If you are thinking about selling your business, the tax you pay on any qualifying gain has become more expensive. From 6 April 2026, Business Asset Disposal Relief applies a Capital Gains Tax rate of 18% on qualifying gains, up from 14% in 2025/26 and up from the 10% rate that applied on disposals made on or before 5 April 2025.
For business owners who built their company under the old rules, this is a significant shift that affects the net proceeds of any exit. The relief is still worth claiming, particularly for higher and additional rate taxpayers, but understanding exactly what it is worth now, who qualifies, and what you should be doing in the run-up to a sale has never mattered more.
What Is Business Asset Disposal Relief?
Business Asset Disposal Relief, often shortened to BADR, was previously known as Entrepreneurs’ Relief before it was renamed in April 2020. It is a Capital Gains Tax relief that can reduce the CGT rate you pay on gains from the disposal of a qualifying business, shares in a qualifying trading company, or certain business assets.
Without BADR, gains from the disposal of most chargeable assets are taxed at the standard CGT rates. These rates increased from 30 October 2024. For individuals, most non-residential gains are now charged at 18% within the basic rate band and 24% above it.
BADR now applies a rate of 18% from 6 April 2026. This means the relief no longer gives a lower rate than the basic CGT rate, but it can still create a meaningful saving where gains would otherwise be taxed at 24%.
The lifetime limit for BADR remains at £1 million of qualifying gains. That means over the course of your lifetime, the maximum gain on which you can claim the relief is £1 million, regardless of how many qualifying businesses you sell.
How the Rate Has Changed Over Time
The changes introduced in the Autumn 2024 Budget represented a phased approach. Chancellor Rachel Reeves announced that BADR would not be abolished outright, as some had feared, but that the rate would rise over 2 tax years.
| Period | BADR Rate | Standard CGT Rate for Higher Rate Taxpayers | Effective Saving vs Standard Rate |
|---|---|---|---|
| Before 30 October 2024 | 10% | 20% | 10 percentage points |
| 30 October 2024 to 5 April 2025 | 10% | 24% | 14 percentage points |
| 6 April 2025 to 5 April 2026 | 14% | 24% | 10 percentage points |
| From 6 April 2026 | 18% | 24% | 6 percentage points |
The long-term saving versus the old higher-rate CGT position has fallen from 10 percentage points to 6 percentage points. On a £1 million qualifying gain, BADR would have saved £100,000 under the old 10% BADR and 20% standard higher-rate CGT structure. From April 2026, the maximum saving is £60,000 compared with the 24% standard higher rate.
That is still a meaningful sum, but it is less valuable than it used to be. For business owners who had been planning their exit around the old 10% rate, this is a material change to their net proceeds calculation.
Who Qualifies for BADR?
The qualifying conditions for BADR are worth setting out clearly because they are often misunderstood. The requirements vary depending on whether you are selling a sole trader business, a partnership interest, shares in a company, or assets used by a business.
For a sole trader or business partner disposing of all or part of their business, you must usually have owned the business for at least 2 years before the disposal date. If the business has ceased, the disposal of business assets must normally take place within 3 years of cessation.
For the disposal of shares in a company, you must usually meet all of the following conditions throughout the 2 years ending on the date of disposal:
- You must be an officer or employee of the company, or of a company in the same trading group.
- The company must be a trading company, or the holding company of a trading group.
- For non-EMI shares, the company must be your personal company.
- You must hold at least 5% of the ordinary share capital.
- Those shares must carry at least 5% of the voting rights.
- You must be entitled to at least 5% of either the distributable profits and assets on a winding-up, or at least 5% of the sale proceeds if the company is sold.
Enterprise Management Incentive shares have different rules, so they should be reviewed separately.
There are also rules covering associated disposals, assets used in a business, partnership interests, and joint venture interests. These situations can be more complex, and getting the qualifying conditions wrong means losing the relief entirely.
If you are also reviewing your directors loan accounts position ahead of a sale, this is an area where the interaction with your overall exit structure needs careful attention. An outstanding director’s loan balance at completion can have tax implications that change your net proceeds.
