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Business Asset Disposal Relief (BADR)

Business Asset Disposal Relief is a tax relief that allows qualifying individuals to pay a lower rate of Capital Gains Tax when disposing of business assets or company shares.

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What is Business Asset Disposal Relief?

Business Asset Disposal Relief (BADR) is a UK tax relief that reduces the Capital Gains Tax payable when disposing of qualifying business assets.

Previously known as Entrepreneurs’ Relief, BADR allows qualifying individuals to pay a reduced rate of Capital Gains Tax instead of the standard CGT rates.

The relief can apply when selling company shares, disposing of a business or partnership interest, or distributing assets when closing a solvent company through a Members’ Voluntary Liquidation (MVL).

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John Bell

Senior Partner | Licensed Insolvency Practitioner

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Who qualifies for Business Asset Disposal Relief?

To qualify for Business Asset Disposal Relief, certain conditions must be met at the time the business assets are disposed of.

In most cases, individuals must:

  • Be a Director, officer, or employee of the company
  • Own at least 5% of the company’s shares
  • Hold at least 5% of the voting rights
  • Have held these shares for at least two years before disposal
  • Dispose of shares in a trading company or holding company of a trading group.

These HMRC rules ensure the relief is available to genuine business owners who have been actively involved in the company.

Because eligibility depends on individual circumstances, Directors should confirm their position with their accountant or tax adviser before claiming BADR.

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Not sure whether you qualify for BADR?

We can help you understand whether BADR may apply and whether an MVL is the right route for closing your company.

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Business Asset Disposal Relief tax rate and lifetime limit

Business Asset Disposal Relief allows qualifying individuals to pay a reduced rate of Capital Gains Tax on eligible gains.

From 6 April 2026, the BADR tax rate is 18% on qualifying gains, compared with the standard Capital Gains Tax rate of 24% for higher-rate taxpayers.

The relief applies to qualifying gains up to a £1 million lifetime limit per individual.

The BADR tax rate has changed in recent years:

Disposal date BADR tax rate
On or before 5 April 2025 10%
6 April 2025 – 5 April 2026 14%
From 6 April 2026 onwards 18%

Although the rate has increased, BADR can still provide significant tax savings compared with standard Capital Gains Tax rates.

Business Asset Disposal Relief and Members’ Voluntary Liquidation

Many company Directors use Business Asset Disposal Relief when closing a solvent company through a Members’ Voluntary Liquidation. In an MVL, company assets are distributed to shareholders as capital distributions rather than dividends. This means the funds are taxed under Capital Gains Tax rules instead of dividend Income Tax.

If the shareholder qualifies for BADR, the capital gain may be taxed at the reduced BADR rate, making an MVL a highly tax-efficient way to extract company funds when closing a company.

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Capital distributions vs dividend tax

Normally, money taken from a limited company is taxed as dividend income, which can attract higher tax rates depending on the individual’s tax band.

When a company is closed through a Members’ Voluntary Liquidation, funds are treated as capital distributions instead of dividends. This means they may be taxed under Capital Gains Tax rules, and if the shareholder qualifies for BADR, the gain may be taxed at the reduced BADR rate.

This difference in tax treatment is one of the main reasons Directors choose an MVL when closing a solvent company.

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How to claim Business Asset Disposal Relief

Business Asset Disposal Relief is not applied automatically. Eligible individuals must claim the relief either through their Self Assessment tax return or by completing Section A of the Business Asset Disposal Relief helpsheet.

Claims must usually be made by 31 January following the end of the tax year after the disposal took place. For example, if the disposal took place during the 2025–26 tax year, the claim deadline would usually be 31 January 2028.

There is no limit to how many times you can claim Business Asset Disposal Relief, but the relief only applies up to the £1 million lifetime limit of qualifying gains.

Because tax circumstances vary, Directors should seek advice from their accountant or tax adviser to confirm eligibility and ensure the relief is claimed correctly.

Why choose Clarke Bell for advice on Business Asset Disposal Relief?

If you are considering closing a solvent company, understanding how Business Asset Disposal Relief may apply is an important part of planning the most tax-efficient route.

With 30+ years of experience and thousands of MVLs completed, Clarke Bell helps Directors understand their options, assess whether an MVL is suitable, and move forward with a clear, fixed-fee process.

4,000+
Members’ Voluntary Liquidations

£559,000,000+
Total cash distributed

Nationwide service
Remote consultations available

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Get clear advice on whether Business Asset Disposal Relief may apply, how an MVL works, and what the next steps could look like for your company.

“Clarke Bell Ltd have recently dealt with our company MVL. The process was straightforward, and all correspondence was very easy to follow and act upon. We found the guidance and service to be 1st class and would thoroughly recommend Clarke Bell Ltd to any business requiring this service.” – Alan

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Corporate Insolvency Manager

FAQs about Business Asset Disposal Relief

Yes. Entrepreneurs’ Relief was renamed Business Asset Disposal Relief in 2020. The relief still provides a reduced Capital Gains Tax rate for qualifying business disposals.

From 6 April 2026, the BADR tax rate is 18% on qualifying gains up to the £1 million lifetime limit. This is lower than the standard Capital Gains Tax rate that may apply without the relief.

To qualify for BADR, an individual must usually own at least 5% of the company’s shares and voting rights, be a Director or employee, and have held the shares for at least two years before disposal.

Yes. Business Asset Disposal Relief may apply when closing a solvent company, particularly when the company is closed through a Members’ Voluntary Liquidation (MVL), and assets are distributed as capital.

The lifetime limit for Business Asset Disposal Relief is £1 million of qualifying gains per individual. Once this threshold is reached, additional gains are taxed at the standard Capital Gains Tax rates.

Yes. Business Asset Disposal Relief can apply when selling shares in a trading company, provided the individual owns at least 5% of the shares and voting rights, has been an officer or employee, and has held the shares for at least two years before disposal.

Further Reading on Members’ Voluntary Liquidation

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Maximise Business Asset Disposal Relief with Clarke Bell

Business Asset Disposal Relief can significantly reduce the Capital Gains Tax you pay when selling or closing your company. If you’re planning to close a solvent company, a Members’ Voluntary Liquidation may allow you to extract company funds in a more tax-efficient way.

Clarke Bell has helped thousands of company Directors complete MVLs over the past 30 years, providing clear advice, fixed-fee services, and a straightforward process from start to finish.

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