Business Asset Disposal Relief (BADR) – How to Maximise Tax Savings Before April 2025
Business Asset Disposal Relief (BADR)—formerly known as Entrepreneurs’ Relief—offers business owners a lower Capital Gains Tax (CGT) rate of 10% on qualifying disposals of business assets. However, the window for securing the 10% rate is closing, as the tax rate will increase to 14% in April 2025 and 18% in April 2026.
This article explains:
What qualifies for BADR
Who can claim the relief
How upcoming tax rate increases will impact sellers
The best timing strategies for maximising savings
What is Business Asset Disposal Relief (BADR)?
BADR allows business owners to pay a reduced CGT rate when selling all or part of their business. Currently, gains qualifying for BADR are taxed at 10% instead of the standard 24% CGT rate.
Who Can Claim BADR?
BADR is available to:
- Sole traders and business partners selling their business.
- Company directors and shareholders selling shares in their personal company.
- Some trustees who sell qualifying business assets.
Upcoming Changes to BADR Tax Rates:
- 10% rate (until 6 April 2025)
- 14% rate (from 6 April 2025)
- 18% rate (from 6 April 2026)
HMRC BADR Guidance:
Claiming Business Asset Disposal Relief
Who Qualifies for BADR?
To qualify for BADR, you must meet the two-year ownership rule before selling.
Qualifying Business Assets
The following disposals may qualify for BADR:
Selling all or part of a business – The business must have been owned for at least two years before the sale.
Closing a business and selling its assets – Business assets must be sold within three years of ceasing trade.
Selling shares in your personal company – The company must be a trading company, and the seller must:
- Own at least 5% of shares and voting rights.
- Be entitled to at least 5% of profits and sale proceeds.
- Have been involved for at least two years before selling.
Selling property used by a business – If the property is owned personally but used by a trading business, it may qualify as an “associated disposal.”
Important: BADR is not available for selling investment properties, rental businesses, or companies holding significant non-trading assets.
Why Timing Matters: Should You Sell Before April 2025?
With the BADR tax rate increasing, selling before 6 April 2025 could save thousands in tax.
Scenario 1: Selling Before April 2025 (10% Tax Rate)
- A business owner sells their company for £1 million, with a £500,000 gain.
- Under BADR at 10%, they pay £50,000 CGT.
Scenario 2: Selling After April 2025 (Higher Tax Rate)
If they wait until:
- 2025/26, BADR increases to 14%, and they pay £70,000 CGT (an extra £20,000).
- 2026/27, BADR increases to 18%, and they pay £90,000 CGT (an extra £40,000).
Best Strategy: If you meet the two-year rule, selling before 6 April 2025 could save thousands.
How Business Owners Can Maximise BADR Benefits
To secure the lowest tax rate, business owners should:
Review ownership periods – Ensure you meet the two-year qualifying rule.
Plan your sale carefully – If you’re already in the process of selling, accelerate completion before 6 April 2025.
Use Spouse Transfers – Spouses and civil partners each have a £1m BADR limit, allowing couples to reduce tax on up to £2m in gains.
Keep accurate records – Ensure you can prove trading status, share ownership, and asset use to meet BADR conditions.
Seek professional advice – Get a tax review to confirm eligibility before selling.
Need help maximising your BADR claim? Contact Merranti Accounting for expert tax advice.
Special Considerations for Business Sales
1. Selling a Business to a Close Company (BADR Restrictions)
- If a business owner sells their business to a close company (where they own 5%+ of shares), BADR may not apply to the gain on goodwill.
- To qualify, shares must be sold within 28 days of the business sale.
2. Landlords Selling Furnished Holiday Lets (FHLs)
- BADR is available to FHL landlords if they sell the property within three years of ceasing the business.
- Deadline: The FHL must cease trading before 5 April 2025 to qualify for the 10% BADR rate.
3. Holding Company Sales
- If selling shares in a holding company, the subsidiary must be a trading company at the time of sale.
- If the company stopped trading, it must have done so within the last three years to qualify for BADR.
Need clarification on BADR for your business sale? Talk to an expert today.
BADR Tax Savings Breakdown: How Much Can You Save?
| Sale Date | BADR Rate | CGT on £500,000 Gain | Tax Saving (vs 24%) |
|---|---|---|---|
| Before 6 April 2025 | 10% | £50,000 | £70,000 saved |
| 6 April 2025 – 5 April 2026 | 14% | £70,000 | £50,000 saved |
| 6 April 2026 or later | 18% | £90,000 | £30,000 saved |
Conclusion: Selling before 6 April 2025 offers maximum tax savings!
Final Thoughts: Should You Sell Now or Wait?
Sell Before April 2025 If:
You meet the two-year rule for BADR.
You want to lock in the 10% tax rate before it rises.
Your sale process is already underway.
Wait Until 2025/26 If:
You haven’t met the two-year rule yet.
You need more time to find the right buyer.
Avoid Delaying Until 2026/27 If:
You want to minimise your CGT bill.
You want to maximise your net profit from the sale.
Need help deciding? Speak to Merranti Accounting for expert tax advice on timing your business sale strategically.
Next Steps: Claim BADR Before the 10% Rate Ends
Merranti Accounting specialises in CGT planning and BADR claims. We help business owners sell tax-efficiently and maximise their savings.
Need advice on BADR eligibility?
Want to reduce your CGT liability before April 2025?
Planning to sell your business and need a tax review?
Book a FREE consultation today and secure your 10% BADR tax rate before it’s too late!