What the 18% Rate Actually Means for Your Proceeds
To make this concrete, consider a business owner who sells their limited company for a gain of £800,000 after taking into account their base cost, annual exemption, and any available reliefs.
Under the rules that applied on disposals made on or before 5 April 2025, with BADR at 10%, the CGT bill would have been £80,000, leaving net proceeds after CGT of £720,000.
Under the rules applying from 6 April 2026, with BADR at 18%, the CGT bill on the same qualifying gain is £144,000, leaving net proceeds after CGT of £656,000.
The difference is £64,000. That is a significant sum that has moved from the seller’s pocket to HMRC. It is not a reason not to sell, but it is a reason to think carefully about timing, valuation, deal structure, and personal tax planning.
For anyone approaching a business sale, working with accountancy services Stockport business owners rely on for exit planning is essential. The decisions you make in the 12 to 24 months before completion can materially affect how much you walk away with.
Getting Your Business Valuation Right
Before any of the tax planning around a sale can be done properly, you need to know what your business is actually worth. This is an area where owners regularly make errors, often in both directions. Overvaluing your business wastes time in failed sale processes. Undervaluing it means leaving money on the table.
Our business valuation service helps business owners understand the realistic range of values for their company ahead of a sale or investor approach. And our guide to the most common business valuation errors covers the mistakes that regularly inflate or deflate valuations in ways that cause problems further down the line.
A realistic valuation is also the foundation for calculating your expected CGT liability so you can plan around it. Getting this figure wrong at an early stage means your tax planning is built on assumptions that may not hold.
The Importance of Clean Accounts and Records Before a Sale
A buyer’s due diligence process will go through your financial records in considerable detail. Any inconsistencies, missing records, or unexplained figures will either delay the deal, reduce the price you achieve, or create warranty and indemnity issues in the sale documentation.
Getting your accounts in order before you go to market is one of the highest-return investments you can make ahead of a sale.
This means your bookkeeping services Stockport records need to be complete, accurate, and reconciled. It means your historic accounts need to present the business clearly and consistently. And it means any unusual items, related party transactions, or one-off costs need to be clearly identified and explained.
Management accounts vs year-end accounts are both relevant in this context. Your statutory accounts give a buyer the historic picture, but up-to-date management accounts showing current year performance are increasingly expected as part of any serious sale process. Our monthly management accounts service means you always have current financial information to hand, which speeds up due diligence and demonstrates that the business is professionally run.
Understanding how management accounts help directors control business spending is also relevant in the months leading up to a sale, because cost discipline in that period directly affects the profitability metrics on which your valuation may be based.
Reducing Corporation Tax Before You Sell
The period before a sale is a natural time to review your company’s tax position. A business that has been paying more Corporation Tax than it needed to because available reliefs were not being claimed is a business where the historic numbers may not reflect the full commercial picture.
Reviewing whether there are legitimate ways to reduce corporation tax before a disposal is worth doing, both to tidy up the tax position and to make sure the company’s records are robust before due diligence begins.
However, pre-sale tax planning must be handled carefully. Artificial steps that reduce profits or create unusual transactions can worry buyers, affect valuation, or create avoidable tax risk. The aim should be clean, supportable planning rather than aggressive last-minute changes.
Working with a limited company tax accountant who understands the interaction between Corporation Tax, BADR, dividends, director loan accounts, and exit planning is essential here. These are not decisions to make in isolation from each other.
You can use our Corporation Tax Calculator to check your expected liability and our corporation tax deadlines in the UK guide to make sure payments are up to date before any completion process.
BADR and Inheritance Tax Planning
Business Asset Disposal Relief and Inheritance Tax planning often sit alongside each other, particularly for older business owners who are deciding between selling the business during their lifetime, gifting shares, or passing the business on through their estate.
Business Property Relief is a separate relief that can apply to qualifying business assets for IHT purposes. From 6 April 2026, 100% relief for qualifying business and agricultural property is capped, with a £2.5 million allowance applying to assets that would otherwise qualify for full relief. Qualifying value above that level may receive 50% relief, depending on the asset and the circumstances.
