What is Business Asset Disposal Relief (formerly Entrepreneurs' Relief) and how to claim in 2025

Selling a business can be a huge milestone, but once the sale goes through, there's another big thing to think about – tax. Business Asset Disposal Relief, or simply BADR, is a government scheme that can reduce the Capital Gains Tax you owe when selling business assets.

To fully take advantage of BADR, you'll need to understand what it is, who qualifies, how recent changes could affect your plans, and how to make a successful claim. If your sale involves international transactions or large sums, Wise Business can also help the process run without any obstacles, with low fees and real exchange rates to keep things simple and cost-effective.

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What is Business Asset Disposal Relief?

Previously known as Entrepreneurs' Relief, Business Asset Disposal Relief (BADR) is a tax break designed to benefit business owners when they sell their business assets, shares, or a stake in the company¹. If you qualify, any gains from the sale are taxed at a reduced rate of just 10%, up to a lifetime allowance of £1 million.

This is significantly lower than the standard Capital Gains Tax (CGT) rates, which are currently set at 24% for higher-rate taxpayers. The 10% rate can make a huge difference, especially when it comes to maximising your profits from selling a business or business assets.

What are the Business Asset Disposal Relief conditions for eligibility?

If you want to claim BADR, there are a few rules you'll need to follow, and they depend on how you're exiting the business. The idea behind these conditions is to make sure the tax break goes to people who've genuinely built and run businesses, not just passive investors. Whether you're a sole trader, startup founder, or selling shares in a company, the eligibility criteria vary, so it's worth getting familiar with the details.

Selling all or part of a business or sole trade

If you're running your own business as a sole trader or as part of a partnership, you could be eligible for BADR when you sell either the whole thing or a distinct part of it. To qualify, you'll need to have owned the business for at least two years² before the sale, and it must have been actively trading during that time (not just sitting on investment assets). The sale also has to include some of the key business assets, like premises or equipment. Simply selling off bits and pieces of your setup won't be enough.

Selling shares in a personal company

If you're a shareholder in a business, BADR might be available when you sell your shares, but only on certain conditions. First off, the company needs to be trading, or be the holding company of a trading group. You also need to have had a hands-on role, like being a director or employee, and owned at least 5% of both the shares and the voting rights² for at least two years before selling. There are some extra technicalities if your shares entitle you to company profits or assets, so it's worth double-checking with a tax adviser if things aren't clear.

Selling business assets after closure

If your business has already closed, don't worry, because you might still be able to claim BADR. As long as the sale of your assets happens within three years of the business shutting down³, you could still qualify. You'll need to show that the business was actively trading up until it closed and that the assets you're selling were genuinely used to run it. It's a handy option if you've taken some time to wrap things up but still want to take advantage of the tax relief.

What changes were made to BADR following the August 2024 budget?

When there are so many tax rules, it's only typical that a change is on the horizon. The August 2024 budget brought a significant shake-up to Business Asset Disposal Relief (BADR)⁴. The key change is that the tax rate applied to qualifying gains would rise in stages.

As of 6 April 2025¹, the rate of BADR has risen to 14%, and from 6 April 2026, it will increase further to 18%. While these rates are still much lower than the usual CGT rate, they represent a reduction in the tax relief you could otherwise claim if you sell before these changes take effect. For example, if you sold shares and made a gain of £1 million:

• Right now, your tax bill would be £100,000 (10% of £1 million).
• From 6 April 2025, that same gain would be taxed at 14%, meaning your bill would rise to £140,000.
• By 6 April 2026, the tax rate will be 18%, making your bill £180,000.

Even with the increase, the rates are still much more favourable than the 24% CGT rate, but the savings would be significantly lower.

How do I make a Business Asset Disposal Relief claim?

If you're eligible for Business Asset Disposal Relief (BADR), the next step is to make sure you claim it properly and within HMRC's deadlines. The relief can significantly reduce your Capital Gains Tax bill, but it's not applied automatically. You'll need to claim it yourself when filing your tax return³. To claim BADR, you'll typically need to do one of the following:

• If you're submitting your Self Assessment tax return online, there's a specific section for claiming BADR.
• If you're filing on paper, use the Capital Gains Tax summary pages (SA108) and include details of the claim in box 50⁵.
• If you're not submitting a return but still need to make a claim, you can write directly to HMRC, but you'll need to do so within the time limit.

The deadline for claiming BADR is 12 months after the 31 January filing deadline following the end of the tax year in which the disposal was made⁶.

Is there a limit to how much I can claim?

There's a lifetime Business Asset Disposal Relief limit on how much you can claim. As of 2025, the maximum amount of qualifying gains you can claim relief on is £1 million over your lifetime. This means that no matter how many times you sell a business or shares in a qualifying company, once you've claimed BADR on £1 million worth of gains, any further gains will be taxed at the standard Capital Gains Tax rates.

Importance of understanding Entrepreneurs' Tax Relief

If you're building a business from the ground up, you're probably juggling product development, hiring, scaling, and, surely, a never-ending stream of decisions. So, while thinking about tax relief might not be at the top of your list, understanding how it all works can make a major difference when it comes time to cash out or sell shares².

Plans for a future exit

Every founder starts with an eye on growth, but a smart one also plans the eventual exit. Whether that's selling your company, handing it over, or stepping back after expansion, having a full understanding of how BADR works helps you make more strategic moves.

Timing matters more than ever

Because the BADR tax rate is increasing over the next two years, reacting on time can significantly impact your final tax bill. And being aware of the rise, jumping to 14% in April 2025 and 18% in April 2026, means you've still got time to act or adjust your plans.

International transactions and cross-border exits

Selling a business or shares isn't always a UK-only affair. If your exit involves receiving large payments from abroad, or you're perhaps relocating, the international side of things adds a layer of complexity.

That's where Wise Business can help. Wise makes it simple and cost-effective to send, receive, and convert large sums in multiple currencies, with transparent mid-market exchange rates and no hidden fees. It's especially useful if you're dealing with international buyers or investors or want to move your funds across borders.

Save on costs with Wise Business

Understanding BADR could help you save significantly on tax, especially if you're planning to sell your business or shares internationally. Keep in mind that Wise Business makes it easier to manage global payments with transparent, low-cost transfers, a multi-currency account, and a powerful currency converter. You can even spend like a local in over 40+ currencies with a Wise Business card. When the time comes to cash out, Wise helps you keep more of what you've earned.

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Sources used for this article:

Sources checked on 06-May-2025