CAPITAL GAINS TAX

• Business Asset Disposal Relief (BADR)

  Business Asset Disposal Relief (BADR) - formerly known as Entrepreneurs' Relief, renamed with effect from 6 April 2020 — may be available for certain business disposals and has the effect of charging qualifying gains at a reduced rate, up to a lifetime limit. That lifetime limit has changed significantly over the years: it started at £10 million (from 6 April 2011), was cut sharply to £1 million from 11 March 2020, and remains £1 million for 2026/27. The rate charged on qualifying gains has also risen in stages — from 10%, to 14% from 6 April 2025, to 18% from 6 April 2026.

  The relief applies to gains arising on a disposal of:

  • the whole, or part, of a trading business that is carried on by the individual, either alone or in partnership, in the 24 months prior to sale
  • shares in an unquoted trading company, or holding company of a trading group, provided that the individual owns broadly a 5% shareholding (of the ordinary share capital and voting rights, and of distributable profits and net assets on a winding up) throughout the 24 months prior to sale, and has also been an officer or employee of the company throughout that time
  • assets used by a business or a company which has ceased within the last three years
  • assets used in a partnership or by a company but owned by an individual, if the assets disposed of are 'associated' with the withdrawal of the individual from participation in the partnership or the company

  A trading business includes professions but only includes a property business if it is a 'furnished holiday lettings' business — though note that the furnished holiday lettings regime itself was abolished from 6 April 2025, so this route to qualification no longer applies in the way it once did and is worth checking carefully with affected clients.

  Restrictions on obtaining the relief on an 'associated disposal' are likely to apply in certain specific situations. This includes the common situation where a property is in personal ownership but is used in an unquoted company or partnership trade in return for a rent. Relief is restricted where rent is paid.

• Business asset rollover relief and Gift Hold-Over relief

  Business asset rollover relief — You may be able to delay paying Capital Gains Tax if you:

  • dispose of some business assets
  • use all or part of the proceeds to buy new assets

  Business Asset Rollover Relief means you won't pay any tax until you sell the new asset. You may then need to pay tax on the gain from the original asset.

  You can also claim:

  • provisional relief if you're planning to buy new assets with your proceeds but haven't done so yet
  • relief if you use the proceeds to improve assets you already own

   

  Gift Hold-Over Relief — You may be able to claim Gift Hold-Over Relief if you give away business assets (including certain shares) or sell them for less than they're worth to help the buyer. Gift Hold-Over Relief means:

  • you don't pay Capital Gains Tax when you give away the assets
  • the person you give them to pays Capital Gains Tax (if any is due) when they sell (or 'dispose of') them

  Tax isn't usually payable on gifts to your husband, wife, civil partner or a charity.

  Eligibility — The conditions for claiming relief depend on whether you're giving away business assets or shares.

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