If you’re thinking about selling your company in the next 12 to 18 months, Business Asset Disposal Relief (BADR) could make a significant difference to how much you keep after tax. But with the relief rate due to rise again in April 2026, timing your sale could be more important than ever.

What is BADR?

Business Asset Disposal Relief, known as Entrepreneurs’ Relief until 2020, is a valuable Capital Gains Tax (CGT) relief for business owners who sell (or “dispose of”) all or part of their business, certain business assets, or shares in their personal trading company.

When you qualify for BADR, the tax you pay on your gain is charged at a reduced rate rather than the standard CGT rate. The idea is simple: it rewards people who have built and grown businesses by letting them keep more of the proceeds when they sell.

In practical terms, BADR can reduce the tax bill on the sale of a company by tens of thousands of pounds.

The Current Rate (October 2025)

As of now, disposals made on or after 6 April 2025 attract a 14% BADR rate, up from the long-standing 10%. This change took effect at the start of the 2025/26 tax year.

While the 14% rate is higher than business owners enjoyed in previous years, it remains significantly lower than the main Capital Gains Tax rates that apply to most other assets. For many SME owners, BADR is still the most effective way to protect value at exit.

What’s Changing from April 2026

From 6 April 2026, the BADR rate will increase again—from 14% to 18%.
This upcoming rise is already confirmed, and it will affect all qualifying business sales completed on or after that date.

On a £1 million gain, that 4% increase means an additional £40,000 in tax for the same transaction. For many owners who are currently planning to sell, it could make the difference between completing before or after the end of the 2025/26 tax year.

The Lifetime Limit

The lifetime limit for BADR remains at £1 million of qualifying gains per individual.

This means you can claim BADR multiple times, across different business disposals, until you’ve used up your £1m allowance. After that, any further gains are taxed at the standard CGT rate.

You claim the relief through your Self Assessment tax return or by completing HMRC’s BADR help sheet (HS275). The usual deadline is the first anniversary of 31 January following the end of the tax year in which the sale took place. So, for example, if you sell your business in December 2025, you’ll have until 31 January 2028 to make your claim.

Who Qualifies for BADR?

You may qualify if you’re:

• Selling all or part of a sole trade or partnership, or
• Selling shares or securities in a “personal company” that’s a trading company (or the holding company of a trading group), and
• An employee or officer of that company who meets the minimum shareholding and time-held tests.

The company must be a genuine trading business, not mainly an investment vehicle, and you must have met the qualifying conditions throughout the minimum ownership period (normally two years prior to disposal)How It Interacts with Investors’ Relief

Investors’ Relief (IR) is aimed at external investors in unlisted trading companies. Following the 2024 Budget, IR has been aligned with BADR:

• Same rate: 14% (rising to 18% in April 2026)
• Same lifetime cap: £1 million

This alignment simplifies matters for companies with both founder shareholders and external investors planning exits around the same time.

What the Upcoming Rate Rise Means for Sellers

1. Timing Your Sale

If you’re planning to sell in 2026, the difference between completing in March and April could be substantial. A 4% higher rate on your BADR-eligible gain is effectively an additional £40,000 of tax on a £1m transaction.

If your deal timetable allows, completing before 5 April 2026 could preserve the 14% rate. However, anti-avoidance rules apply, so seek advice before trying to artificially shift your disposal date.

2. Understanding Your Lifetime Cap

If you’ve claimed BADR before, make sure you know how much of your £1m lifetime allowance remains. You’ll want to allocate that allowance carefully to the disposal that gives you the best tax outcome.

3. Ensuring You Qualify

Before you go to market, confirm your personal company status, shareholding, and employment position. Seemingly small changes, like share restructuring or a late investment round, can disrupt eligibility if they alter your ownership period or percentage.

4. Considering Earn-outs and Deferred Payments

Earn-outs, deferred consideration, or loan notes can all affect when your gain arises and whether it qualifies for BADR. It’s worth checking the structure before terms are finalised.

5. Avoiding Common Pitfalls

• Don’t leave qualification checks until the last minute.
• Avoid assuming that property or assets used by your business will automatically qualify, they often don’t.
• Watch for anti-forestalling rules that prevent using “pre-sold” shares or other artificial steps to lock in the lower rate.

Practical Steps to Take Now

• Check eligibility: Confirm that you, your business, and your shares meet the qualifying conditions.
• Track prior usage: Know exactly how much of your lifetime cap is available.
• Review deal timing: If possible, plan to complete before 5 April 2026 to benefit from the lower rate.
• Prepare your claim: Keep records ready for your Self Assessment.
• Model the numbers: Even a small shift in completion date or structure can have a big impact on the final after-tax proceeds.

The Bottom Line

• BADR rate now: 14% (effective from 6 April 2025)
• Rising to: 18% from 6 April 2026
• Lifetime cap: £1 million per individual
• Claim deadline: Usually 31 January, one year after the filing deadline for the tax year of disposal

Final Thoughts

For owners planning to sell their business in the next year or two, timing will be crucial. BADR still offers significant savings compared to standard Capital Gains Tax rates, but those savings are set to shrink in April 2026.

If you’re already thinking about selling, it may be worth reviewing your timeline and structure now to ensure you qualify and can take full advantage of the current rate.

At Barnsgate Solutions, we help business owners navigate every stage of the sale process, from preparing your company for market to structuring your exit efficiently. If you’d like to understand how the April 2026 rate change might affect your net proceeds, get in touch and we’ll walk you through the numbers.