When you run your own business, there are a lot of tax laws, rules and regulations you need to understand, and Business Asset Disposal Relief (BADR) is one of them.
Since April 6th 2008, Business Asset Disposal Relief has provided Capital Gains Tax relief for individuals and trustees disposing of business assets. Of course, certain criteria must be met to qualify for BADR. If you meet them, you could be eligible for a percentage reduction on taxes.
In this blog, we’ll look into what Business Asset Disposal Relief is, what qualifies someone for it, and how to claim it.
Business Asset Disposal Relief: Explained
Business Asset Disposal Relief (BADR) offers eligible people a reduction in Capital Gains Tax for business and asset sales.
Previously known as Entrepreneurs’ Relief, BADR reduces taxes on qualifying disposals from the standard 24% to a lower rate of 10%. This relief is designed to help reduce the tax burden on business owners for the disposal of their business or assets.
Am I Eligible for Business Asset Disposal Relief?
To qualify for Business Asset Disposal Relief (BADR), you must meet specific criteria set out by HMRC.
The main condition you must meet to be eligible for BADR is the sale of business assets.
However, there are additional conditions required alongside this, including the following:
- Selling a business, either in part or in full, which you have owned for two years up to the disposal date
- Selling business assets within three years of closing a business, provided it was owned for at least two years before the sale
- Selling an asset used by a partnership or company, where the sale is linked to a qualifying sale of partnership assets or company shares
- Selling qualifying shares in a trading company or the holding company of a trading group, where the following is true:
1. You own at least 5% of the ordinary share capital and voting rights, or you hold qualifying Enterprise Management Incentive shares
2. You are entitled to at least 5% of the company’s profits and 5% of the assets available to shareholders, or
3. You would be entitled to a minimum of 5% of the sale proceeds if the entire share capital of the company were sold on the date of disposal.
- Shares must have been held for a minimum of 2 years (24 months) before you can claim BADR
Are you a trustee wondering if you’re eligible to claim Business Asset Disposal Relief? Check out the information below.
I’m a Trustee Member: Am I Eligible for Business Asset Disposal Relief?
Yes, trustee members are also eligible for Business Asset Disposal Relief (BADR). However, what you can claim is slightly different.
Trustee members can claim BADR on the following:
- Shares in a company where there is a beneficiary who also holds a qualifying interest in the company in their own name
- Assets used in a business carried on by a beneficiary, where the business has stopped trading
Trustee members do not need to meet the same criteria as business owners, either, as they simply facilitate the claim. It’s the beneficiary’s status that determines eligibility.
Are There Assets That Don’t Qualify for Business Asset Disposal Relief?
Yes, some assets don’t qualify for BADR. Meaning, even if you meet the eligibility criteria, you won’t be able to apply for this tax relief on them.
The main investment assets you can’t claim BADR on include:
- Assets you’re holding for rental income (buy-to-let properties, for example)
- Passive investments from stocks, shares, or securities
- Companies considered cash-rich
- Companies with substantial non-trading assets
- Companies which are no longer trading
Alongside this, there are certain situations and transactions which do not qualify for BADR. As such, you cannot claim on the following:
- Shares of less than 5% of the ordinary share capital
- Individual asset sales (e.g, a vehicle or a machine)
- Assets, shares, or businesses which you’ve owned for less than 2 years
For full details on what does and doesn’t qualify for Business Asset Disposal relief, it’s always best to refer to the guidelines set out on the UK Government website.
How Do I Claim Business Asset Disposal Relief?
Claiming Business Tax Disposal Relief is done through the Government, and it can be done in two different ways.
You can claim BADR by either:
- Filling out your Self Assessment tax return
OR
- Filling out Section A on the Business Asset Disposal Relief helpsheet
While there’s no limit to the number of claims you can make for BADR throughout your lifetime, there is a limit to the total you can claim. Over a lifetime, you can claim a maximum of £1 million in Business Asset Disposal Relief.
When Do I Need to Apply For My Business Asset Disposal Relief?
If you’re claiming BADR, there is a deadline that must be met in order for your claim to be processed.
Your BADR claim must be made on or before 31 January following the tax year of disposal.
For example, if the disposal was in the tax year 2025/26, you must have filed for your claim no later than 31 January 2027.
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Looking for more business advice? Discover how VAT works for online goods or what HMRC says about travel expenses over on our blog.