This makes the sell versus hold decision more complex than it used to be. If you sell the business during your lifetime, you may crystallise a CGT liability and turn a qualifying business asset into cash, which does not usually benefit from Business Property Relief. If you hold the business until death, Business Property Relief may reduce the IHT position, and assets are generally rebased to market value for CGT purposes at death.
This interaction means the sell versus hold decision is not purely a CGT question. Our guide to 3 inheritance tax reliefs families often overlook covers some of the reliefs that are most commonly missed in this kind of planning conversation, and it is worth reading alongside any exit planning work.
For a more detailed review of your estate and inheritance tax position, our inheritance tax services can help you understand how your business assets fit into your broader picture.
The Personal Tax Position After a Sale
A business sale generating a large gain is a significant personal tax event. You usually need to report the gain on your personal tax return UK and pay any CGT owed by 31 January following the end of the tax year in which the disposal occurred. The 60-day reporting and payment rule applies to UK residential property disposals, not most business share sales.
This means a sale completing in August 2026 would fall in the 2026/27 tax year, with CGT normally due by 31 January 2028. That gives you time, but it is not unlimited. It is worth making sure your accountant has the full picture of the transaction well before the deadline so there are no surprises.
A large capital gain does not normally create payments on account by itself, because payments on account generally relate to Income Tax and Class 4 National Insurance rather than CGT. However, your wider income position in the year of sale still matters, especially if you receive salary, dividends, rental income, pension income, or consultancy income alongside the disposal.
Our UK income tax guide gives a clear overview of how the income tax system works alongside CGT for individuals with significant one-off receipts. Our tax tables for 2025/26 are also a useful reference for the transitional year, although you should always confirm the current rates and thresholds for the tax year in which the disposal actually takes place.
Reinvesting After a Sale
One question that often comes up after a business sale is what to do with the proceeds. Some business owners choose to invest in another business, either as a founder or as an investor. Others look at property, pensions, or other asset classes.
For those considering reinvesting into a new business venture, it is important to understand that CGT relief is not automatic. Business Asset Rollover Relief can defer gains in certain cases where qualifying business assets are sold and the proceeds are reinvested into new qualifying business assets within the required timeframe. This is more relevant to asset sales than straightforward share sales.
Enterprise Investment Scheme deferral relief may also be relevant where gains are reinvested into qualifying EIS shares, but this has its own conditions and investment risk. It should not be treated as a simple like-for-like replacement for BADR.
For business owners who have been trading for many years and are thinking about stepping back, pension planning may also be worth reviewing. However, personal pension tax relief depends on relevant UK earnings, annual allowance rules, tapering, carry forward, and the type of contribution made. Capital gains themselves are not usually relevant earnings for personal pension contribution relief, so advice is essential before assuming sale proceeds can simply be paid into a pension tax-efficiently.
The interaction between CGT, income tax, pension allowances, and your broader personal tax position is complex, which is another reason why having strong accountancy services Stockport business owners trust for personal and business tax together is so valuable at this stage.
If you do plan to start again in some form, our guide on how to register as self-employed and the comparison of sole trader advantages versus limited company structures gives a clear starting point for thinking about how to structure the next chapter.
Could Relocating Before a Sale Change the Numbers?
A small number of business owners explore the option of relocating before a sale to improve their overall tax position on exit. The tax treatment of business disposals varies significantly between jurisdictions, and for some larger transactions the potential saving makes this worth examining seriously.
That said, relocation planning is complex. UK residence, statutory residence rules, double tax treaties, the location of the business, where value has built up, and the UK’s temporary non-residence rules can all affect whether a gain remains taxable in the UK. In many cases, simply moving shortly before a disposal will not remove the UK tax position.
If you are considering the possibility of establishing yourself or your business in a lower-tax jurisdiction ahead of an exit, our dubai relocation services for uk businesses team can advise on the options and what is realistically involved. This is a specialist area and should be planned well in advance rather than treated as a last-minute step before completion.
