What’s Changing with BADR and Capital Gains Tax
From 6 April 2026, the Business Asset Disposal Relief (BADR) rate—formerly Entrepreneurs’ Relief—is set to rise from 14% to 18%, mirroring the main lower rate of Capital Gains Tax (CGT). (gov.uk)
Additionally, Investor’s Relief (another relief tackling capital gains) will be aligned with this new lower CGT rate. (assets.publishing.service.gov.uk)
Who’s Affected & What Qualifies
The relief still only applies to gains on qualifying disposals—assets like business shares or assets used in your trade, subject to certain ownership and personal participation tests. Gains must meet BADR criteria. For example:
- You must have owned the relevant business assets for at least two years before disposal.
- You must be a sole trader, business partner, or shareholder carrying out a business through a company and meet other qualifying conditions.
Examples: Before vs. After
| Scenario | Disposal Date | Gain | Applicable Rate | Tax Payable on Gain* |
|---|---|---|---|---|
| Sole trader sells qualifying business shares in March 2026 | 5 April 2026 | £100,000 | 14% | £14,000 |
| Same disposal on or after 6 April 2026 | 6 April 2026 | £100,000 | 18% | £18,000 |
*Assumes full gain qualifies, ignoring personal allowances or further reliefs.
Actionable Advice for Entrepreneurs
- Plan ahead: If possible, complete qualifying disposals before 6 April 2026 to benefit from the lower 14% rate.
- Review asset sales and exits: Where timing flexibility exists, delay disposals if they don’t meet qualifying criteria now.
- Documentation is key: Have robust records showing your involvement and ownership period to satisfy HMRC requirements.
- Model cash flow: The higher rate increases tax payable; plan for the impact on net proceeds, especially for retirement or business exit planning.
Broader Implications
- This change is part of wider efforts in the Budget 2025 to reform taxes on wealth and assets. (assets.publishing.service.gov.uk)
- Entrepreneurs who rely on BADR as part of succession or exit strategies will need to adapt. Those unable to satisfy qualifying requirements or timing may see significantly higher liabilities.
"From 6 April 2026, the CGT rate for Business Asset Disposal Relief and Investors’ Relief will increase to match the main lower rate at 18%." (assets.publishing.service.gov.uk)
Summary
| Key Date | Rate Change | Affected Reliefs |
|---|---|---|
| 6 April 2025 | BADR/Investor’s Relief goes from 10% → 14% | Transitional period—used for disposals after that date until 5 April 2026. (gov.uk) |
| 6 April 2026 | Reliefs align to 18% rate | Major jump for those awaiting exit events or considering sales. |
What to Do Now
- If a sale or disposal is already planned: accelerate it, provided you meet all qualifying conditions.
- Review business structure & shareholding profiles to ensure eligibility.
- Speak with a tax adviser to re-evaluate your exit or succession plan under the new regime.
Category: Tax Planning
Tax Home: UK
Author: NomadicTax Research Team
ReadTime: 6 min
Published: true