Navigating Business Asset Disposal Relief for UK Entrepreneurs

For UK entrepreneurs and business owners considering the sale of their business, shares in a trading company, or an interest in a trading partnership, understanding Business Asset Disposal Relief (BADR) is crucial. At CIGMA Accounting, we’re dedicated to guiding you through the intricacies of BADR to ensure you maximize your financial benefits.

What is Business Asset Disposal Relief?

Previously known as Entrepreneurs’ Relief prior to 6 April 2020, BADR offers a significantly reduced Capital Gains Tax (CGT) rate of 10% on qualifying assets, as opposed to the standard rate. This relief is available when exiting a business under specific conditions, providing substantial tax savings.

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Eligibility Criteria for BADR

To qualify for BADR, certain conditions must be met, including:

  1. For Business Owners:

    • You must be a sole trader or a business partner.
    • The business must have been owned by you for at least 2 years up to the sale date.
  2. For Shareholders:

    • You need to be an employee or office holder in the company.
    • The company must primarily be involved in trading activities.
    • For non-EMI shares, you must hold at least 5% of the shares and voting rights.
  3. Special Considerations for EMI Shares:

    • Shares must be acquired post-5 April 2013.
    • The option to buy them should have been granted at least 2 years before their sale.

The Financial Aspect: Calculating Your Tax

When claiming BADR, the calculation of your tax liability involves:

  • Summing up gains on qualifying assets and deducting any losses.
  • Applying the 10% tax rate to the remaining amount after your tax-free allowance.
  • For higher rate Income Tax payers, different rates apply for gains not covered by BADR (28% for residential property and 20% for other assets).
  • Basic rate taxpayers have varied rates based on their total taxable income and the nature of the gains.

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Lifetime Limit and Claiming Process

An essential aspect of BADR is its £1 million lifetime limit, which can be higher for assets sold before 11 March 2020. Claims for BADR are made either through self-assessment tax return or by completing Section A of the Business Asset Disposal Relief helpsheet.

Professional Assistance from CIGMA Accounting

Navigating the complexities of BADR can be challenging.
At CIGMA Accounting, we offer expert guidance and support to ensure you meet all the qualifying criteria and maximize your relief. Our team is equipped to handle all aspects of your claim, from initial assessment to filing the necessary paperwork.

Reach out to us by completing this form and one of our staff members will get in touch within one business day. 

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