Business asset disposal relief – plan for the tax rate increase

When an individual makes a disposal that qualifies for Business Asset Disposal Relief (BADR), they will often pay a lower rate of Capital Gains Tax (CGT) compared to other assets. The current rate of tax due on qualifying BADR gains is 14%, compared with the normal CGT rates of 18% (basic rate) and 24% (higher rate).

However, the rate of tax applied on BADR qualifying disposals is set to increase from 14% to 18% from April 2026. Given that each individual has a lifetime BADR allowance of £1m this rate increase can lead to a long-term higher tax charge of £40,000 per individual. Therefore, if you are contemplating making a disposal of any assets that would qualify for this relief, you may wish to ensure this is brought forward and completed before April 2026 as you could save up to £40,000 in CGT.

BADR was formerly known as Entrepreneurs Relief and applies on material disposals of business assets. This would include shares in an individual’s trading company, a whole or a part disposal of a sole trade partnership business, and qualifying assets used in a trade.

Various conditions would need to be met for this relief to apply and careful planning is essential to ensure an individual meets all of the qualifying conditions.

If you have any further questions regarding this article, please contact Joe Wilson on 023 8046 1237 or email Joe Wilson.