Business Asset Disposal Relief: What the 18% Rate Means for Your Exit
For years, Business Asset Disposal Relief was the reward at the end of building a company. Sell up, claim the relief, and the tax on your gain came in at a flat 10%.
That’s no longer the case.
The rate has climbed twice in two years, and since 6 April 2026 it sits at 18%.
If you’re planning an exit, that matters. The relief is still worth having, but it’s worth a lot less than it was, and the old instinct to rush a sale before a deadline no longer applies, because the deadline has passed. In this article, we look at where the rate stands now, whether you still qualify, and why selling is no longer a decision you can make on capital gains tax alone.
What is Business Asset Disposal Relief?
Business Asset Disposal Relief (BADR) reduces the rate of Capital Gains Tax you pay when you sell a qualifying business. It applies to the disposal of a sole trade or partnership interest, or shares in a trading company where you’re an officer or employee. Previously known as Entrepreneurs’ Relief, it’s meant to reward people who’ve built something and are stepping away.
The relief is capped at a £1 million lifetime limit on gains. That limit hasn’t moved, and it counts across your whole life, so earlier claims eat into what’s left.
Where the rate stands now
The rate has moved three times in quick succession. It held at 10% for years, rose to 14% for the 2025/26 tax year, and increased again to 18% for disposals on or after 6 April 2026. That’s the business asset disposal relief rate you’re working with today.
The effect on real money is stark. On a full £1 million gain, the relief once saved you up to £140,000 against the standard higher rate of CGT. At 18% it saves around £60,000. The tax bill on that same £1 million gain is now £180,000, where a seller who completed before April 2025 would have paid £100,000. Same business, same gain, £80,000 difference depending only on when the deal completed.
It’s still worth claiming. Higher-rate taxpayers pay 24% CGT on most assets, so 18% on the first £1 million remains a genuine saving. But the gap has narrowed from ten percentage points to six, and that changes the maths on decisions people used to treat as obvious.
Can I backdate a sale?
The natural reaction to a rate rise is to try to lock in the old rate. HMRC saw that coming, and anti-forestalling rules are in place to stop it.
Normally CGT is worked out using the rate in force on the date you enter an unconditional contract, not the completion date. That would let sellers sign before a rate change and complete afterwards at the lower rate.
For these increases, that principle is overridden. Signing an unconditional contract before the deadline doesn’t secure the old rate unless the contract is genuinely commercial and wasn’t created to gain a tax advantage. Where the parties are connected, such as relatives, the bar is higher still.
In truth, there’s no clever timing trick left. The 18% rate applies to disposals now, and manufacturing an earlier date won’t work.
Do I still qualify?
It’s possible, yes. However, you have to meet the conditions, and they’re strict enough that people assume they qualify when they don’t. The full qualifying rules run to some detail, but broadly you need to have met each of these throughout the two years up to the sale:
- You’ve owned the business, or held the shares, for at least two years.
- For a company sale, you hold at least 5% of the ordinary shares and voting rights, and you’re an officer or employee.
- The company is trading, not an investment vehicle.
There’s a trap worth knowing about. If a new share issue dilutes your holding below 5%, you can lose the relief, though an election can sometimes preserve the gain built up to that point. And if you’ve stopped trading, you generally have three years to dispose of the assets and still claim.
These are exactly the details that unravel late in a deal, which is why they’re better checked early. If you’re weighing up how you hold the business in the first place, our guide to holding a business personally or through a limited company is a useful starting point.
Sell or hold? It’s no longer just a CGT question
Here’s the shift that matters most. When BADR was worth 10%, the sums often pointed one way. Now that it’s 18%, and with another change landing alongside it, the sell-versus-hold decision has become genuinely finely balanced.
From 6 April 2026, Business Property Relief for inheritance tax is capped. Where qualifying business and agricultural assets once attracted 100% relief without limit, there’s now a £2.5 million allowance, with value above that potentially getting 50% relief. That pulls the decision in two directions. Sell during your lifetime and you crystallise a CGT bill at 18%, turning a relieved asset into taxable cash. Hold the business until death and Business Property Relief may reduce the inheritance tax position, while the assets are generally rebased to market value for CGT purposes.
Neither route is automatically better. It depends on the size of the gain, your wider estate, your income needs and your timeline. What’s clear is that you can’t answer it by looking at CGT alone anymore, which is a real change from how exit planning worked even two years ago.
Plan your exit around the numbers that matter
An exit is one of the few financial decisions you make once, with no chance to redo it. The 18% rate, the anti-forestalling rules and the Business Property Relief cap all interact, and the right answer for one business owner is the wrong one for the next.
The decisions you make in the 12 to 24 months before a sale, on valuation, structure and timing, tend to matter more than anything you can do at completion.
If you’re thinking about selling and want to understand what your exit really looks like after tax, get in touch. Whittock Consulting provides senior finance director support for owners planning a sale, a succession or the next stage of growth. We’d love to hear from you.
