BADR tax

BADR tax stands for Business Asset Disposal Relief tax (previously known as Entrepreneurs’ Relief), and it’s a form of Capital Gains Tax (CGT) relief.

In short, BADR encourages business investment and growth. If you’re a higher or additional rate taxpayer, this can offer valuable tax relief when you sell or dispose of a business asset.

What does disposal mean?

We know what you’re thinking – the term ‘disposal’ sounds drastic! Disposing of an asset doesn’t always mean selling it, a disposal could also mean you’ve given it away or swapped it for something else. 

Either way, you could be entitled to valuable tax relief.

Understanding Business Asset Disposal Relief

Essentially, Business Asset Disposal Relief reduces the CGT rate from 20% to 10%. That’s a huge reduction of 10% on qualifying assets.

The relief has a £1 million lifetime limit, meaning your potential tax savings could be up to £100,000.

Am I eligible?

You’re eligible for BADR if you are:

1. An individual looking to dispose of their personal business or shares in a business partnership
2. A director or employee selling shares of a company you work for.

Companies and investors are not eligible for BADR.

Selling your business

To qualify for the relief, you must be a sole trader or business partner and have owned the business for at least 2 years.

Selling shares

If you’re looking to sell shares or securities, you must be an employee or office holder within a company that trades (rather than invests).

How to claim BADR

Business Asset Disposal Relief has a deadline of 31st January, but this is set at one year on from the tax year the disposal was made.

For example:

• If you dispose of your asset on 3rd February 2024, you have until 31st January 2025 to make a claim.
• If you dispose of your asset on 3rd June 2024 (the next tax year), you would have until 31st January 2026 to make a claim.