Business Asset Disposal Relief (BADR) charges Capital Gains Tax at a reduced rate when you sell or wind up a trading company you have a real stake in, up to a £1 million lifetime limit. The rate is no longer the 10% most guides still quote. It rose to 14% for disposals made between 6 April 2025 and 5 April 2026, and to 18% for disposals from 6 April 2026. That matters more than a rate change usually would, because from the same date the main Capital Gains Tax rate is 18% on gains falling within your basic rate band and 24% above it. BADR now saves you nothing on the part of a gain that would have been taxed at 18% anyway. It saves six percentage points only on the part that would otherwise reach 24% — which is still real money on a large gain, but it is a different relief from the one directors planned around three years ago.
Rates and conditions below are from gov.uk and HMRC's Capital Gains Manual, verified on 13 August 2026. Capital Gains Tax is personal tax on the shareholder, not a company tax. Nothing here is advice on a specific disposal — the anti-forestalling rules alone turn on contract dates that need looking at individually.
Is BADR still 10%?
No. It has moved twice in two years, and this is the single most common error in circulation.
Disposal date
BADR rate
On or before 5 April 2025
10%
6 April 2025 – 5 April 2026
14%
From 6 April 2026
18%
If you are reading an article, a forum answer or an AI summary that says BADR is 10%, it was written for a disposal that completed before April 2025. The lifetime limit has not moved with the rate: it remains £1 million of qualifying gains per person, and it is a lifetime figure, not an annual one. Once you have used it, it is gone.
The rate applying to your disposal is fixed by when the disposal happens, not when you claim. HMRC also operates anti-forestalling rules for unconditional contracts entered into before a rate change but completed after it — set out in CG64174. If your contract straddles 5 April 2026, that is the page your accountant will be working from, and it is not a question to settle from a table.
How much is Business Asset Disposal Relief worth now?
Work it in two parts, because a single blended number hides the change.
Take a director with a £500,000 qualifying gain, no other gains, and the £3,000 annual exempt amount available. The basic rate band for 2026 to 2027 is £37,700, and how much of it is free depends on their income.
Without BADR
With BADR
Gain within the basic rate band
18%
18%
Gain above the basic rate band
24%
18%
Saving
—
6 points, on the higher-rate slice only
For most directors selling a company, income has already used the basic rate band, so nearly the whole gain sits in the 24% column and BADR takes it to 18%. On a £500,000 gain that is roughly £30,000 — worth having, and worth the paperwork.
What has gone is the old arithmetic. In 2024 the same gain compared 10% against 20%, and the relief halved the bill. It no longer does. If you have been carrying a plan built on "I'll pay 10% when I sell", the plan needs re-running before you act on it, not after.
What are the conditions for Business Asset Disposal Relief?
For a disposal of shares in your own company, all of the following must hold throughout the two years ending with the date of disposal:
The company is a trading company, or the holding company of a trading group. An investment company does not qualify, and a company that has stopped trading and is sitting on cash has a limited window.
You hold at least 5% of the ordinary share capital and that holding gives you at least 5% of the voting rights.
You are an officer or employee of the company — a director counts.
You are entitled to at least 5% of the distributable profits and of the assets on a winding up, or would receive at least 5% of the proceeds on a sale of the whole ordinary share capital.
Two of these catch people out. The officer or employee test means a founder who resigned to move on and sold a year later can fail it. And the 5% of ordinary share capital and voting rights test is why alphabet share structures set up purely for dividend flexibility sometimes turn out not to qualify — if a class carries no votes, it does not get you to the 5% voting threshold. If you set your share classes up for the reasons in our guide to paying yourself from a limited company, it is worth checking what they do on an exit as well as on a dividend.
What is the two-year rule?
Every qualifying condition has to be met for a continuous two years ending on the date of disposal — not two years at some point in the past. There is no partial relief for eighteen months.
There is one important variation. If the company has ceased trading, you can still claim, provided the conditions were met for two years up to the date trading stopped and you dispose of the assets within three years of that date. This is the route most relevant to a solvent winding-up: the company stops trading, the assets are distributed, and the clock is three years, not open-ended.
That interacts directly with how you close the company. A distribution in a members' voluntary liquidation can be a capital distribution and so fall within BADR; taking the same money out as a dividend before you close does not — it is income, taxed at dividend rates. We cover the mechanics of the two routes in how to close a limited company, and the choice between them is worth making before you file anything, not after.
