Understanding Business Asset Disposal Relief (BADR)

How does Business Asset Disposal Relief work?

Business Asset Disposal Relief reduces the rate of Capital Gains Tax (CGT) when selling business assets, shares in the business or the business itself. That can lead to substantial savings for higher and additional rate taxpayers. 

Currently, BADR reduces the standard and higher rate of CGT on qualifying assets from 24% to just 10%. From April 2025, the CGT payable under BADR will rise to 14%, followed by 18% in April 2026. Although the relief available is falling, it still offers a valuable tax break to business owners.  

Business Asset Disposal Relief is available to the individuals behind the businesses rather than the companies themselves. The relief is solely targeted at business assets and is not available on investment assets. 

What qualifies for Business Asset Disposal Relief?

Business Asset Disposal Relief is available on the disposal or sale of three types of business assets:

• All or part of a sole trader or partnership business
• Shares or securities in a limited company
• Assets used in a business at the time when the business is no longer carried out

There are different eligibility criteria for each of these asset types.

• When selling all or part of a business, you must have been a sole trader or partner in a trading business for at least two years. You can claim BADR when selling business assets within three years of its closure.
• When selling shares or securities in a limited company, you must have been an office holder or employee of a trading company for at least two years and hold at least 5% of the shares and voting rights.
• When disposing of assets during the closure of a limited company, you must own at least 5% of the company’s shares and the company must have been trading for at least two years before its closure.

How to claim Business Asset Disposal Relief  

If you’re selling a sole trader business or closing a limited company via Members’ Voluntary Liquidation, there’s a good chance you’ll be able to reduce your tax liability via BADR.

Claiming the relief is relatively simple. You’ll need to include the details of the asset disposal on your Self Assessment tax return. Alternatively, you can complete Section A of the Business Asset Disposal Relief helpsheet. You can claim BADR up until 31 January, one year on from the tax year when you made the disposal. For example:

• If you sold or closed your business in the 2023 to 2024 tax year, you must claim BADR by 31 January 2026.
• If you sold or closed your business in the current tax year (2024-2025), you have until 31 January 2027 to claim the relief. 

It’s worth noting that when you liquidate a limited company, it’s the date you received the funds rather than when the asset was sold that’s important. That’s the date you must use on your tax return and when the clock to claim the relief starts ticking. 

Asset and business sales experts

At Eddisons Asset Auctions, we professionally value and sell diverse assets across a wide range of sectors to ensure you achieve the best price. We also have a leading business sales service to maximise your return. Contact our team for a free, no-obligation asset appraisal or to enquire about your eligibility for Business Asset Disposal Relief.