reduces the rate of CGT on qualifying business disposals. Key features: (1) Rate — 10% (instead of the standard CGT rate of 24% for higher-rate taxpayers). The rate increases to 14% from 6 April 2025 and to 18% from 6 April 2026. (2) Lifetime limit — £1 million per individual (reduced from £10 million in 2020). (3) Qualifying disposals — the sale of all or part of a trading business, shares in a personal trading company, and assets used in a business that has ceased. (4) Conditions — for shares in a personal company, the individual must hold at least 5% of the ordinary share capital and voting rights, be an officer or employee, and the company must be a trading company, for at least 24 months before the disposal. (5) Claim — BADR must be claimed on the self-assessment return, by the first anniversary of the 31 January following the tax year of disposal. BADR can save up to £140,000 per individual (£1 million × 14% rate difference) compared to the standard CGT rate (for disposals from April 2025). Relevant legislation: TCGA 1992, Sections 169A-169K (BADR conditions and rates); Finance Act 2025 (rate changes from April 2025 and 2026). Example: A business owner sells their shares in a trading company for £3 million. The cost was £100,000. The gain is £2.9 million. BADR applies to the first £1 million of the gain at 10% (before April 2025) = £100,000. The remaining £1.9 million is subject to CGT at 24% = £456,000. Total CGT: £556,000. Without BADR, the CGT would be £696,000 (24% of £2.9 million). BADR saving: £140,000. Common mistake: Not claiming BADR on the self-assessment return. The relief must be actively claimed, and the deadline (first anniversary of 31 January following the tax year) is strict. Missing the deadline means the full CGT rate applies.

What are the qualifying conditions for BADR?

For shares in a personal company, you must hold at least 5% of the ordinary share capital and voting rights, be an officer or employee, and the company must be a trading company, for at least 24 months before the disposal. To qualify for BADR on the disposal of shares in a personal company, the following conditions must be met for at least 24 months before the date of disposal (or the date the business ceased, if earlier): (1) 5% shareholding — the individual must hold at least 5% of the ordinary share capital of the company AND at least 5% of the voting rights. From 6 April 2018, an additional condition was added: the individual must also be entitled to at least 5% of the profits available for distribution AND at least 5% of the assets on winding up. (2) Officer or employee — the individual must be an officer (e.g., director) or employee of the company (or a company in the same trading group). (3) Trading company — the company must be a trading company or the holding company of a trading group. An investment company does not qualify. (4) 24-month period — all conditions must be met for a continuous period of at least 24 months before the disposal. If the conditions are not met for the full 24 months, BADR is not available. For the sale of a whole business (not shares), the conditions are different: the individual must have owned the business for at least 24 months and the business must be a trading business. The conditions are strict, and specialist advice is needed to confirm eligibility. Relevant legislation: TCGA 1992, Sections 169I(6) (5% shareholding conditions); Section 169I(7) (officer/employee condition); Section 169I(5) (trading company condition). Example: A director holds 10% of the ordinary share capital and voting rights of a trading company, and has been a director for 3 years. They sell their shares. The conditions for BADR are met: 5%+ shareholding, officer, trading company, 24-month period. BADR at 10% applies to the first £1 million of the gain. Common mistake: Not meeting the 5% shareholding condition. The 5% must be held for the full 24-month period — if the shareholding falls below 5% at any point during the 24 months, BADR is not available.

How do the April 2025 BADR rate changes work?

From 6 April 2025, the BADR rate increases from 10% to 14%. From 6 April 2026, it increases to 18%. The rate is based on the date of disposal, not the date of the agreement. Disposals before 6 April 2025 continue to qualify for 10%. The October 2024 Budget announced increases to the BADR rate: (1) From 6 April 2025 — the BADR rate increases from 10% to 14% for disposals on or after that date. (2) From 6 April 2026 — the BADR rate increases further to 18% for disposals on or after that date. Key points: (a) Date of disposal — the rate is determined by the date of disposal (the date the contract becomes unconditional, or the completion date for unconditional contracts). (b) Transitional rules — for contracts entered into before 30 October 2024 but completed after 6 April 2025, the 10% rate may still apply (subject to conditions). (c) Lifetime limit — the £1 million lifetime limit remains unchanged. (d) EMI shares — the BADR rate for EMI shares also increases, but the timing may differ (specialist advice needed). (e) Planning — business owners considering a sale before the rate increases should consider accelerating the disposal to benefit from the lower rate. The rate increases mean that the BADR saving compared to the standard CGT rate (24%) decreases: before April 2025, the saving is 14% (24% - 10%); from April 2025, the saving is 10% (24% - 14%); from April 2026, the saving is 6% (24% - 18%). Relevant legislation: Finance Act 2025 (BADR rate changes); TCGA 1992, Sections 169A-169K (as amended). Example: A business owner sells their shares in March 2025 (before 6 April 2025). The gain is £1 million. BADR at 10% applies: CGT = £100,000. If the sale is delayed to May 2025 (after 6 April 2025), BADR at 14% applies: CGT = £140,000. The rate increase costs an additional £40,000 in CGT. Common mistake: Assuming that the contract date determines the rate. The rate is based on the date of disposal (completion), not the date of the contract. A contract signed before 30 October 2024 but completed after 6 April 2025 may still qualify for the 10% rate (subject to transitional rules).

