Published: June 2026 | Fact-Checked & Audited By: David Vance, CTA FCA (Chartered Tax Advisor & Accountant)
This guide is fully updated for the 2026/27 HMRC tax year. All calculations and tax rules have been audited against official UK legislation.
When selling your business, a share of a partnership, or shares in your personal trading company, you face a major tax event. Fortunately, HMRC provides a highly valuable tax relief designed to reward entrepreneurs: Business Asset Disposal Relief (BADR). Formerly known as Entrepreneurs’ Relief, this scheme can dramatically lower the Capital Gains Tax you pay on disposal. However, following recent budgets, the rates have changed. In this guide, we break down the BADR rules, eligibility criteria, and the new tax rates for the 2026/27 tax year.
What is Business Asset Disposal Relief?
Business Asset Disposal Relief reduces the rate of Capital Gains Tax payable on qualifying business disposals. There is a lifetime limit of **£1 million** of qualifying gains. Any gains that exceed this £1 million lifetime limit are subject to the standard CGT rates of 18% or 24% depending on your income bracket.
The New BADR Tax Rate for 2026/27
Following the phased rate increases introduced in the Autumn Budget, the tax rate for Business Asset Disposal Relief has been adjusted. For the current 2026/27 tax year (effective for disposals on or after 6 April 2026), the BADR rate is:
- 18% on qualifying gains up to the £1 million lifetime limit.
This is an increase from the previous 14% rate (2025/26) and the historical 10% rate. Even at 18%, it still represents a valuable saving compared to the higher standard CGT rate of 24%.
Who is Eligible for BADR?
HMRC applies strict conditions that must be met for a continuous period of **at least 2 years** leading up to the sale date:
- Sole Traders / Partners: You must have owned the business for at least 2 years.
- Company Shareholders: You must hold at least 5% of the ordinary share capital and voting rights in a trading company, and be an employee or director of that company.
- Assets: If you are selling assets used by your business, the sale must be associated with the withdrawal or sale of the business itself.
To run calculations on your business exit and model your potential capital gains liabilities, use our Capital Gains Tax Calculator.
What People Search For: FAQs on Business Asset Disposal Relief
1. What is the business asset disposal relief rate in 2026?
For the 2026/27 tax year, the BADR tax rate is 18% on qualifying gains up to the £1 million lifetime limit. Gains above £1 million are taxed at standard rates (up to 24%).
2. What is the lifetime limit for Business Asset Disposal Relief?
The lifetime limit is capped at £1 million. This means you can claim the discounted 18% rate on up to £1 million of cumulative gains across your lifetime business sales.
3. Who qualifies for Entrepreneurs’ Relief / BADR?
To qualify, you must be a sole trader, partner, or own at least 5% of shares in a trading company where you are a director or employee. You must meet these conditions for at least 2 years before the sale.
4. Can I claim BADR if I sell a buy-to-let property?
No. Residential property investment businesses do not qualify as “trading businesses” under HMRC rules. Therefore, buy-to-let property sales are excluded from BADR and taxed at standard property rates (up to 24%).
5. Does BADR apply to Furnished Holiday Lets (FHL)?
Yes. Although standard buy-to-let properties are excluded, Furnished Holiday Lets are treated as trading assets for CGT purposes and can qualify for BADR if they meet the active business trading criteria.
6. What is the 5% rule for corporate shareholders claiming BADR?
You must hold at least 5% of the ordinary share capital and 5% of the voting rights of the company. In addition, you must be entitled to at least 5% of profits available for distribution and 5% of assets in a winding-up.
7. How is BADR claimed on a tax return?
You must claim Business Asset Disposal Relief through your Self Assessment tax return. The claim must be submitted by January 31 following the tax year in which the business or shares were sold.
8. What is the difference between BADR and Investors’ Relief?
BADR is for active directors and employees who own 5% or more of a trading company. Investors’ Relief is for external, passive investors who subscribe for new shares in an unlisted trading company and hold them for at least 3 years.
9. What is the Investors’ Relief rate and limit for 2026/27?
For the 2026/27 tax year, the Investors’ Relief rate is 18% (aligned with BADR), and the lifetime limit is capped at £1 million (reduced from £10 million for disposals on or after 30 October 2024).
10. Can partners in a partnership claim Business Asset Disposal Relief?
Yes. Partners who sell all or part of their interest in a trading partnership can claim BADR on their share of the gains, provided they have been a partner in the business for at least 2 years.