As of today (6th April 2025), the Business Asset Disposal Relief (BADR) rates will be changing, meaning business owners will now pay more tax on chargeable gains when selling a business.
In this article, Corporate & Commercial expert Hem Gujadhur outline the new rates, what they mean for business owners and how they will change in the future.
*Disclaimer* This article is not intended as tax advice. If you would like tax advice, please refer to a qualified tax advisor.
What is Business Asset Disposal Relief?
BADR is a relief available to business owners to reduce the Capital Gains Tax (CGT) payable on gains on a disposal of certain assets (including shares in a qualifying company), up to a current lifetime allowance of £1 million. It is important to bear in mind that there are specific requirements that business owners must meet in order to qualify for BADR.
Anything over the £1 million threshold is subject to the standard CGT rates, which are as follows:
- 24% on gains from residential property
- 28% on gains from your ‘carried interest’ in an investment fund
- 24% on gains from other chargeable assets
To find out more information on these rates, click here.
What is the new BADR rate?
From 6th April 2025, the amount of CGT paid under BADR will change, meaning business owners will now have to pay more on gains made from the sale of their business or shares.
Previously, CGT would be reduced to 10% if BADR was applicable, but this rate has increased from 10% to 14%. This means that a £1 million pound gain will now incur CGT of £140,000 instead of £100,000 under the old rate.
Read our guide to selling a business here.
What are the future rates for business asset disposal relief?
With the upcoming changes to BADR, business owners should be aware of further increases to the CGT where BADR is applicable.
From 6th April 2026, the BADR rate will change again, increasing from 14% to 18%. Meaning a £1 million gain will result in a £180,000 tax bill.
This upcoming change will make it even more important for business owners to carefully plan the timing of their sales to minimise tax liabilities.
If you would like to discuss your options, please call 01202 499255 or fill out the form at the top of the page.
How to reduce Capital Gains Tax when selling a business?
Whilst Business Asset Disposal Relief can help to reduce your payable CGT, there are also other ways to do so including:
- Gift the business to a spouse or partner,
- Consider holdover relief (Gift of business assets relief),
- Use rollover relief (Reinvestment relief),
- Make use of your annual CGT allowance, or
- i.e. the maximum amount of money that you can earn in profit tax-free
- Considering other exemptions which may be available.
Related: How to get your commercial property ready for sale
How do I sell my business?
While every business sale is different, there are usually three main steps involved in the process.
Preparation
At this stage, you’ll want to prepare your business for sale so that you can realise the maximum value of your interest.
This will ensure that your business is an attractive prospect to a buyer.
Related: How to groom your business for sale
Structuring
How you structure the sale is often driven by the tax implications that will apply, so it’s recommended that you speak to a tax advisor for tailored advice at the earliest opportunity. We can recommend tax advisors as required if you get in touch with us.
The structure of the sale will also depend on how you operate your business since different rules apply for partnerships, limited companies and sole traders.
Related: How to sell your shares back to the company
Legal
The legal process for selling a business can be broken down as follows:
- Heads of Terms
- Due Diligence
- Contract
- Disclosure
- Additional Documents
- Post Completion
My colleague Karen Edwards has explained each of these steps in more detail here.
Business Asset Disposal Relief and selling a business advice
At Frettens, our highly skilled Corporate & Commercial Team are happy to offer tailored advice on how these changes might affect you when selling your business.
To get in touch, you can call us on 01202 499255 or fill out the form at the top of this page. We offer a free initial chat to discuss business needs to all new clients.
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