What is Business Asset Disposal Relief?
Business Asset Disposal Relief reduces Capital Gains Tax to 18% from April 2026 on qualifying gains when you sell all or part of your business, up to £1 million.
What Business Asset Disposal Relief means
Business Asset Disposal Relief, known as Entrepreneurs' Relief until 2020, gives a lower rate of Capital Gains Tax on the sale of a business. It applies to gains up to a lifetime limit of £1 million per person.
The rate has been rising: 10% until 5 April 2025, 14% for 2025/26 and 18% from 6 April 2026. It can apply when you:
- sell all or part of a business you run as a sole trader or partner, having owned it for at least two years
- sell shares in your personal trading company, where for the two years before the sale you held at least 5% of the ordinary shares and voting rights and were an officer or employee
- sell assets of a business within three years of it stopping trading
Example
A founder who is a higher rate taxpayer sells her shares in a trading company in 2026/27 for £600,000. She subscribed £100 for them and has met the conditions for more than two years.
| With the relief | Without the relief | |
|---|---|---|
| Gain | £599,900 | £599,900 |
| Less annual exempt amount | £3,000 | £3,000 |
| Taxable gain | £596,900 | £596,900 |
| Rate | 18% | 24% |
| Capital Gains Tax | £107,442 | £143,256 |
The relief saves her £35,814. For a basic rate taxpayer with band space left, the saving is smaller, because part of the gain would have been taxed at 18% anyway.
Why it matters for your business
Now that the relief rate matches the basic rate of Capital Gains Tax, it matters most to higher and additional rate taxpayers, and to anyone selling a large stake. The two-year conditions mean planning has to start early: issuing shares to a family member or a key employee shortly before a sale will not qualify them.
The relief must be claimed, normally on your tax return, by the first anniversary of the 31 January after the tax year of the sale. For a 2026/27 disposal, that is 31 January 2029. Cloudkeepers can check the conditions before you agree a deal.
Business Asset Disposal Relief vs Investors' Relief
Investors' Relief is a similar relief for outside investors who are not employees, holding new shares in an unlisted trading company for at least three years. It has its own separate lifetime limit and follows the same rate increases.
Common questions
Usually, yes, for higher and additional rate taxpayers, who would otherwise pay 24% on the gain. For basic rate taxpayers the saving is limited to the part of the gain that would have fallen above the basic rate band. The relief also does not reduce the gain itself, only the rate.
Only in limited cases. Property used in your trading business can qualify when sold as part of the business, or as an associated disposal alongside a qualifying sale of shares or a partnership interest. Investment property and furnished lettings do not qualify on their own.