What Is Business Asset Disposal Relief and How Much Can You Save in 2026/27?

Business Asset Disposal Relief (BADR) is a Capital Gains Tax relief that taxes qualifying business gains at 18% rather than the standard higher rate of 24%, saving a higher-rate taxpayer up to £60,000 on gains within the £1 million lifetime limit. Previously known as Entrepreneurs' Relief, it applies to qualifying disposals of company shares or business assets, but only where precise conditions are met throughout a defined qualifying period. The rate itself has changed significantly following the October 2024 Autumn Budget, so understanding business asset disposal relief UK 2026/27 is essential before any sale. This guide is written by Blue Tick Accountants, a Guildford-based UK tax advisory and accountancy practice that helps company owners plan their exits.

Key Takeaways

• Business Asset Disposal Relief taxes qualifying gains at 18% instead of the standard higher rate of 24% for 2026/27.
• The lifetime limit on gains eligible for BADR is £1 million per person, accumulated across all qualifying disposals in your lifetime.
• The qualifying conditions must be met throughout the two-year period ending on the date of disposal, or the date the company ceases trading if earlier.
• To qualify on shares, you must hold at least 5% of ordinary share capital, voting rights, distributable profits, and assets on winding-up, and be an officer or employee throughout.
• BADR now offers no benefit to basic-rate taxpayers, for whom the standard CGT rate is already 18%; its value is concentrated among higher-rate and additional-rate taxpayers.
• A married couple who each meet the conditions each have their own separate £1 million lifetime limit, doubling the relief available to the household.

What Is Business Asset Disposal Relief and How Much Can You Save in 2026/27?

Business Asset Disposal Relief is a Capital Gains Tax relief that taxes qualifying gains at 18% rather than the standard higher rate of 24%. For a higher-rate taxpayer, this 6 percentage point saving on gains up to the £1 million lifetime limit represents a maximum tax saving of £60,000.

It is worth understanding how the relief has evolved. When it was introduced as Entrepreneurs' Relief, the CGT rate was just 10%. The October 2024 Autumn Budget increased this in two stages: to 14% from 6 April 2025, then to 18% from 6 April 2026. At the same time, the main CGT rates rose from 10% and 20% to 18% and 24%. As a result, BADR now offers no benefit at all to basic-rate taxpayers, for whom the standard CGT rate is already 18%. The relief's value today is concentrated among higher-rate and additional-rate taxpayers.

That said, BADR remains the most widely available CGT relief for business owners, and a saving of up to £60,000 on a qualifying disposal is still worth planning around carefully.

Worked example. You sell your company shares in 2026/27 and realise a gain of £900,000. You are a higher-rate taxpayer. Without BADR, CGT at 24% produces a bill of £216,000. With BADR at 18%, the tax charge falls to £162,000. The saving is £54,000. This is not trivial, and it is easily lost through poor structuring or a failure to meet the qualifying conditions in the period leading up to the sale.

What Are the Qualifying Conditions for Business Asset Disposal Relief?

BADR does not apply automatically: you must satisfy a specific set of conditions throughout the qualifying period of two years ending on the date of disposal, or the date the company ceases trading if earlier. Miss any condition during that window and the relief can be lost entirely.

Personal company test. To qualify on a disposal of shares, the company must be your "personal company." This means you must hold at least 5% of the ordinary share capital, be entitled to at least 5% of the voting rights, and be entitled to at least 5% of distributable profits and 5% of assets on a winding-up. All three thresholds must be met simultaneously throughout the two-year qualifying period.

Officer or employee. You must be an employee or officer of the company throughout the qualifying period. A non-executive director or a director with any employment contract will typically satisfy this condition, but it must be maintained consistently. If you resign from the board or reduce your shareholding below 5% in the two years before a planned sale, you may lose the relief entirely.

Trading company requirement. The company must be a trading company or the holding company of a trading group. A company whose activities are wholly or mainly investment activities will not qualify. This is particularly relevant for companies that have accumulated significant investment assets over time, where the investment component may begin to dominate and threaten trading status.

