Business asset disposal relief

By taking advantage of business asset disposal relief, you can significantly reduce the tax liability on the sale of your business or qualifying assets. If you need assistance in planning your disposal or ensuring eligibility, we’re here to help.

Reducing capital gains tax when selling your business

Business asset disposal relief (formerly known as entrepreneurs’ relief) allows qualifying business owners to reduce the rate of capital gains tax (CGT) on the disposal of their business or business assets. Instead of the standard CGT rates, gains that qualify for this relief are taxed at a reduced rate of 10%, up to a lifetime limit of £1 million. From 6 April 2025, the tax rate on gains qualifying for BADR will increase from 10% to 14%.

Eligibility criteria

To qualify for business asset disposal relief, the following conditions must be met:

– Ownership: You must have owned the business or business assets for at least two years prior to the sale.

– Type of business: The business must be a trading business, not an investment business.

– Shares and securities: If selling shares or securities, the company must be a trading company, and you must hold at least 5% of both:

• The shares and voting rights, and
• Either the profits available for distribution or disposal proceeds if the company is sold.

– Enterprise management incentive (EMI) shares: Special rules apply, with some conditions relaxed, for shares acquired through an EMI scheme.

Lifetime limit

A lifetime limit of £1 million applies to the total gains eligible for business asset disposal relief. If you have already claimed relief on gains reaching this amount, any further disposals will not qualify for the reduced CGT rate.

Key considerations

• Plan ahead: Ensure you meet the two-year ownership and employment criteria before disposing of your business or assets.
• Review shareholdings: If you hold shares in a trading company, confirm that your ownership and voting rights meet the 5% threshold.
• Closing your business: If you’re closing your business, remember that business assets must be disposed of within three years to qualify for relief.
• Lifetime limit tracking: If you’ve claimed business asset disposal relief in the past, check your remaining lifetime limit to assess eligibility.
• Partnerships and sole traders: Relief may apply to assets disposed of as part of your business, such as land or property used by the business, provided other conditions are met.

Additional notes

While this relief provides a valuable tax-saving opportunity, ensuring compliance with the qualifying conditions is essential. Complex scenarios, such as partial disposals or restructuring, may require additional guidance.