Does BADR apply to EMI shares?

Yes. EMI shares automatically qualify for BADR without needing to meet the 5% shareholding and officer conditions. The BADR rate for EMI shares is 10% before April 2025, increasing to 14% from April 2025 (though EMI shares may retain the 10% rate until April 2026 — specialist advice needed). EMI shares have a special BADR treatment: (1) Automatic qualification — EMI shares automatically qualify for BADR without needing to meet the 5% shareholding and officer conditions that apply to other BADR claims. This means employees with even small EMI option holdings can benefit from the 18% rate. (2) Holding period — the 24-month holding period for BADR starts from the date of grant of the EMI option (not the date of exercise). This is more generous than for other shares, where the holding period starts from acquisition. (3) Rate — the BADR rate for EMI shares is 10% before April 2025. The October 2024 Budget announced rate increases, and the treatment of EMI shares under the new rates is subject to ongoing confirmation: it is expected that EMI shares will retain the 10% rate until April 2026, at which point the rate increases to 18%. Specialist advice is needed to confirm the exact treatment. (4) Lifetime limit — the £1 million lifetime limit applies to EMI shares and other BADR-qualifying disposals combined. (5) Claim — BADR must be claimed on the self-assessment return. The automatic qualification for EMI shares is one of the key advantages of EMI — it makes BADR available to employees who would not otherwise meet the 5% shareholding condition. Relevant legislation: TCGA 1992, Section 169I (BADR for EMI shares); Finance Act 2025 (rate changes). Example: An employee exercises EMI options (acquiring shares for £50,000) and holds the shares for 2 years. They sell the shares for £1,050,000. The gain is £1,000,000. BADR at 10% applies: CGT = £100,000. Without BADR (at 24%), the CGT would be £240,000. The BADR saving is £140,000. The employee did not need to meet the 5% shareholding condition (automatic qualification for EMI shares). Common mistake: Not claiming BADR for EMI shares. Even though EMI shares automatically qualify, BADR must still be claimed on the self-assessment return. Failing to claim means the full 24% CGT rate applies.

How is the £1 million BADR lifetime limit applied?

The £1 million lifetime limit applies per individual across all BADR-qualifying disposals. Once the limit is used, no further BADR is available. The limit was reduced from £10 million to £1 million from 11 March 2020. The BADR lifetime limit is the maximum amount of qualifying gains that an individual can claim BADR on during their lifetime. Key points: (1) £1 million — the current lifetime limit is £1 million per individual (reduced from £10 million for disposals on or after 11 March 2020). (2) Per individual — the limit is per individual, not per disposal or per company. Married couples each have their own £1 million limit. (3) Cumulative — all BADR-qualifying disposals during the individual's lifetime count towards the limit. Once the limit is used, no further BADR is available. (4) Timing — the limit is applied to the gains (not the proceeds). For example, if an individual has £600,000 of BADR-qualifying gains from a previous disposal, they have £400,000 of remaining BADR limit. (5) Partial use — if a disposal produces gains exceeding the remaining limit, BADR applies to the qualifying portion up to the limit, and the standard CGT rate applies to the excess. (6) Previous use — individuals who previously used Entrepreneurs' Relief (the predecessor to BADR) have their previous usage counted towards the £1 million limit. (7) Planning — individuals approaching the limit should consider the timing and structuring of disposals to maximise the use of BADR. Spouses can each claim BADR, potentially giving a combined £2 million of gains at the reduced rate. Relevant legislation: TCGA 1992, Section 169AA (lifetime limit); Finance Act 2020 (reduction from £10 million to £1 million). Example: An individual has previously used £400,000 of their BADR lifetime limit. They sell their business for a gain of £800,000. BADR at 10% applies to the remaining £600,000 of the limit. The remaining £200,000 of the gain is subject to CGT at 24%. Total CGT: £60,000 (10% of £600,000) + £48,000 (24% of £200,000) = £108,000. Common mistake: Not tracking previous BADR usage. The lifetime limit is cumulative, and previous claims (under Entrepreneurs' Relief) count towards the £1 million. Individuals should keep records of all BADR/ER claims to track their remaining limit.

