Business Asset Disposal Relief (Entrepreneurs' Relief): At a glance

What is Business Asset Disposal Relief (BADR)? When does BADR apply? What is the rate of BADR? How to claim BADR.

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This is a freeview 'At a glance' guide to CGT Business Asset Disposal Relief (BADR), the relief formerly known as Entrepreneurs' Relief.

At a glance

At a glance

Entrepreneurs' Relief (ER) was renamed Business Asset Disposal Relief (BADR) by Finance Act 2020. 

BADR is a Capital Gains Tax (CGT) relief that reduces the rate of tax paid on the disposal of qualifying business assets where the disposal proceeds are high enough to take you into the higher tax bands.

It can apply to disposals of:

  • A sole trade and its assets.
  • Partnership interests and assets.
  • Shares in your own company.
  • Joint venture interests.
  • Business assets held by a trust.

When is BADR available?

  • It is available to CGT disposals made by individuals and trustees. It does not apply to disposals by companies.
  • It applies to qualifying disposals of business assets. It does not apply to the disposal of investment or non-business assets.

The effect of BADR

  • It reduces the rate of CGT payable on qualifying disposals to 14% (10% before 6 April 2025, and 18% from 6 April 2026). 
  • An individual may claim BADR up to a lifetime limit of qualifying capital gains. This limit is currently £1 million.

Restrictions

  • BADR does not apply to carried interest gains. These are charged at 32% (18% and 28% before 6 April 2025).
  • From 6 April 2026, a revised tax regime for carried interest will be introduced. This will treat carried interest as trading profits subject to Income Tax and Class 4 National Insurance Contributions (NICs), not CGT. 

How BADR works 

Chargeable gains covered by BADR are taxed at a tax rate of 14% (10% before 6 April 2025, and 18% from 6 April 2026). 

The amount of BADR given depends on the amount of the individual's BADR lifetime limit after taking previous disposals into account at the date of the disposal.

The lifetime limit is as follows:

  • £1 million from 11 March 2020.
  • £10 million from 6 April 2011  to 10 March 2020.
  • £5 million from 23 June 2010 to 5 April 2011.
  • £2 million from 6 April 2010 to 22 June 2010.
  • £1 million for 2008-09 and 2009-10.

Gains in excess of the lifetime limit will be charged at the CGT rate applicable for that period.

The 'mechanics' of this relief have changed over the years, if you have made several disposals in your lifetime, this can make the calculation of your lifetime limit tricky.

Example 1

John owns a sole trade and two companies. He disposes of his business and his shareholdings between 2018-19 abd 2025-26 as follows.

He sold his sole trade and business premises making a £250,000 capital gain in November 2018. The disposal qualified for BADR and his gain was taxed as follows:

2018-19: first disposal  £
£250,000 x 10% 25,000
CGT due (ignoring annual exemption) 25,000

In August 2019 he sells all his shares in his first company. The £500,000 gain qualifies for BADR as follows:

2019-20: second disposal £
£500,000 x 10% 50,000
CGT due (ignoring annual exemption) 50,000

In May 2025 he sells his second company making a £650,000 gain which again qualifies for BADR. The lifetime limit decreased to £1 million (from £10 million) on 11 March 2020. The rate of BADR increased to 14% (from 10%) on 6 April 2025.

2025-26: third disposal £
£250,000 x 14% 35,000
£400,000 x 24% 96,000
CGT due (ignoring annual exemption) 131,000

Example 2

Taking the above example, say John sold his sole trade and business premises for £500,000 and his first company for £750,000, the first two disposals would still qualify for full BADR as the lifetime limit was £10 million.

BADR would not be available on the third disposal, as the lifetime limit reduced to £1 million on 11 March 2020, so John would have used his full allowance. The total gain would therefore be subject to CGT at 24%.

Notes

  • An individual will be able to make more than one claim for relief up to the total of the lifetime limit prevailing at the date of the disposal.
  • In these examples, John can first use his annual exemption to offset his gains that do not qualify for BADR. If all his gains qualified for BADR he would deduct his available annual exemption from the BADR-qualifying gain before calculating CGT due.

Different forms of BADR

BADR applies to a 'material disposal' of business assets, there are separate rules for the different classes of asset. These comprise:

Different forms of BADR Applies to:

Disposal of a business or part of a business

 Sole traders or partners: S.169I(2)(a) TCGA 1992

Disposal of the assets of a business following its cessation

 Sole traders or partnerships: s.169I(2)(b)
Disposal of shares or securities in a company Officer or employee shareholders
Disposal of a joint venture interest Joint venture officer or employee shareholders
Disposal of trust business assets Trustees
Disposal associated with a material disposal Shareholders or partners
Disposal of shares or securities in a company (Investors' Relief) Investor shareholders (not officers or employers)

Try the Toolkits for BADR

These online tools are designed to work through the complex rules in minutes, they cover:

BADR: business and asset disposals (sole traders)
This toolkit covers around 50 different permutations of the rules covering disposals made by an individual.

  • Between 6 April 2014 and 29 October 2018.
  • Between 29 October 2018 and 5 April 2019.
  • On or After 6 April 2019.

BADR: share disposals
This toolkit covers share disposals and share disposals following incorporation and all the different permutations of the relief for shares for disposals.

  • Between 6 April 2014 and 29 October 2018.
  • Between 29 October 2018 and 5 April 2019.
  • On or After 6 April 2019.