Business asset disposal relief at 18%: Exit planning advisory for UK accountants

Published Friday 10 July 2026

Table of contents

• What BADR at 18% means for your clients
• Who qualifies for BADR
• How the 18% rate affects exit timelines
• How to identify clients affected by the rate change
• How to build BADR advisory into your practice
• Simplify exit planning advisory with Xero
• FAQs on Business Asset Disposal Relief

Key takeaways

• The BADR rate has increased to 18% for the 2026/27 tax year, up from 14% in 2025/26 and 10% before that, reducing but not eliminating the Capital Gains Tax saving.
• The full £1 million lifetime allowance at the 18% rate means a potential saving of up to £60,000 compared to the standard 24% CGT rate.
• The qualifying criteria include at least two years of asset ownership, a minimum 5% shareholding, and the company being a trading company. There's a £1 million lifetime limit per individual.
• The rate change makes early conversations with clients essential. Those planning to sell part or all of their business in the coming years will need to align with the relief criteria now.

What BADR at 18% means for your clients

From 6 April 2026, Business Asset Disposal Relief is taxed at 18% on qualifying gains up to the £1 million lifetime limit, compared with the standard Capital Gains Tax rate of 24%.

If a client disposes of part or all of their business through selling part of their business, or shares, or the entire company, they may be able to pay a reduced rate of Capital Gains Tax. They receive this reduced rate by claiming Business Asset Disposal Relief (BADR), which currently sits at a rate of 18%, instead of the standard 24% Capital Gains Tax rate.

For clients who maximise the full £1 million lifetime allowance, this means a potential saving of up to £60,000 compared to the standard CGT rate.

The tax rate has increased in stages. Gains on assets sold before April 2025 were taxed at a 10% rate, then a 14% rate between 6 April 2025 and 5 April 2026. The new 18% rate applies to gains made on assets sold after 6 April 2026.

Clients can still claim Business Asset Disposal Relief for gains made in previous tax years. The deadline for claiming on assets sold or businesses closed in the 2024/25 tax year is 31 January 2027, and clients will be entitled to the earlier, lower rate of Capital Gains Tax (10%).

Claiming BADR tax relief can be tricky. You may need to help your clients work out which of their assets are eligible, whether the percentage and type of shares they hold qualify for relief, and how much they're able to claim. BADR is claimed using a Self Assessment return, or the Business Asset Disposal Relief helpsheet (HS275).

Who qualifies for BADR

Whether a client is selling the business itself, part of the business, or ordinary shares, they must have owned the asset for the two years prior to disposing of it. Or, if they're selling assets from a business that has closed, they must dispose of assets within three years of the company closing to qualify. Sole traders, business partners, and some trustees qualify, providing they meet the two-year rule.

Other qualifying criteria to be aware of include:

• The company must be a trading company (or holding company of a trading group). Investment companies don't qualify for the relief.
• If clients are selling shares or securities, they must be an employee or office holder of the company (or company group), and the shares must equate to at least 5% of voting rights and shares. The client must also be entitled to profits on winding up the company, and disposal proceeds if the company is sold.
• If clients are selling shares from an Enterprise Management Incentive, the shares must have been purchased after 5 April 2013 and the clients must have had the option to buy them at least two years before disposing of them.

The BADR lifetime allowance is currently £1 million. This is the maximum claimable amount on qualifying gains, so it's important to check if your clients have used the relief scheme previously, and how much they have remaining. Relief must also be claimed by 31 January, following the end of the tax year assets were disposed in.

Investors' Relief rates have also increased to 18% from April 2026, aligning with the BADR rate. Clients with qualifying investments may need to review both reliefs as part of their disposal planning.

You can find the full details of HMRC's eligibility for BADR online.

How the 18% rate affects exit timelines

For accountants and bookkeepers, it's important to know whether clients are planning to sell part or all of their business in the next few years. This will enable you to support them with BADR criteria, which is influenced by the types of shares your clients own, as well as their title and employment status within the business.