Share Schemes › Tax Reliefs

Business Asset Disposal Relief (BADR)

Name: Newshams Tax Advisers
Address: 71-75 Shelton Street, Covent Garden, London, WC2H 9JQ, GB
Telephone: +448002118657
Price range: ££££
Rating: 5.0

BADR reduces the CGT rate to 10% on qualifying business disposals, up to a lifetime limit of £1 million. Understand the conditions, qualifying assets, and the April 2025 rate changes.

Book a Consultation +44 (0) 800 211 8657

Business Asset Disposal Relief (BADR) — formerly known as Entrepreneurs' Relief — is one of the most valuable CGT reliefs available to business owners and employees. It reduces the CGT rate to 10% on qualifying business disposals, up to a lifetime limit of £1 million per individual. From April 2025, the BADR rate is increasing from 10% to 14%, and from April 2026, it will increase further to 18%. Understanding the conditions and how to qualify is essential for anyone selling a business or shares.

What BADR Provides

BADR reduces the CGT rate on qualifying business disposals to 10% (increasing to 14% from April 2025 and 18% from April 2026). The lifetime limit is £1 million per individual. Qualifying disposals include: the sale of a trading business, shares in a personal trading company, and assets used in a business that has ceased. The relief can save up to £140,000 per individual (£1 million × 14% rate difference) compared to the standard CGT rate.

Qualifying Conditions

To qualify for BADR on the sale of shares in a personal company, the individual must meet the following conditions for at least 24 months before the disposal: (1) 5% shareholding — hold at least 5% of the ordinary share capital and 5% of the voting rights. (2) Officer or employee — be an officer (director) or employee of the company. (3) Trading company — the company must be a trading company (or the holding company of a trading group). (4) 24-month period — the conditions must be met for at least 24 months before the disposal (or the date the business ceased, if earlier).

The April 2025 Rate Changes

From 6 April 2025, the BADR rate increases from 10% to 14% for disposals on or after that date. From 6 April 2026, the rate increases further to 18%. The £1 million lifetime limit remains unchanged. The rate is applied based on the date of disposal, not the date of the agreement. Disposals before 6 April 2025 continue to qualify for the 10% rate. This creates a planning opportunity for business owners considering a sale before the rate increases.

BADR for EMI Shares

EMI shares automatically qualify for BADR without needing to meet the 5% shareholding and officer conditions. The EMI option holding period counts towards the 24-month requirement. The BADR rate for EMI shares is also increasing: 10% before April 2025, 14% from April 2025, and 18% from April 2026. However, EMI shares enjoy a special rate — the BADR rate for EMI shares remains at 10% until April 2026 (the increase to 14% applies from April 2025 for other BADR assets, but EMI shares retain the 10% rate until the April 2026 increase to 18%).

Key Points

What You Need to Know

BADR reduces CGT to 10% on qualifying business disposals (increasing to 14% from April 2025)
The lifetime limit is £1 million per individual
Qualifying conditions: 5% shareholding, officer/employee, trading company, 24-month period
EMI shares automatically qualify for BADR without the 5% and officer conditions
The BADR rate increases to 14% from April 2025 and 18% from April 2026

Expert Answers

Share Schemes Frequently Asked Questions

Detailed answers with legislation references, practical examples and common pitfalls.

Explore More

All Share Schemes Topics

EMI Eligibility & Qualifying Companies EMI Tax Advantages Company Share Option Plan (CSOP)Growth Shares Business Asset Disposal Relief (BADR)Share Schemes on Exit Save As You Earn (SAYE / Sharesave)Unapproved Options & RSUs Share Incentive Plan (SIP)Employee Ownership Trusts (EOTs)Share Valuation for EMI & CSOP HMRC EMI Notification & Reporting Phantom Shares & Cash-Settled Awards Share Schemes on IPO

Need Specialist Share Schemes Advice?

Our tax advisers can help you navigate share schemes with clear, practical advice tailored to your circumstances.

Book a Consultation Call +44 (0) 800 211 8657