If you’re considering selling your business or shares, acting sooner rather than later could save you a significant amount of tax. The rules around Business Asset Disposal Relief (BADR)—formerly known as Entrepreneurs’ Relief—are changing, and timing your sale carefully can make a big difference.
Here’s what you need to know to make the most of the current rates.
What is BADR?
BADR is a relief that reduces the Capital Gains Tax (CGT) rate to 10% on qualifying gains from selling all or part of a business, or shares in a personal trading company. It’s a valuable tool for business owners looking to sell efficiently.
To qualify, certain conditions must be met:
- For Sole Traders:
- You must have owned the business for at least two years prior to the sale.
- If the business has ceased trading, its assets must be sold within three years to qualify.
- For Shareholders in Personal Trading Companies:
- You must hold at least 5% of the ordinary share capital, giving you at least 5% voting rights and entitlement to:
- 5% of distributable profits.
- 5% of distributable assets on winding up.
- 5% of proceeds if the company is sold.
- You must hold at least 5% of the ordinary share capital, giving you at least 5% voting rights and entitlement to:
Why Timing Matters
The current CGT rates for 2024/25 make BADR particularly appealing, but these rates won’t last forever:
- Up to 5 April 2025: Gains eligible for BADR are taxed at 10%.
- From 6 April 2025: The rate increases to 14%, meaning smaller savings.
- From 6 April 2026: The rate jumps to 18%, eroding the benefit further.
For high earners, this limited-time 10% rate could save up to £140,000 compared to the standard CGT rate of 24%.
What’s the Lifetime Limit?
Each individual has a lifetime BADR limit of £1 million. This means:
- You can only claim the relief on gains up to £1 million over your lifetime.
- Spouses and civil partners have their own £1 million allowance, so planning together can double the available relief.
Who Should Act Now?
If you’re planning to sell your business or shares and you’ve met the qualifying conditions for at least two years, consider:
- Selling Before 6 April 2025:
- This ensures you access the 10% rate and maximise your savings.
- If your business has already ceased trading, aim to dispose of any remaining assets by this date.
- Selling Before 6 April 2026:
- While the rate will rise to 14% after April 2025, this is still better than the 18% coming in 2026.
- Landlords with Furnished Holiday Lettings:
- If you’re considering exiting the business, act now to lock in the 10% rate before relief for holiday lets ends.
How Can Jon Davies Accountants Help?
Planning the sale of a business is a big decision, and timing is critical to minimising your tax bill. At Jon Davies Accountants, we’re here to help you navigate these changes and ensure you make the most of the current rates.
💡 Contact Jon and the team today to discuss your plans and maximise your savings with BADR.
What are your thoughts on the upcoming rate changes? Let us know if you’d like to explore your options further!
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Any questions?
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