If you resigned as a director of your company and sold your shares two years later, you are right to ask whether you can still claim Business Asset Disposal Relief (BADR). The short answer is: it depends on whether you met the qualifying conditions during the two years before the sale. Many directors assume leaving the role automatically disqualifies them. That is not always correct, but the rules are tighter than most people realise.

BADR (formerly Entrepreneurs' Relief) gives you a reduced Capital Gains Tax rate on the first £1 million of lifetime gains when you sell shares in your personal company. For disposals from 6 April 2025, the BADR rate is 14%. From 6 April 2026 it rises to 18%. Outside BADR, the main CGT rates are 18% (basic rate) and 24% (higher rate) for non-residential assets. The difference matters. On a £500,000 gain, the tax gap between BADR and the higher main rate is £50,000 from 2025/26.

The critical condition for BADR on share disposals is that you must have been an officer or employee of the company (or of a group company) for a continuous period of 12 months ending with the date of disposal. For disposals before 6 April 2025, the period was 24 months. The new 12-month rule applies to disposals on or after 6 April 2025. If your disposal happened before that date, the old 24-month rule applies.

So if you sold in April 2024, you needed to have been a director or employee for the 24 months up to the sale date. If you resigned in April 2022 and sold in April 2024, you were not a director during that 24-month window. You would fail the condition. But if you resigned in April 2022 and sold in April 2025, under the new 12-month rule you would need to have been a director or employee for just the 12 months up to the sale. If you left in April 2022 and sold in April 2025, you still fail. You were not a director or employee during the 12 months before the sale.

The Two Year Gap: What Actually Happens

Let's be specific. You resigned as director in March 2023. You sold your shares in March 2025. That is a two year gap between leaving and selling. Under the rules applying to a March 2025 disposal, you needed to have been an officer or employee for the 24 months ending with the sale. You were not. You resigned 24 months before the sale. You fail the qualifying period condition. No BADR.

If you sold in June 2025 instead, the 12-month rule applies. You needed to have been an officer or employee for the 12 months ending with the sale. You resigned in March 2023, which is 27 months before the sale. You still fail. The gap is too long either way.

The only scenario where a two year gap might work is if you remained an employee after resigning as director. The condition says "officer or employee". If you stepped down as director but stayed on as a salaried employee, and you held at least 5% of the shares and 5% of the voting rights, you might still meet the conditions. But you must have been an employee for the full 12 or 24 months ending with the disposal. If you stopped being an employee at the same time you resigned as director, the clock stops.

The Personal Company Test

There is a second condition that often trips people up. Throughout the qualifying period, the company must have been your personal company. That means you must have held at least 5% of the ordinary share capital and at least 5% of the voting rights. And you must have been entitled to at least 5% of the profits available for distribution and at least 5% of the assets on a winding up.

If you resigned as director but kept your shares, you might still hold 5% of the shares and votes. That part of the test can survive your departure. But the officer or employee condition cannot. If you are not a director or employee during the qualifying period, you fail regardless of how many shares you hold.

There is also the trading company condition. The company (or group) must have been a trading company or the holding company of a trading group throughout the qualifying period. If the company stopped trading after you left, or changed its activities, that could break the condition too. HMRC looks at the period ending with the disposal, not just the period when you were a director.

What If You Sold To A Third Party After Leaving?

Some directors resign, leave the business entirely, and then sell their shares to a third party months or years later. The sale itself might be a straight share disposal. The CGT calculation is straightforward. The BADR claim is not. If you were not a director or employee at any point during the 12 or 24 months before the sale, you cannot claim BADR on that disposal. Period.

The same applies if you sold shares back to the company (a share buyback) after leaving. A share buyback can qualify for BADR if the conditions are met. But you still need to meet the officer or employee condition. If you resigned before the buyback and were not employed during the qualifying period, BADR is not available. The company might still proceed with the buyback, but you pay CGT at the main rates.

