Business Asset Disposal Relief (BADR) 2026/27: 14% CGT Rate
Business Asset Disposal Relief (formerly Entrepreneurs' Relief) provides a 14% CGT rate on qualifying gains up to a £1 million lifetime limit. This guide covers the qualifying conditions, worked examples, and the key risks that can disqualify you.
Last updated for the 2026/27 tax year. The 14% rate applies to disposals from 30 October 2024 onwards.
What is Business Asset Disposal Relief?
BADR (previously Entrepreneurs' Relief until April 2020) reduces the CGT rate on qualifying gains from business disposals. Standard rates in 2026/27 are 18%/24%. BADR cuts that to 14% — regardless of whether you are a basic or higher-rate taxpayer — on qualifying gains up to the lifetime limit.
The BADR rate was 10% from 2020 until 29 October 2024, then rose to 14% from 30 October 2024. A further increase to 18% is scheduled from 6 April 2026. If you have a qualifying disposal coming up, the disposal date matters. Check which rate applies to your specific date.
Qualifying conditions for shares in a personal company
The most common route to BADR is shares in a personal trading company. All the following must be satisfied throughout the two years immediately before disposal:
- You hold at least 5% of the ordinary share capital
- Those shares carry at least 5% of the voting rights
- You are entitled to at least 5% of distributable profits and 5% of assets on winding up
- You are an officer (director) or employee of the company
- The company is a qualifying trading company or the holding company of a trading group
The two-year qualifying period is strict. Set up and sell a company within 18 months — no BADR. Become a director less than two years before sale — no BADR, even if you held the shares for longer. The two-year clock runs to the disposal date.
The trading company requirement
The company must be a trading company. Its activities must be substantially trading rather than investment. HMRC applies a broadly 80% test: at least 80% of assets, income and activities should be trading rather than investment-related.
Cash-rich companies can fail this test. Retaining large profits as cash, or holding investment properties alongside trading, can push the investment element above the threshold. Common triggers include:
- Holding significant investment properties in addition to trading
- Substantial surplus cash built up over years (beyond normal working capital)
- Substantial investment portfolio within the company
If your company is cash-rich before sale, take professional advice on whether to extract the cash as a pre-sale dividend (paying income tax) to preserve trading status for BADR. It is a trade-off between paying income tax on the dividend now versus losing the 14% rate later.
Dilution below 5%: protecting your BADR eligibility
Dilution below 5% through a new share issue is a common risk. A funding round that issues new shares to investors can take you from 8% to 4%, and you lose BADR eligibility immediately.
HMRC provides an anti-dilution election for this situation. Where shares are diluted below 5% due to a qualifying commercial share issue, you can elect to be treated as having disposed of and reacquired the shares at market value at the point of dilution. This crystallises a gain while BADR still applies. The election must be made within the Self Assessment deadline.
If you are about to raise investment that will dilute your holding below 5%, model the position carefully. Making a BADR election before the dilution can be significantly better than selling after it.
Worked example
Sarah founded a marketing agency in 2020 and has owned 60% of the shares throughout. In 2026/27, she sells all her shares for £900,000. Her original subscription cost was £5,000. She has not previously used any BADR lifetime limit.
Note: BADR gains are not reduced by the annual exempt amount. The AEA is separate. Sarah should claim BADR on her Self Assessment return for 2026/27.
Other qualifying assets
BADR also applies to:
- Sole trader or partnership assets, disposal of all or part of a business run as a sole trade or partnership, where the assets have been used in the business
- Associated disposal, disposal of a personal asset (e.g. business premises you own personally but used by the company) at the same time as a qualifying company disposal
- Trustees, gains from trusts holding qualifying business assets, subject to specific rules
Calculate CGT on your business sale
Our calculator shows CGT at standard rates. For BADR gains, apply 14% to your qualifying gain directly and compare with the standard rate estimate.
Open the CGT calculatorFrequently asked questions
What is the BADR rate for 2026/27?
14% for disposals made on or after 30 October 2024 up to 5 April 2026. A further change to 18% is planned from 6 April 2026, check the rate applicable to your disposal date.
What is the BADR lifetime limit?
£1 million per individual, cumulative across all qualifying disposals throughout your lifetime. Once used up, there is no reset, further qualifying gains are taxed at standard rates.
Is BADR claimed automatically?
No. You must claim BADR on your Self Assessment return (SA108 Capital Gains pages) for the year of disposal. If you do not claim within the amendment window (typically four years), the relief is permanently lost.
What happens if my shareholding drops below 5% before sale?
You lose BADR eligibility. If the dilution arose from a qualifying commercial share issue, you can make an election to crystallise the gain at market value before dilution and claim BADR on that amount.
This page is for general information only. BADR conditions are complex, take qualified tax advice before a business disposal to confirm eligibility and structure the transaction correctly.