What is the lifetime limit for BADR and how is it calculated?

Under Section 169N of TCGA 1992 (as amended by Section 22 of the Finance Act 2020), the statutory lifetime limit on qualifying capital gains is £1,000,000 per individual. Every pound of Entrepreneurs' Relief or BADR claimed since 6 April 2008 counts cumulatively towards this lifetime threshold. Any chargeable gains exceeding your remaining lifetime allowance are subject to standard CGT rates (18% to the extent of any unused basic rate income tax band, and 24% for higher or additional rate bands).

What are the 5% personal company tests for company share disposals?

Under Section 169S TCGA 1992, for a disposal of shares in a limited company to qualify for BADR, the company must be your 'personal company'. Throughout a continuous qualifying period of at least 2 years ending with the disposal date, you must: (1) be an officer (such as a statutory director) or an employee of the company or a group company; (2) hold at least 5% of the ordinary share capital; (3) exercise at least 5% of the voting rights; and (4) satisfy an economic test by being entitled to either at least 5% of distributable profits and 5% of net assets on winding up, OR at least 5% of the disposal proceeds on a sale of the entire ordinary share capital.

What is the 2-year holding rule for sole traders and partnerships?

Under Section 169I(2) TCGA 1992, an individual selling the whole or part of an unincorporated business (as a sole trader or through a trading partnership) must have owned the business for a continuous period of at least 2 years (24 months) up to the date of disposal. If the business ceased trading prior to the sale of business assets, the disposal must take place within 3 years of cessation, and the 2-year qualifying condition must have been met at the date trade ceased.

Can spouses double the £1,000,000 BADR lifetime limit to £2,000,000?

Yes, with legitimate pre-sale planning. Under Section 58 TCGA 1992, asset and share transfers between spouses or civil partners living together take place on a 'no gain, no loss' basis. If a founder transfers shares to their spouse and the receiving spouse is also an employee or officer of the trading company and holds at least 5% of shares, voting, and economic rights for at least 2 full continuous years prior to the sale, each spouse can claim their own £1,000,000 BADR allowance. This allows a couple to shelter up to £2,000,000 of capital gains at the 18% BADR rate, saving up to £120,000 in Capital Gains Tax.

Does BADR apply to Members' Voluntary Liquidations (MVLs)?

Yes. Capital distributions made by a liquidator to shareholders during a formal Members' Voluntary Liquidation (MVL) of a solvent trading company are treated as capital receipts under Section 122 TCGA 1992 rather than income dividends. Provided the company was a trading company and the shareholder met the 5% ownership and officer/employee tests for the 2 years leading up to the appointment of the liquidator, BADR can be claimed on capital distributions made within 3 years of the company ceasing trade.

What qualifies as an 'associated disposal' under Section 169K TCGA 1992?

An associated disposal allows an individual who personally owns an asset (such as commercial premises, land, or plant) that is used in the trade of their partnership or personal company to claim BADR when disposing of that personal asset. To qualify, the disposal must be made as part of the individual's withdrawal from the business (accompanying a material disposal of shares or partnership interest), the asset must have been used for business purposes for at least 2 years, and relief may be restricted if the company or partnership paid market rent for the asset.

How do I claim BADR on my Self-Assessment tax return?

BADR is not granted automatically by HMRC. You must formally submit a claim on the Capital Gains Summary (form SA108) of your HMRC Self-Assessment tax return or through a joint section 169M election. Under Section 169M TCGA 1992, the statutory deadline to claim BADR is the first anniversary of the 31 January following the end of the tax year in which the disposal occurred. For a disposal completed in the 2026/27 tax year (ending 5 April 2027), the formal claim deadline is 31 January 2029.

Statutory 2026/27 BADR Engine (TCGA 1992 s.169H–V)

BADR Calculator UK (2026/27)

Calculate Business Asset Disposal Relief on company share disposals, sole trader sales, and partnership exits. Model the 18% statutory BADR rate, the £1,000,000 lifetime limit, and 5% personal company tests under TCGA 1992.