Planning Around The Condition

If you are still a director or employee and are considering resigning, think about the timing of your share sale. If you plan to sell within the next 12 or 24 months, delay your resignation until after the sale. Once you resign, the clock starts running against you. If you sell first and resign after, you preserve the qualifying period.

If you have already resigned and want to sell, consider whether you can return as an employee for the required period before selling. HMRC will look at whether the employment is genuine. A short-term re-employment purely to secure BADR could be challenged. But if you have ongoing involvement with the business, perhaps as a consultant or part-time employee, that might work. You need to be on payroll, receiving salary, and subject to the usual employment conditions. A consultancy agreement alone does not count. You must be an employee for employment law and tax purposes.

If you cannot meet the officer or employee condition, BADR is lost on that disposal. You can still use your £1 million lifetime limit on future disposals from other companies, but not on this one. If you have already used some of your limit on earlier disposals, the remaining balance carries forward.

Practical Example: The Bristol Software Director

Take a director of a software consultancy in Bristol. She resigned as director in January 2023 but kept her 30% shareholding. The company continued trading. She sold her shares in March 2025 for a gain of £400,000. She was not a director or employee during the 24 months before the sale. She cannot claim BADR. Her CGT bill at the main higher rate (24%) is £96,000. If she had sold before resigning, she would have paid BADR at 10% (the rate before 6 April 2025), a bill of £40,000. The difference is £56,000. That is the cost of the gap.

If she had sold in June 2025 instead, the BADR rate is 14% and the main higher rate is 24%. The gap is still £40,000 on a £400,000 gain. The timing of the resignation relative to the sale is the decisive factor.

What About Partial Claims?

BADR is an all-or-nothing relief on each disposal. You cannot claim BADR on part of a gain from a single disposal. If you fail the conditions for the shares you are selling, the entire gain is taxed at the main rates. There is no partial relief for the period when you were a director.

However, if you sold shares in multiple tranches, each tranche is a separate disposal. You might qualify for BADR on an earlier tranche sold while you were still a director, and fail on a later tranche sold after you left. That is allowed. Each disposal is tested independently against the conditions at the date of that disposal.

HMRC's Approach To Late Claims

If you sold shares after leaving your director role and did not claim BADR on your tax return, you can amend the return within 12 months of the filing deadline. For a disposal in the 2023/24 tax year, the return was due by 31 January 2025. You can amend it until 31 January 2026. After that, you would need to make a formal overpayment relief claim. HMRC will look at whether you met the conditions at the time of disposal. If you did not, the claim will be rejected.

If you think you might have met the conditions but did not claim, check the dates carefully. Gather evidence of your employment or directorship during the qualifying period. Payslips, P60s, board minutes, and employment contracts all help. If you cannot prove you were an officer or employee during the relevant period, the claim will fail.

Summary: The Decision Framework

Ask yourself these questions in order:

  • When did you dispose of the shares? Before or after 6 April 2025? That determines whether the 24-month or 12-month rule applies.
  • Were you a director or employee at any point during the 12 or 24 months ending with the disposal date? If not, BADR is not available.
  • If you were an employee but not a director, did you hold at least 5% of the shares and voting rights throughout the qualifying period? If not, you fail the personal company test.
  • Was the company a trading company throughout the qualifying period? If it became an investment company or ceased trading, you fail.

If you answered no to any of these, you cannot claim BADR on that disposal. The gain is taxed at the main CGT rates. If you answered yes to all three, you can claim BADR and pay tax at the reduced rate.

The two year gap between leaving your director role and selling your shares almost always breaks the officer or employee condition. There are narrow exceptions where you remained an employee throughout the gap. But for most directors who resign completely and sell later, BADR is lost. The only reliable fix is to sell before you resign.

If you are planning an exit and want to understand your BADR position, speak to an accountant before you make any changes to your role. Once you resign, the options narrow significantly. Contact our ICAEW qualified team to review your specific situation. We work with directors across the UK, from London to Manchester to Bristol, helping them structure exits that preserve reliefs.

For more on share disposals and capital gains, read our exit and capital gains guides.