Timing the two-year clock. The qualifying period runs backwards from the date of disposal. If you are planning to sell a business, the two-year window means that BADR planning must begin well in advance. Acquiring shares in a company, being appointed as a director, or restructuring the share capital can all reset or interrupt the qualifying period if not handled carefully.

How Does the £1 Million Lifetime Limit Work?

The lifetime limit for BADR is £1 million of qualifying gains across all disposals in a person's lifetime. This is not a per-transaction limit: it accumulates across all qualifying disposals over your lifetime.

If you have previously claimed BADR or its predecessor Entrepreneurs' Relief on an earlier disposal, the gains from that claim count against your £1 million lifetime allowance. You can claim the relief across multiple disposals as long as the cumulative qualifying gains do not exceed £1 million.

Any gains above the lifetime limit are taxed at the standard rates: 18% for basic-rate taxpayers or 24% for higher-rate taxpayers. It is therefore important to track your remaining lifetime allowance, particularly if you have sold a business before or made qualifying asset disposals in previous years.

Where a married couple each own shares in the same company and each independently meets the qualifying conditions, each spouse has their own separate £1 million lifetime limit. In a well-structured company with equal shareholding, this doubles the relief available to the household.

How Can You Plan Ahead to Maximise Business Asset Disposal Relief?

The most effective way to maximise BADR is to plan two years ahead, because it is a qualifying-period relief: you cannot retrospectively satisfy conditions you failed to maintain. The following planning considerations are the most important.

Review your shareholding two years in advance. If you currently hold less than 5% of the ordinary share capital, you cannot qualify. This may arise through dilution if the company has issued shares to employees or investors without a corresponding anti-dilution mechanism. An annual review of the share register and the 5% tests is essential for any business owner with a potential exit on the horizon.

Maintain your directorship or employment. If your role in the business is changing in the run-up to a sale, for example as part of a management handover, take advice on whether a change of title or a revised employment arrangement could inadvertently break the officer or employee test.

Consider the timing of a sale. If you have not yet completed two years as a director-shareholder in a qualifying trading company, delaying a disposal until that threshold is met could save significant CGT. In a business valued at £1 million with a gain of £600,000, the difference between paying 18% and 24% is £36,000, often well worth waiting for.

Entrepreneurs' Relief on associated disposals. BADR can also apply to gains on assets held personally but used in the business, such as a property or piece of equipment that was used in your trade. This is known as an associated disposal claim and requires careful structuring to ensure the conditions are met, including that the disposal forms part of the same transaction as the qualifying business disposal.

EMI share options. Employees and directors holding qualifying Enterprise Management Incentive options may also be able to access BADR on option gains, provided the options were granted at least two years before disposal. This is an important planning tool for businesses that use EMI schemes as part of their reward strategy.

What Common Traps Disqualify a BADR Claim?

The most common traps that disqualify a BADR claim are share dilution below 5%, creeping investment activity, premature retirement from the board, and misunderstanding the two-year clock on restructures. Each of these can quietly break a condition that must hold throughout the qualifying period.

Share dilution below 5%. When a company raises investment or issues shares to key employees, existing shareholders can fall below the 5% threshold without realising it. Keeping careful track of the share capital structure, and taking professional advice before any share issue, is essential.

Investment activity creeping in. A trading company that accumulates significant cash, loans to connected parties, or investment properties may cease to qualify as a trading company under HMRC guidance. Once investment activities become substantial, even temporarily, the trading company test can be failed. Regular reviews of the company's balance sheet with an eye on trading versus non-trading assets are advisable.

Retiring from the board prematurely. Some business owners step back from executive roles in the years before a sale, moving to a consultancy arrangement or a non-board role. If this removes the formal directorship, the officer test may be broken. Even a short gap between leaving a directorship and completing a sale can affect eligibility.

Misunderstanding the two-year clock on restructures. Where a business restructure creates a new holding company, or where shares are exchanged as part of a reorganisation, BADR planning needs to consider whether the qualifying period restarts. In many cases it does not, but the position should be confirmed in advance.