TCGA 1992 & FA 2025£1,000,000 Lifetime Cap2026/27 18% Rate

Quick Scenario Presets

TCGA 1992 Statutory BADR Engine

Business Sale & Relief Parameters

Disposal Category (TCGA 1992 s.169I)

Gross Sale Proceeds (£)

Agreed enterprise/share valuation

Acquisition Base Cost (£)

Original subscription or purchase cost

Disposal Costs (£)

Legal, broker, corporate finance fees

Prior BADR Claimed (£)

Lifetime cap: £1,000,000 max

Annual Other Taxable Income (£/year)

Salary, dividends, rental profit (determines basic rate band for excess gains)

2026/27 Annual Exemption (£3,000)Under Section 1K TCGA 1992 (if not used against other gains)

Statutory Qualification Checklist (TCGA 1992 s.169I & s.169S)

Qualifies for BADR

2-Year continuous ownership periodOfficer or employee of company≥ 5% ordinary share capital≥ 5% voting rights≥ 5% profits/assets or sale proceedsTrading company (≤ 20% non-trading)

Total Tax Payable on Disposal

£143,100.00

Effective CGT Rate

17.9%

Net Retained Cash£681,900.00Cash in hand post-tax

Statutory Tax Saved£47,700.00Compared to standard CGT

Remaining Lifetime Cap£205,000.00Out of £1,000,000

Gain Allocation & Statutory Tax Rates

Gross Sale Proceeds£850,000.00

Less: Allowable Costs (Acquisition, Stamp, Legal, Fees)- £52,000.00

Gross Capital Gain£798,000.00

Less: Annual Exempt Amount (s.1K TCGA 1992)- £3,000.00

Total Net Chargeable Gain£795,000.00

BADR Qualifying GainTaxed at 18% BADR rate (s.169N TCGA 1992)

£795,000.00

Tax: £143,100.00

Disposal Proceeds Breakdown

Net Cash (80%)HMRC Tax (17%)Costs & Base

Tax Comparison: With vs Without BADR

Tax Without BADR (Standard CGT)£190,800.00Standard 18% / 24% rates across entire gain

Tax With BADR Claim (18%)£143,100.00Capped rate on first £1m qualifying gains

Direct Cash Saved by Relief£47,700.00

Spousal Planning (£2m Cap)

Under Section 58 TCGA 1992, transfers of shares between spouses are on a “no gain, no loss” basis. If your spouse is an officer or employee and holds at least 5% for at least 2 years prior to sale, both spouses can claim BADR.

Double Lifetime Shelter:

Single Founder: £1,000,000 at 18% BADR

Spouses Joint: £2,000,000 at 18% BADR

Potential tax saving on £2m sale: up to £120,000

Autumn Budget Rate Changes

Under the Finance Act 2025, the BADR rate increased from 10% to 14% on 6 April 2025, and increases to 18% from 6 April 2026. While the basic rate matches standard CGT, BADR continues to save 6% for higher rate taxpayers on gains up to £1,000,000.

Statutory Legislation & Principles

How Business Asset Disposal Relief (BADR) Works in 2026/27

Business Asset Disposal Relief (BADR), formerly known as Entrepreneurs' Relief, is the primary statutory capital gains tax relief available to UK entrepreneurs, founders, and business owners. Governed by Sections 169H to 169V of the Taxation of Chargeable Gains Act 1992 (TCGA 1992), BADR provides a preferential rate of Capital Gains Tax on qualifying business disposals up to a strict cumulative lifetime ceiling of £1,000,000.

Under measures introduced in the Finance Act 2025, the statutory BADR rate underwent a phased two-step transition. Having sat at 10% for over a decade, the rate increased to 14% on 6 April 2025 for the 2025/26 tax year, and now stands at 18% for the 2026/27 tax year onwards. While this rate matches the standard basic rate of CGT, it provides a vital 6% tax reduction (18% vs 24%) for higher and additional rate taxpayers, delivering up to £60,000 in net cash savings on a qualifying £1,000,000 gain.

The Phased BADR Rate Transition (2024 to 2027)

The following table outlines the statutory evolution of BADR rates against standard Capital Gains Tax rates across recent tax years:

Tax Year / Period	BADR Rate	Standard Basic CGT	Standard Higher CGT	Max Saving on £1m Cap
Pre-6 April 2025	10%	10%	20%	£100,000
2025/26 (Transition)	14%	18%	24%	£100,000
2026/27 (Current)	18%	18%	24%	£60,000

Qualifying for BADR: The Strict 5% Tests (TCGA 1992 s.169S)

To claim BADR on a disposal of shares in or securities of a limited company, the company must be your “personal company”. HMRC rigorously enforces every statutory limb under Section 169S TCGA 1992. Failure on any single condition across the 2-year qualifying period completely disqualifies the disposal:

1. Officer or Employee Requirement

You must hold a genuine office (such as Companies House registered statutory director or company secretary) or be an employee of the company (or a company within the trading group) throughout the entire 24 months up to the disposal date.

2. The 5% Ordinary Share & Voting Test

You must hold at least 5% of the nominal value of the company's issued ordinary share capital AND be able to exercise at least 5% of the voting rights by virtue of that holding. Preference shares without voting rights cannot satisfy this limb.

