Tax Relief Guide
Business Asset Disposal Relief: What Business Owners Need to Know for 2027
Business Asset Disposal Relief (BADR), formerly Entrepreneurs' Relief, currently taxes qualifying gains at 18% within a £1 million lifetime limit. For qualifying disposals on or after 6 April 2027, the announced lifetime limit falls to £500,000. The 18% rate is not scheduled to change on that date.
The important April 2027 BADR change is the lifetime qualifying-gains limit, not the 18% rate.
The limit reduction is an announced change being introduced through Finance Bill 2026-27. Until legislation is passed it remains subject to change, and previous qualifying claims, including earlier Entrepreneurs' Relief claims, count towards your lifetime limit.
What is Business Asset Disposal Relief?
BADR is a capital gains tax relief that reduces the rate an individual pays on qualifying gains when they sell all or part of a trading business, or shares in a personal trading company. It was known as Entrepreneurs' Relief until April 2020, and older advice using that name describes the same relief.
Two distinctions matter. First, the relief applies to the taxable gain, not the sale price: the gain is broadly what you receive less what the shares or business assets cost you, and the two figures can be very different. Second, eligibility depends on both the individual and the transaction. Owning a qualifying company is not enough on its own; the disposal itself must also qualify.
What changes from 6 April 2027?
| BADR | Up to 5 April 2027 | From 6 April 2027 |
|---|---|---|
| Qualifying CGT rate | 18% | 18% |
| Lifetime qualifying-gains limit | £1 million | £500,000 |
| Status | Current position | Announced change, subject to legislation |
Previous BADR and Entrepreneurs' Relief claims reduce your remaining lifetime headroom. If you have claimed on earlier disposals, the allowance available for a future sale may already be partly used.
Who may qualify?
For a share disposal, the standard conditions run through a two-year qualifying period ending with the disposal. In outline, you must have been an employee or office-holder of the company, the company must be a trading company or the holding company of a trading group, and it must be your personal company: broadly, you must hold at least 5% of the ordinary share capital, at least 5% of the voting rights, and the relevant economic entitlement to at least 5% of the proceeds on a sale or winding up. The answer is not simply "own 5% of the company"; each limb of the test has its own detail.
Different provisions can apply to sole traders and partners disposing of business assets, to EMI shares, to associated disposals of assets used by the business, to disposals on business cessation, to share dilution below the 5% threshold, to trustees, and to partial disposals. Each has its own conditions, and the detail should be checked against current HMRC guidance or with a qualified tax adviser.
BADR and retirement planning
Your retirement date should not be set solely by a tax deadline. A premature sale can sacrifice value or transaction certainty, and preparation, buyer demand and commercial terms may outweigh the tax difference. On a £1 million qualifying gain the illustrative cost of missing the higher limit is £30,000, a sum that a rushed or poorly prepared sale could easily exceed. Tax advice is most valuable when it is obtained early enough to influence the plan, and agreeing Heads of Terms does not by itself secure a particular tax treatment.
BADR and succession
BADR can become relevant across most exit routes: full external sales, partial share sales, management buyouts, family transfers that involve a disposal, EOT transactions, phased exits and retained equity that is sold later. The rules interact with each route differently, and no route automatically qualifies. This page explains the relief; it does not provide structuring advice, and the retirement, exit and succession planning guide covers the wider planning questions.
An illustrative example
The example below assumes a £1 million qualifying gain, no previous BADR claims, that the remaining gain would otherwise be taxed at 24%, and that no losses or other reliefs apply.
| Illustrative tax on a £1m qualifying gain | Amount |
|---|---|
| Before 6 April 2027: £1,000,000 × 18% | £180,000 |
| From 6 April 2027: £500,000 × 18% | £90,000 |
| From 6 April 2027: £500,000 × 24% | £120,000 |
| Total illustrative tax from 6 April 2027 | £210,000 |
| Illustrative difference | £30,000 |
This is not an individual tax quotation. Sale price is not the same as taxable gain, and the free indicative business valuation does not calculate your taxable capital gain. Your actual position depends on your circumstances, your claim history and the final legislation. Professional tax advice is required.
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Request a confidential discussionOfficial sources
The material tax claims on this page are drawn from primary Government sources rather than accountancy-firm commentary:
- HM Revenue & Customs: Business Asset Disposal Relief guidance (GOV.UK).
- HMRC: Business Asset Disposal Relief helpsheet (HS275).
- HM Treasury / HMRC: BADR lifetime-limit policy paper.
- HM Treasury: Budget 2026 and the Budget 2026 Overview of Tax Legislation and Rates.
- Finance Bill 2026-27 (the announced limit change is being introduced through this Bill).
Tax information on this page was checked against HMRC and HM Treasury material on 1 November 2026. The April 2027 limit change is an announced measure subject to legislation; the current law is the 18% rate and £1 million lifetime limit. Individual circumstances require professional advice.
Published by BusinessValuation.co.uk. Last reviewed 1 November 2026. BusinessValuation.co.uk is not a tax adviser, accountancy practice or law firm, and this page is general information, not personal tax advice.
Business Asset Disposal Relief FAQ
Direct answers to the questions owners ask most about BADR and the 2027 change.
What is BADR?
Business Asset Disposal Relief is a capital gains tax relief, formerly known as Entrepreneurs' Relief, that applies a reduced 18% rate to qualifying gains when an individual sells all or part of a trading business or shares in a personal trading company. It reduces the tax on the gain, not on the sale price, and eligibility depends on both the individual and the transaction.
What changes to BADR in April 2027?
The announced change is to the lifetime limit, not the rate. For qualifying disposals on or after 6 April 2027, the lifetime qualifying-gains limit falls from £1 million to £500,000. The 18% rate is not scheduled to change on that date. The change is being introduced through Finance Bill 2026-27 and remains subject to legislation.
Do previous BADR claims count towards the limit?
Yes. The lifetime limit applies across all qualifying disposals you have ever claimed on, including claims made under the former Entrepreneurs' Relief. Previous claims reduce the headroom available for future disposals, so your remaining allowance may be lower than the headline figure.
Should I sell my business before April 2027 because of BADR?
Not on the strength of the tax change alone. On a £1 million qualifying gain the illustrative difference is £30,000, which a premature or poorly prepared sale could easily exceed in lost value or weaker terms. Preparation, buyer demand and commercial terms often outweigh the tax difference. Take tax advice early enough to influence the plan rather than letting the deadline set your retirement date.
Does BADR apply to a partial sale of my shares?
It can. A disposal of part of your shareholding may qualify if the conditions are met, and separate provisions exist for associated disposals and share dilution. Each disposal uses lifetime headroom, and eligibility depends on your specific circumstances, so the position needs review by a qualified tax adviser.
Is BADR the same as Founders' Relief?
No. BADR is an existing relief with an announced limit change. Founders' Relief is a separate relief proposed at Budget 2026, intended for founders and significant early investors in qualifying high-growth companies, with a proposed 10% rate and £10 million lifetime limit. It is not yet law and its proposed conditions are fundamentally different from BADR.
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