Business Asset Disposal Relief (BADR), formerly known as Entrepreneurs’ Relief, has long served as a valuable incentive for business owners planning to sell their business or shares. However, changes introduced in Budget 2024 are set to alter the landscape considerably over the next 12 months—and could have a material impact on your financial planning.
In this article, we examine what’s changing, what it means for you, and how you can prepare.
What Does BADR Cover—and Who Can Claim It?
BADR allows eligible individuals to pay a reduced rate of Capital Gains Tax (CGT) on the first £1 million of lifetime gains when selling qualifying business assets. The relief applies when selling:
- A trading business operated as a sole trader or in partnership (including goodwill and related assets);
- Shares in your personal company—where you hold at least 5% of shares and voting rights and are an employee or officeholder;
- Personally owned assets used by your business, such as property or equipment, as part of a wider exit (e.g. ceasing to trade or disposing of shares);
- Assets from a recently ceased business, as long as trading ended within the last three years.
To qualify, you must usually have owned the asset or interest for at least two years, and the business must be actively trading—not an investment or property holding company.
What’s Not Covered?
BADR doesn’t apply to:
- Investment assets like buy-to-lets or second homes
- Shares in non-trading or investment companies
- Assets not actively used in the business
- Sales where you don’t fully exit the business
- Passive investors not involved in day-to-day operations
If there is any uncertainty around whether your assets qualify, it’s essential to review this as part of your forward planning.
Budget 2024: What Has Changed?
The Chancellor’s Spring Budget introduced a phased increase to the BADR tax rate:
- Until 5 April 2025: Gains eligible for BADR were taxed at 10%, up to a lifetime limit of £1 million.
- From 6 April 2025 to 5 April 2026: The rate increases to 14%.
- From 6 April 2026 onwards: The rate is expected to rise further to 18%.
Any gains in excess of the £1million threshold is currently taxed at 24% and the rate from 6 April 2026 is yet to be declared. Below shows the potential difference in tax payable for a disposal pre 6 April and post 6 April
*Assumed rates post April 2026
What This Means for Business Owners
These changes are not simply technical updates—they have clear and immediate implications for business owners planning to exit, restructure, or pass on their businesses in the near term.
Here’s what you should consider now:
Timing is crucial
If you are preparing to sell your business or company shares, completing the transaction before April 2026 could save you a significant amount in tax. With rates rising incrementally, the earlier you act, the greater the benefit.
Alternative disposal strategies may be available
Even without a third-party buyer, there may be legitimate ways to crystallise gains before the deadline—through internal company reorganisation, share restructuring, or gifting strategies. These approaches must be carefully structured to avoid falling foul of anti‑avoidance rules.
Anti‑forestalling provisions are in place
HMRC is introducing anti‑forestalling rules to prevent arrangements designed solely to benefit from the lower rate. If you enter into a contract before April 2026, you’ll need to demonstrate that the transaction was commercially motivated and unconditional. Extra scrutiny will be applied where related parties are involved.
Qualifying criteria still apply
Now is an ideal time to review whether your assets or shares qualify for BADR. If your company’s activities are more investment‑oriented or if you do not meet the 5% shareholding and employment criteria, you may need to take action now to become eligible.
Planning ahead offers a clear advantage
Engaging with professional advisers early allows time to structure disposals, prepare necessary documentation, and ensure all eligibility conditions are met before the rates increase.
In Summary: Plan Now to Maximise Relief
The changes introduced in Budget 2024 mark a significant shift in how gains from business sales will be taxed. While BADR remains a valuable relief, its benefits are being gradually reduced. For those considering selling all or part of a business in the near future, the message is clear: review your plans and take advice sooner rather than later.
We’re here to help. Whether you are looking to sell, restructure or plan for succession, our team can work with you to ensure your arrangements are as tax‑efficient as possible ahead of the April 2026 changes.
Get in touch with us today to discuss your plans.