You claim on your Self Assessment tax return, in the Capital Gains Tax summary pages, for the tax year in which the disposal falls. There is no separate application and no advance clearance for the relief itself.
The deadline is the first anniversary of the 31 January following the tax year of disposal. For a disposal in the 2026 to 2027 tax year, that means 31 January 2029. It is a long window, and it is still missed — usually because the disposal was treated as a company event and never reached the shareholder's personal return.
Keep the evidence for the qualifying conditions, not just the sale figures: the share register showing your holding, the dates you held office, and the accounts supporting that the company was trading. HMRC tests the two years, and the company's own filing history is part of how it does that — the corporation tax returns showing trading profits are among the clearest evidence you have, which is one more reason to keep them straight while the company is running. Our guide to corporation tax for directors covers what the company is filing and why.
Is Business Asset Disposal Relief still 10%?
No. It was 10% for disposals on or before 5 April 2025, 14% for disposals between 6 April 2025 and 5 April 2026, and it is 18% for disposals from 6 April 2026. Guidance still quoting 10% is describing a disposal that completed more than a year ago.
How much is Business Asset Disposal Relief worth?
It charges qualifying gains at 18% instead of the main rates of 18% within your basic rate band and 24% above it. In practice that is a saving of six percentage points on the part of the gain that would otherwise be taxed at 24%, up to a £1 million lifetime limit.
What is the 2 year rule for Business Asset Disposal Relief?
Every qualifying condition — trading company, 5% of ordinary share capital and voting rights, and being an officer or employee — must be met throughout the two years ending with the disposal. If the company has ceased trading, the two years must end on the date trading stopped and you must dispose within three years of it.
Does Business Asset Disposal Relief apply to a company winding up?
It can. A capital distribution in a solvent winding-up may qualify if the conditions are met and the distribution falls within three years of trading ceasing. Taking the same funds as a dividend before closing does not qualify — that is income, not a capital gain.
Is the £1 million limit annual?
No. It is a lifetime limit per person, covering all qualifying disposals you ever make. Once used, it does not refresh in a later tax year.
Business Asset Disposal Relief (BADR) charges Capital Gains Tax at a reduced rate when you sell or wind up a trading company you have a real stake in, up to a £1 million lifetime limit. The rate is no longer the 10% most guides still quote. It rose to 14% for disposals made between 6 April 2025 and 5 April 2026, and to 18% for disposals from 6 April 2026. That matters more than a rate change usually would, because from the same date the main Capital Gains Tax rate is 18% on gains falling within your basic rate band and 24% above it. BADR now saves you nothing on the part of a gain that would have been taxed at 18% anyway. It saves six percentage points only on the part that would otherwise reach 24% — which is still real money on a large gain, but it is a different relief from the one directors planned around three years ago.
Rates and conditions below are from gov.uk and HMRC's Capital Gains Manual, verified on 13 August 2026. Capital Gains Tax is personal tax on the shareholder, not a company tax. Nothing here is advice on a specific disposal — the anti-forestalling rules alone turn on contract dates that need looking at individually.
Is BADR still 10%?
No. It has moved twice in two years, and this is the single most common error in circulation.
Disposal date
BADR rate
On or before 5 April 2025
10%
6 April 2025 – 5 April 2026
14%
From 6 April 2026
18%
If you are reading an article, a forum answer or an AI summary that says BADR is 10%, it was written for a disposal that completed before April 2025. The lifetime limit has not moved with the rate: it remains £1 million of qualifying gains per person, and it is a lifetime figure, not an annual one. Once you have used it, it is gone.
The rate applying to your disposal is fixed by when the disposal happens, not when you claim. HMRC also operates anti-forestalling rules for unconditional contracts entered into before a rate change but completed after it — set out in CG64174. If your contract straddles 5 April 2026, that is the page your accountant will be working from, and it is not a question to settle from a table.
How much is Business Asset Disposal Relief worth now?
Work it in two parts, because a single blended number hides the change.
Take a director with a £500,000 qualifying gain, no other gains, and the £3,000 annual exempt amount available. The basic rate band for 2026 to 2027 is £37,700, and how much of it is free depends on their income.