3. The 5% Economic Entitlement Test

Under Section 169S(3), you must satisfy either: (a) entitlement to at least 5% of profits available for distribution to equity holders AND 5% of assets available on a winding-up; OR (b) entitlement to at least 5% of the proceeds on a sale of the whole ordinary share capital.

4. Trading Company Status (s.165A)

The company must be a commercial trading company (or the holding company of a trading group). Companies carrying on substantial non-trading activities (such as holding large passive cash reserves, buy-to-let properties, or listed shares exceeding 20% of turnover, assets, or management time) will fail the trading company test.

The £1m Lifetime Limit & Spousal Planning Strategies

Under Section 169N TCGA 1992, each individual has a statutory lifetime qualifying gains limit of £1,000,000. When you sell a business for £2,500,000, only the first £1,000,000 of qualifying gains benefits from the 18% BADR rate. The remaining £1,500,000 of chargeable gain is taxed at the standard higher CGT rate of 24%.

Doubling Relief to £2,000,000 for Married Couples & Civil Partners

Under Section 58 TCGA 1992, transfers of shares between spouses living together are made on a 'no gain, no loss' basis. If a founder transfers a 10% or 20% equity stake to their spouse, and the spouse becomes an active employee or officer of the trading company, the spouse can build their own independent BADR entitlement.

Crucially, the receiving spouse must hold the shares and hold their office/employment for at least 2 full continuous years (24 months) prior to the exit date. If structured in advance, the couple can claim two separate £1,000,000 allowances, sheltering £2,000,000 of capital gains and saving up to £120,000 in Capital Gains Tax.

Sole Traders, Partnerships & the 3-Year Post-Cessation Window

For unincorporated sole traders and partners, BADR applies to the disposal of the whole or part of a business. Crucially, the sale of an isolated single asset (such as an individual commercial van or single machine) does not qualify unless it represents the disposal of an identifiable, standalone section of the trading activity.

If an unincorporated business ceases trading, Section 169I(4) TCGA 1992 provides a 3-year grace period: you can sell the business assets within 3 years of trade ceasing, provided the business was owned throughout the 2-year period up to the date trading ceased.

Business Asset Disposal Relief FAQs (2026/27)

Statutory questions and answers on BADR rates, 5% personal company rules, the £1m cap, and HMRC claims.

Business Asset Disposal Relief (BADR)—formerly known as Entrepreneurs' Relief—is a statutory relief under Sections 169H to 169V of the Taxation of Chargeable Gains Act 1992 (TCGA 1992). It reduces the rate of Capital Gains Tax (CGT) payable when you dispose of all or part of an eligible trading business or qualifying company shares. Following changes enacted in the Finance Act 2025, the BADR tax rate is 18% for disposals made on or after 6 April 2026 (having increased from 10% to 14% on 6 April 2025). Gains qualifying for BADR up to the lifetime limit of £1,000,000 are taxed at 18%, saving higher and additional rate taxpayers 6% compared to the standard 24% CGT rate.

Recommended Resources

✨ Recommended Resources

Explore connected tax calculation tools, salary benchmarks, and statutory business guides.

Related Calculators

All Calculators

Capital Gains Tax Calculator

Calculate standard CGT on residential property (18%/24%) and shares.

Open Tool

Director Salary & Dividend Calculator

Optimise limited company director extraction with 2026/27 tax rates.

Open Tool

Sole Trader vs Limited Company

Compare annual tax efficiency, Class 4 NI, Corporation Tax, and profits.

Open Tool

After-Tax Investment Calculator

Model growth, dividends, interest yields, and net disposal returns.

Open Tool

Compare Common UK Salaries

All Salary Brackets

£25,000 / yr£1,793 / mo

£35,000 / yr£2,393 / mo

£50,000 / yr£3,293 / mo

£75,000 / yr£4,506 / mo

Statutory Tax Guides & Blog

Visit Blog Hub

Director Salary & Dividend Guide 2026/27

Comprehensive remuneration strategies, £12,570 salary, and CT rates.

Read Guide

How UK Income Tax Works (2026/27)

Personal allowance, tax bands, and HMRC PAYE deduction rules.

Read Guide

UK Tax Brackets 2026/27

Comprehensive statutory rate tables for England, Wales, and Scotland.

Read Guide

Relief is conditional

Business Asset Disposal Relief and EMI share treatment depend on ownership, employment, trading and holding-period conditions. A rate comparison does not establish eligibility.

Check the actual disposal date and available lifetime limit. EMI grant, exercise and sale can have different tax consequences. Income Tax and NI may apply where qualifying conditions are not met.

Check the rules for your circumstances

Official guidance supports the rules described here; it does not approve or certify this calculator. Confirm dates, eligibility and unsupported cases before making a financial decision.