Are you selling your business in 2026/27? If so, you pay 18% capital gains tax on the first £1 million of qualifying gain, thanks to Business Asset Disposal Relief (BADR). That is a 2 percentage point saving against the standard 20% rate for higher-rate taxpayers. The BADR rate rose to 18% from 6 April 2026 (having been 14% in 2025/26 and 10% in earlier years), so the headroom is narrower than it once was, but the relief remains meaningful for qualifying owner-manager exits.
BADR applies when you dispose of shares in a personal trading company or sell business assets as a sole trader or partnership. You must have owned the business and been an employee or officer for at least two years before the disposal. The relief is a lifetime allowance: once you have used £1 million of qualifying gains, any further gains are taxed at normal rates. The £1 million limit has been frozen since March 2020, so inflation has already eroded its real value.
A common trap catches owner-managers who hold shares through a nominee or a holding company structure. To qualify, you must hold at least 5% of the ordinary share capital and voting rights directly, and be entitled to at least 5% of distributable profits and assets on a winding up. If you have a separate holding company that owns your trading subsidiary, HMRC may treat that as a disqualifying intermediary. Check your share register now, not the week before exchange.
Consider a practical example. A software company director sells 100% of her shares for £1.8 million in 2026/27. Her base cost is negligible, so the gain is £1.8 million. After deducting the annual exempt amount of £3,000, the first £1 million of gain is taxed at 18% (BADR, from 6 April 2026) and the remaining £797,000 at 20%. The total CGT bill is £180,000 plus £159,400, equalling £339,400. Without BADR, the entire gain would be taxed at 20%, costing £359,400. The relief saves £20,000. A comparable sale completed before 6 April 2026, when BADR was 14%, would have attracted a bill of £299,400 and saved £60,000.
BADR also covers disposals of goodwill and certain business assets for sole traders and partnerships. But beware: if you sell goodwill to a company you control, the relief is specifically denied. That structure was common before 2015 and HMRC now treats it as a tax avoidance arrangement. You should also note the "significant commercial interdependence" rule if you run multiple businesses through separate companies. HMRC may treat them as a single business for the two-year qualifying period test, which can help or hinder depending on your facts.
From 6 April 2026, the BADR rate is 18% (having risen from 14% in 2025/26). If you are planning an exit, now is the time to review your share structure, ensure you meet the 5% tests, and consider whether a full sale or a staged disposal better suits your tax position. BADR applies only to disposals that transfer control of the whole business, so selling shares in tranches over several years may not qualify.
For UK business owners across all sectors, BADR is the single most powerful tax relief on exit. A properly timed and structured sale can save five figures or more. At 18% in 2026/27, the rate is no longer at its historical low, but the saving against the full 20% rate remains real for qualifying disposals.