Without BADR
With BADR
Gain within the basic rate band
18%
18%
Gain above the basic rate band
24%
18%
Saving
—
6 points, on the higher-rate slice only
For most directors selling a company, income has already used the basic rate band, so nearly the whole gain sits in the 24% column and BADR takes it to 18%. On a £500,000 gain that is roughly £30,000 — worth having, and worth the paperwork.
What has gone is the old arithmetic. In 2024 the same gain compared 10% against 20%, and the relief halved the bill. It no longer does. If you have been carrying a plan built on "I'll pay 10% when I sell", the plan needs re-running before you act on it, not after.
What are the conditions for Business Asset Disposal Relief?
For a disposal of shares in your own company, all of the following must hold throughout the two years ending with the date of disposal:
The company is a trading company, or the holding company of a trading group. An investment company does not qualify, and a company that has stopped trading and is sitting on cash has a limited window.
You hold at least 5% of the ordinary share capital and that holding gives you at least 5% of the voting rights.
You are an officer or employee of the company — a director counts.
You are entitled to at least 5% of the distributable profits and of the assets on a winding up, or would receive at least 5% of the proceeds on a sale of the whole ordinary share capital.
Two of these catch people out. The officer or employee test means a founder who resigned to move on and sold a year later can fail it. And the 5% of ordinary share capital and voting rights test is why alphabet share structures set up purely for dividend flexibility sometimes turn out not to qualify — if a class carries no votes, it does not get you to the 5% voting threshold. If you set your share classes up for the reasons in our guide to paying yourself from a limited company, it is worth checking what they do on an exit as well as on a dividend.
What is the two-year rule?
Every qualifying condition has to be met for a continuous two years ending on the date of disposal — not two years at some point in the past. There is no partial relief for eighteen months.
There is one important variation. If the company has ceased trading, you can still claim, provided the conditions were met for two years up to the date trading stopped and you dispose of the assets within three years of that date. This is the route most relevant to a solvent winding-up: the company stops trading, the assets are distributed, and the clock is three years, not open-ended.
That interacts directly with how you close the company. A distribution in a members' voluntary liquidation can be a capital distribution and so fall within BADR; taking the same money out as a dividend before you close does not — it is income, taxed at dividend rates. We cover the mechanics of the two routes in how to close a limited company, and the choice between them is worth making before you file anything, not after.
You claim on your Self Assessment tax return, in the Capital Gains Tax summary pages, for the tax year in which the disposal falls. There is no separate application and no advance clearance for the relief itself.
The deadline is the first anniversary of the 31 January following the tax year of disposal. For a disposal in the 2026 to 2027 tax year, that means 31 January 2029. It is a long window, and it is still missed — usually because the disposal was treated as a company event and never reached the shareholder's personal return.
Keep the evidence for the qualifying conditions, not just the sale figures: the share register showing your holding, the dates you held office, and the accounts supporting that the company was trading. HMRC tests the two years, and the company's own filing history is part of how it does that — the corporation tax returns showing trading profits are among the clearest evidence you have, which is one more reason to keep them straight while the company is running. Our guide to corporation tax for directors covers what the company is filing and why.
Is Business Asset Disposal Relief still 10%?
No. It was 10% for disposals on or before 5 April 2025, 14% for disposals between 6 April 2025 and 5 April 2026, and it is 18% for disposals from 6 April 2026. Guidance still quoting 10% is describing a disposal that completed more than a year ago.
How much is Business Asset Disposal Relief worth?
It charges qualifying gains at 18% instead of the main rates of 18% within your basic rate band and 24% above it. In practice that is a saving of six percentage points on the part of the gain that would otherwise be taxed at 24%, up to a £1 million lifetime limit.
What is the 2 year rule for Business Asset Disposal Relief?
Every qualifying condition — trading company, 5% of ordinary share capital and voting rights, and being an officer or employee — must be met throughout the two years ending with the disposal. If the company has ceased trading, the two years must end on the date trading stopped and you must dispose within three years of it.
Does Business Asset Disposal Relief apply to a company winding up?
It can. A capital distribution in a solvent winding-up may qualify if the conditions are met and the distribution falls within three years of trading ceasing. Taking the same funds as a dividend before closing does not qualify — that is income, not a capital gain.
Is the £1 million limit annual?
No. It is a lifetime limit per person, covering all qualifying disposals you ever make. Once used, it does not refresh in a later tax year.