Getting Your Payroll in Order Before a Sale
One area of the business that buyers scrutinise carefully during due diligence is payroll. Errors in historic PAYE submissions, underpaid employer National Insurance, holiday pay mistakes, pension auto-enrolment gaps, or informal arrangements with workers can all create liabilities that reduce the price a buyer is willing to pay, or are picked up as warranties in the sale documentation.
Making sure your payroll records are clean, your Stockport payroll services obligations have been met correctly, and any irregular arrangements have been properly reviewed is a sensible step in the 12 months before any sale process begins.
If your business has grown to a reasonable size, it is also worth reviewing whether what employers need to know before hiring their first employee guidance was followed correctly when you first took on staff, as historic compliance gaps sometimes surface during due diligence.
Keeping Your Records in Good Shape Ahead of a Sale
Good small business bookkeeping records matter at every stage of running a business, but they matter especially when you are approaching a sale. Buyers want to see clean, consistent, reconciled records, usually covering at least the last 3 financial years, plus current year trading.
Gaps, inconsistencies, or records that exist only in spreadsheets rather than proper accounting software are red flags.
If you have been managing your finances through manual processes, transitioning to Xero bookkeeping well in advance of any sale process gives you time to get everything reconciled and presented clearly before a buyer’s accountants start asking questions.
How poor invoice tracking can damage your cash flow is one example of the kind of operational weakness that creates problems both for your day-to-day cash position and for how your business looks to a potential acquirer. Addressing it well before you go to market always produces a better outcome than trying to tidy up in the middle of a due diligence process.
The 3 accounting reports every limited company owner should review regularly covers which reports matter most for demonstrating financial health to a buyer, and understanding depreciation in the context of your asset base is relevant too, particularly if the sale includes physical assets.
FAQs: Business Asset Disposal Relief
What is the BADR rate from April 2026?
From 6 April 2026, the BADR rate is 18% on qualifying gains. This is up from 14% for disposals made between 6 April 2025 and 5 April 2026, and 10% for disposals made on or before 5 April 2025.
Has the lifetime limit for BADR changed?
No. The lifetime limit of £1 million of qualifying gains has not changed. The main change introduced after the 2024 Budget was to the BADR rate itself.
Do I qualify for BADR if I own less than 5% of the shares in my company?
For ordinary non-EMI shares, usually not. One of the qualifying conditions for BADR on a share disposal is that you hold at least 5% of the ordinary share capital and voting rights, and meet the wider economic entitlement test. There are special rules for EMI shares and certain dilution situations, so you should take advice before assuming you do not qualify.
Can I claim BADR if I have already used some of my lifetime allowance?
Yes. BADR is a cumulative lifetime relief. If you have previously claimed relief on £300,000 of qualifying gains, you would have £700,000 of lifetime allowance remaining.
When do I need to pay CGT after selling my business?
CGT on the disposal of business assets other than residential property is usually reported on your Self Assessment tax return and paid by 31 January following the end of the tax year in which the disposal occurred. UK residential property disposals have separate 60-day reporting and payment rules.
Does BADR apply to goodwill?
This depends on the structure of the sale. Goodwill sold by a sole trader or partner as part of a qualifying business disposal can qualify. Goodwill disposed of within a limited company does not attract BADR at company level, because companies pay Corporation Tax on their gains. On a company share sale, the shares themselves may qualify if the BADR conditions are met.
Can I claim BADR if I am a sleeping partner in a business?
It depends on the structure and your legal position. For a company share disposal, you normally need to be an officer or employee of the company, so a purely passive shareholder would usually fail that condition. For a partnership disposal, the rules are different and may apply where you are disposing of all or part of your interest in a trading partnership that you have owned for at least 2 years. This is an area where detailed advice is important.
Plan Your Exit With the Right Support
The increase in the BADR rate to 18% makes professional exit planning more important than ever. The decisions you make about timing, structure, valuation, records, and tax in the run-up to a sale have a direct and measurable effect on how much you take home.
At U&W Chartered Accountants, we work with business owners across Stockport to plan business disposals properly. Whether you are at the early thinking stage or actively preparing for a sale, we can help you understand your position and make decisions that protect your proceeds.
Find out more on our about page or speak to the team directly via our contact page. You can request a quote for your limited company today to get started.
