Can Business Asset Disposal Relief (BADR) improve a clients’ business sale value?
Selling a company or its assets without careful tax planning can put a substantial part of a sale’s value at risk of being lost to Capital Gains Tax (CGT).
Business Asset Disposal Relief (BADR), formerly known as Entrepreneurs Relief, can be an effective way to help preserve the value of a sale.
When your clients are preparing to sell or close a business, they must understand if BADR is beneficial to their wider exit plans.
What is BADR and who qualifies for it?
BADR is a UK tax relief that can help reduce the rate of CGT liabilities on qualifying disposals or business assets.
Since April 2025, BADR applied a reduced CGT rate of 14 per cent on qualifying lifetime gains up to £1 million.
Any gains above this limit are taxed at the standard CGT rates of 18 per cent or 24 per cent, depending on the taxpayer’s circumstances.
From 6 April 2026, the BADR rate will increase from 14 per cent to 18 per cent and will reduce the tax advantage available to business owners who delay their disposal.
If an individual wants to be eligible for BADR, they must:
- Have owned at least 5 per cent of the company’s shares and voting rights
- Have met this ownership threshold for a continuous period of at least two years prior to the disposal
- Be entitled to at least 5 per cent of distributable profits and assets on winding up or disposal proceeds
- Be an employee or office holder of the company or a company within the same group
- Dispose of shares in a trading company or holding company of a trading group
Where a company ceases trading, BADR may still apply if the shares are sold within three years of cessation and offer flexibility for owners winding down operations.
BADR directly affects the net proceeds and deal structures a business owner receives on sale.
By reducing the CGT rate on qualifying gains, it can significantly increase the post-tax value.
How do you claim BADR?
BADR is claimed through the Capital Gains supplementary pages of an individual’s Self Assessment Tax return.
For disposals in the 2024-25 tax year, the claim must be included in the return due by 31 January 2026 and with the final deadline to claim being January 2027.
Accuracy is crucial for BADR and any incorrect or unsupported claims can lead to HMRC enquiries, delays or the relief being denied altogether.
With increasing scrutiny of HMRC, we can help your clients stay informed of any ongoing changes to BADR and ensure claims are compliant.
How can we help your clients prepare for a sale?
With the BADR rate increasing to 18 per cent from April 2026, planning has never been more important to secure the relief and value of the business your clients have built.
We can help assess their eligibility well in advance of disposal and review shareholdings, voting rights and trading status.
Our team can help advise your clients on the best time to submit ar claim and if alternate exit strategies are better suited to maximise the business sale value.
Equally, if you are looking to sell your own legal practice and are eligible for this relief we can help you make the most of a future acquisition.
Contact us to find out how we can help you with making your clients future business sales tax efficient.