Business Asset Disposal Relief (BADR) applies to the sale of a business, shares in a trading company, or an individual’s interest in a trading partnership. When this relief is available, a reduced Capital Gains Tax (CGT) rate of 10% is applied instead of the standard rate, potentially resulting in significant tax savings for those exiting their business.
To qualify for BADR, certain conditions must be met:
- Sale of a Business or Business Closure:
- you must be a sole trader or business partner;
- you must have owned the business for at least 2 years leading up to the sale or closure; and
- you must dispose of your business assets within 3 years to qualify.
- Sale of Shares or Securities: Both of the following must apply for at least 2 years up to the date you sell your shares:
- You must be an employee or office holder of the company (or a company within the same group).
- The company’s main activities must involve trading, not non-trading activities like investment, or it must be the holding company of a trading group.
Additional rules can apply if the shares are from an Enterprise Management Incentive (EMI).
Currently, you can claim a total of £1 million in BADR over your lifetime, allowing you to qualify for the relief multiple times. The lifetime limit may be higher if you sold assets before 11 March 2020.
Source:HM Revenue & Customs | 02-09-2024
