When you sell a trading business, BADR can be the difference between a 24% tax bill and a materially lower one on your first £1m of gains. But the rate has risen recently, and the qualifying conditions trip people up — especially on earn-outs.
What is BADR?
Business Asset Disposal Relief (BADR) is a Capital Gains Tax relief for people selling all or part of a trading business. It was previously called Entrepreneurs’ Relief (renamed by Finance Act 2020). It applies a reduced CGT rate to qualifying gains, up to a £1,000,000 lifetime limit per person.
The current BADR rate (it has gone up)
This is the part most owners get wrong — BADR is no longer the old 10%. The rate has been increased in stages:
| Period | BADR rate on qualifying gains |
|---|---|
| Up to 5 April 2025 | 10% |
| 6 April 2025 – 5 April 2026 | 14% |
| From 6 April 2026 | 18% |
For context, standard CGT in 2026-27 is 18% (basic rate) and 24% (higher/additional rate), with a £3,000 annual exempt amount. So BADR at 18% still helps a higher-rate seller on the first £1m of qualifying gains — but the gap has narrowed, which makes deal structure and timing matter more than ever.
Who qualifies?
For a sale of shares, you generally need all of the following for at least 24 months before the sale:
- At least 5% of the ordinary shares and 5% of the voting rights.
- You’re an employee or officer of the company.
- The company is a trading company (not mainly an investment company).
Sole traders and partners selling the business (or their share of it) can also qualify on different but related conditions. The £1m lifetime limit applies across all your claims.
A worked example
£1m qualifying gain — BADR vs standard rate (from April 2026)
The annual exempt amount and your other gains will adjust the exact figure — this is illustrative.
Don’t lose BADR on an earn-out
If part of your price is a performance-based earn-out, beware: an unascertainable earn-out is treated as a separate CGT asset (the Marren v Ingles principle). The initial disposal can get BADR, but the later earn-out receipts usually don’t.
- Loan notes + a section 169Q/R election can crystallise the whole gain in year one so BADR applies to the full consideration.
- Ascertainable deferred consideration (a fixed sum paid later) is taxed in full in year one anyway.
- If a later earn-out comes in lower, loss carry-back relief (ss.279A–279C) may help.
Other routes to consider
- Employee Ownership Trust (EOT): from late 2025 the relief is 50% exempt with the balance at 24% (~12% effective) — lower than BADR, but it can’t be combined with BADR and has its own conditions.
- Pension contributions before sale, and spouse transfers (no gain/no loss) to use a second £1m limit and annual exemption, are common planning levers.
- Instalment election (s.280): where consideration is paid over more than 18 months, HMRC may allow the tax to be spread over up to 8 years.
Model your sale before you sign
BuyBuildSell’s deal room compares asset vs share sale, models vendor finance and earn-out structures, and flags the tax implications — so you walk into adviser meetings already knowing the shape of the deal.
Start a confidential enquiry →Frequently asked questions
What is the BADR rate in 2026?
18% on qualifying gains from 6 April 2026 (it was 14% for 2025-26, and 10% up to 5 April 2025), up to a £1m lifetime limit. Standard CGT is 18%/24%. Confirm the current rate with HMRC — it changes with each Budget.
Who qualifies for Business Asset Disposal Relief?
For a share sale: generally 5%+ of ordinary shares and voting rights, employee or officer status, and a trading company — all for 24 months before sale. A £1m lifetime limit applies.
What is the lifetime limit?
£1 million of qualifying gains per person. Gains above it are taxed at the standard rate (24% for higher-rate taxpayers).
Can I get BADR on an earn-out?
The initial disposal can qualify, but unascertainable earn-out receipts usually don’t (Marren v Ingles). Loan notes with a s.169Q/R election can preserve the relief — take specialist advice.
Is BADR the same as Entrepreneurs’ Relief?
Yes — BADR is the renamed Entrepreneurs’ Relief (Finance Act 2020). Conditions are broadly the same; the rate and limit have changed over time.
Related: Vendor finance & earn-outs · Selling a business in Australia: CGT · What’s your business worth? · How to sell without a broker.