Does BADR Apply Beyond Company Shares, to Business Assets and Goodwill?

Yes: BADR is not limited to company shares. It also applies to disposals of the whole or part of a business carried on as a sole trader or partnership. A self-employed person selling their business and its assets can claim BADR on qualifying gains, provided they have owned and operated the business for at least two years before disposal.

For sole traders and partners, BADR applies to gains on goodwill, business premises, and other assets used in the trade at the time of disposal. The same 18% rate and £1 million lifetime limit apply.

Where a sole trader incorporates and transfers their business to a company, gains that arise on that transfer can potentially be deferred using incorporation relief rather than taxed immediately under BADR. However, deferral and BADR are mutually exclusive for the same gain: if incorporation relief is claimed, BADR is not available at the point of incorporation. Advice on which approach produces the better outcome depends on the individual's circumstances and plans for the company.

Frequently Asked Questions

What is the Business Asset Disposal Relief rate for 2026/27?

The Business Asset Disposal Relief rate for 2026/27 is 18%, applied to qualifying gains up to the £1 million lifetime limit. This compares to the standard higher CGT rate of 24%. The rate rose from 10% historically to 14% from 6 April 2025, then to 18% from 6 April 2026 following the October 2024 Autumn Budget.

How much can I save with Business Asset Disposal Relief?

A higher-rate taxpayer can save up to £60,000 with Business Asset Disposal Relief. The relief charges qualifying gains at 18% rather than the standard 24%, a 6 percentage point saving applied to gains up to the £1 million lifetime limit. On a £900,000 gain, for example, BADR reduces the Capital Gains Tax bill from £216,000 to £162,000, a saving of £54,000.

Do I still qualify for BADR if I am a basic-rate taxpayer?

BADR offers no benefit to basic-rate taxpayers for 2026/27 because the standard Capital Gains Tax rate for them is already 18%, the same as the BADR rate. The relief's value is now concentrated among higher-rate and additional-rate taxpayers, who would otherwise pay 24% on their qualifying gains.

How long do I have to hold my shares to claim BADR?

You must meet the qualifying conditions throughout a two-year period ending on the date of disposal, or the date the company ceases trading if earlier. Throughout that period you must hold at least 5% of ordinary share capital, voting rights, distributable profits, and assets on winding-up, and be an officer or employee of the company.

Can my spouse and I both claim Business Asset Disposal Relief?

Yes, where each spouse independently meets the qualifying conditions, each has their own separate £1 million lifetime limit. In a well-structured company with equal shareholding, this doubles the relief available to the household. Each individual must satisfy the 5% personal company test and the officer or employee requirement in their own right.

How Blue Tick Can Help

Blue Tick Accountants advises company directors and business owners on Business Asset Disposal Relief, reviewing qualifying conditions well in advance of any planned exit and modelling the tax position across different sale scenarios. With deep expertise in CGT planning, share structures, and the two-year qualifying period, Blue Tick Accountants ensures the relief is claimed correctly and that a six-figure tax bill is not lost to an inadvertent change of role or share dilution. Head to our website and book a meeting now.

Conclusion

Business Asset Disposal Relief remains one of the most valuable CGT reliefs available to UK business owners, even after the rate increase to 18% for 2026/27. The key to claiming it successfully is not expertise in the mechanics of the claim itself: it is maintaining the qualifying conditions throughout the two-year period leading up to a disposal. Begin the planning process early, review your shareholding and director status annually, and take structured advice before any transaction that might affect your eligibility. With careful preparation, a higher-rate taxpayer can secure a saving of up to £60,000 on a qualifying sale.

About the Author

This guide was written by Leon, founder of Blue Tick Accountants, a Guildford-based UK tax advisory and accountancy practice that helps limited company owners and business sellers across the UK plan tax-efficient exits. It was last reviewed for the 2026/27 tax year.

This article is intended for general informational purposes only and does not constitute tax, legal, or financial advice. Tax rules are subject to change and their application will depend on your individual circumstances. You should always seek advice from a qualified professional before taking action. Blue Tick Accountants accepts no liability for decisions made on the basis of this content.