Timing is another important factor. When a client sells part or all of their business, the date of the disposal is when the contract 'completes'. So, if a contract is delivered in March 2026, but signed in April 2026, your clients will be subject to a newer rate of BADR. This is unless both parties can make the case that it's an 'excluded contract', which HMRC defines in the Capital Gains Manual.

Given that rates have changed multiple times over the last few years, this could mean a different Capital Gains Tax percentage depending on the year your clients dispose of assets in.

Be aware of claiming deadlines too. For disposals in the 2026/27 tax year, clients must claim BADR by 31 January 2029. Missing this window means losing the relief entirely, so it's worth building deadline tracking into your practice workflow.

The decision to sell is one that your clients will balance against a variety of factors. But understanding their ambitions now means you can work together to make sure everything's in place for claiming Business Asset Disposal Relief when the time comes.

How to identify clients affected by the rate change

Clients in the process of disposing of business assets, or who've made disposals in the tax year so far, should be monitored to make sure the right claim is made. Here are some tips for tracking clients affected by Business Asset Disposal Relief rates:

• Review their transactions following 6 April 2026 to check if they have assets subject to the new rate of relief.
• Talk to clients about any contracts that have closed or are due to close in the 2026/27 tax year.
• Keep records of clients' previous Business Asset Disposal Relief claims to track how much is left of their lifetime allowance.
• Review whether clients have issued more shares that could result in a dilution of their 5% ownership; they may still be able to claim BADR.

How to build BADR advisory into your practice

Keeping up with clients' plans for exit and asset sales is key if you want to build BADR advisory into your practice. Make sure you're talking to them regularly about the future, and being proactive with your guidance and support. Producing cash flow projections and other forecasts can help you spot patterns and trends together, and judge how realistic it might be to sell their business.

Having access to reliable financial records for your clients, and being able to search and retrieve these easily, will help you advise them on Business Asset Disposal Relief eligibility. If you also have access to reporting and forecasting software, you can check transactions and estimate their tax liability ahead of time.

HMRC scrutiny on relief claims has increased. Ensuring your clients' records are accurate and that eligibility criteria are clearly documented will strengthen their position if a claim is reviewed.

Simplify exit planning advisory with Xero

Your clients might be a long way from exiting their business, or selling their assets. But you can help them be in the best position to sell, by guiding them on Business Asset Disposal Relief and advising on tax strategy.

To maintain eligibility and calculate how much relief they're entitled to, software like Xero can help you get the numbers right. When clients connect their bank accounts to Xero, transactions flow in automatically, giving you a live view of their financial picture. You can use these records to create reports and forecasts in Xero, based on live data, so checking their eligibility at a glance only takes a few clicks.

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FAQs on Business Asset Disposal Relief

Here are some frequently asked questions on BADR tax relief and how you can support clients with their claims.

What is the BADR rate from April 2026?

The rate is 18%. When clients claim Business Asset Disposal Relief for assets disposed of in the 2026/27 tax year, they pay 18% Capital Gains Tax on qualifying gains, compared with the standard 24% rate.

Can a client claim BADR more than once?

Yes, but only up to the maximum lifetime amount of £1 million across all qualifying disposals. Once a client exhausts the allowance, any further qualifying gains are taxed at the standard 24% CGT rate. If you're advising clients with multiple disposals across different tax years, keep a running total of their cumulative claims to avoid exceeding the limit.

What happens if a shareholding drops below 5%?

If a shareholding drops below 5% because new shares have been issued since your client originally bought them, the client needs to opt for their shares to be treated as sold and rebought, immediately before new shares were issued. The client will then be able to make a claim on the gain generated up until new shares were issued.

How does BADR interact with inheritance tax reliefs?

Some assets eligible for BADR may also qualify for inheritance tax Business Relief. Business Relief can reduce the value of qualifying assets for IHT purposes at rates of 100% or 50% depending on the type of asset. From 6 April 2026, the 100% rate is capped at the first £2.5 million of combined business and agricultural property, with any value above that receiving relief at 50%. The two taxes are triggered at different times: inheritance tax when assets are passed on in life or on death, and Capital Gains Tax when business assets are sold.