Business Asset Disposal Relief (BADR) 2026/27: who qualifies and how to claim

The short answer

Business Asset Disposal Relief (BADR) charges Capital Gains Tax at 18% on qualifying gains from a business sale in 2026/27, up to a £1 million lifetime limit. It was called Entrepreneurs' Relief before 6 April 2020.

Many people still call it entrepreneur relief or an "entrepreneurs allowance". It is a reduced tax rate, not an allowance.

This guide focuses on BADR. For general rates and reporting, read our UK Capital Gains Tax guide. You can also explore assumed figures with the Capital Gains Tax calculator.

BADR rates: 10%, 14%, 18%

The disposal date determines the BADR rate. These rates apply only to qualifying gains.

Source: GOV.UK: Business Asset Disposal Relief.

Who qualifies: selling a business or closing it

For a sale of all or part of a business, the ownership and sole trader or partner conditions must hold for at least 2 years up to the sale.

For the distinction between business structures, see sole trader vs limited company.

Assets you lent to the business may qualify if you sold at least 5% of your part of a partnership or your shares in a personal company, and owned the assets and let the business use them for at least one year up to the sale or closure. Trustees may also qualify; neither area is covered in depth here.

Who qualifies: selling shares in your company

For at least 2 years up to the share sale, you must have been an employee or office holder of the company, or one in the same group. The company must mainly trade rather than invest, or be the holding company of a trading group.

For shares outside an Enterprise Management Incentive (EMI), the company must also have been your personal company for at least those 2 years. That means:

• At least 5% of both the shares and voting rights.
• Entitlement to at least 5% of either the profits available for distribution and assets on winding up, or the disposal proceeds if the company is sold.

For EMI shares, you must have bought them after 5 April 2013 and been given the option to buy them at least 2 years before selling.

If the company stops being a trading company, you can still qualify if you sell the shares within 3 years.

If new shares dilute your holding below 5%, a technical election may let you be treated as selling and buying back immediately before the issue, with a further election to postpone tax on that gain until you sell; take advice.

A share sale is different from taking dividends: our dividend tax guide covers dividend income.

The £1 million lifetime limit and how other gains are taxed

The £1 million limit covers qualifying gains across all your BADR claims, not £1 million for each sale. There is no limit on the number of claims. Earlier claims use up the lifetime total.

If you sold assets before 11 March 2020, you may be able to claim more; contact HMRC about those earlier disposals.

To calculate the tax, add qualifying gains, deduct qualifying losses, then deduct any available annual exempt amount. For 2026/27 the annual exempt amount is £3,000, and the remaining qualifying gain is taxed at 18%.

For higher or additional rate taxpayers, gains that do not qualify are charged at 24%. The annual exempt amount can be used against those 24% gains first, with any remainder against BADR gains.

For basic rate taxpayers, BADR gains use the basic rate band first. Other gains are then charged at 18% within the remaining band and 24% above it. The general rules are in GOV.UK's Capital Gains Tax guidance.

Worked examples

These are illustrations with assumed numbers, not advice or a statement of the relief available to any reader.

Example 1: a £600,000 qualifying gain

A director owns all the shares in a trading company they have worked in for 8 years. They sell in 2026/27 for a £600,000 gain, all qualifying, with no earlier BADR claims and the full annual exempt amount unused.

The comparison assumes the gain would otherwise all be taxed at the 24% higher rate. For a basic rate taxpayer with a small gain, part could instead be taxed at 18%.

Example 2: a gain above the lifetime limit

Assume a £1,300,000 gain in 2026/27 that meets the qualifying conditions, no earlier BADR claims and an unused £3,000 annual exempt amount. Only £1 million can get relief; the excess is assumed to be taxed at 24%.

How and when to claim

Claim through your Self Assessment tax return or by completing Section A of the BADR helpsheet. An authorised accountant can deal with HMRC for you.

The claim deadline is the first anniversary of the 31 January following the tax year of the disposal. For a 2026/27 disposal, that means 31 January 2029.

The first three rows appear in the GOV.UK BADR guide. The 2026/27 date follows the rule in section 169M(3) of the Taxation of Chargeable Gains Act 1992; GOV.UK's table currently stops at 2025/26.

The relief claim deadline is separate from the January return deadline. See our Self Assessment deadlines guide.

What does not get BADR

A company whose main activity is investment rather than trading does not meet the test. For property letting, check that trading test rather than assuming a company structure qualifies.

Holiday lets have their own changes: see furnished holiday lets abolished in 2026/27.

Gains above the available lifetime limit do not get BADR. Neither do share sales that fail the relevant ownership, role or trading conditions.

Investors' Relief is a separate relief and is not covered here.

Timing matters

The conditions are measured over at least 2 years up to the sale. Check the ownership period, your role and the company's trading status well before a planned sale or closure.

This guide does not cover liquidation anti-avoidance rules, associated disposals, joint ventures or trusts in depth. The dilution election above is also technical and needs advice.