Business Asset Disposal Relief (BADR) Rules 2025: What Business Owners Need to Know
If you’re planning to sell your business or shares in 2025, understanding the updated Business Asset Disposal Relief (BADR) rules is vital. Formerly known as Entrepreneurs’ Relief, BADR can significantly reduce your Capital Gains Tax (CGT) bill—provided you meet the qualifying criteria.
In this guide, we explain how BADR works in 2025 and what business owners must know to benefit.
1. What Is Business Asset Disposal Relief (BADR)?
BADR allows individuals to pay a reduced Capital Gains Tax rate of 10% on qualifying business disposals, subject to a lifetime limit of £1 million in gains.
It applies to:
- Sole traders or business partners selling all or part of their business
- Directors or employees selling shares in a ‘personal company’
2. Qualifying Conditions in 2025
To qualify for BADR, you must:
- Be a sole trader, business partner, or shareholder in a personal company
- Have held the business or shares for at least 2 years before the sale
- Have at least 5% of shares and voting rights (for company shareholders)
- Be an employee or officer of the company (if disposing of shares)
Your company must be a trading company or the holding company of a trading group.
3. What Is a Personal Company?
A personal company is one where the seller:
- Holds at least 5% of both the ordinary share capital and voting rights
- Is entitled to at least 5% of either distributable profits or assets on winding up
These requirements must be met for the full 24-month qualifying period.
4. Changes to BADR in 2025
As of 2025, the BADR rules remain mostly unchanged, but HMRC is focusing more closely on:
- Evidence of active involvement in the business
- Substantiating share ownership and employment status
- Proper documentation of business activities during the ownership period
Keeping accurate records is crucial to prove your eligibility during a disposal.
5. Lifetime Limit and Tax Planning
The BADR lifetime limit of £1 million remains in place for 2025. This means:
- Once you’ve used up your £1 million allowance, gains above this will be taxed at the standard CGT rates (10% or 20%, depending on your income bracket)
- Proper tax planning and timing of disposals can help maximise relief
Married couples and civil partners can potentially double the limit if both meet the qualifying criteria.
6. How to Claim BADR
You must claim BADR through your Self Assessment tax return, or by writing to HMRC. The deadline is:
- 12 months after 31 January following the end of the tax year in which the disposal occurred
For example, for disposals in the 2024/25 tax year, the deadline to claim is 31 January 2027.
Common Pitfalls to Avoid
- Failing to meet the two-year ownership rule
- Insufficient shareholding or voting rights
- Not being a company officer at the time of disposal
- Selling a non-trading company (e.g. investment company)
How Eclat Accountancy Can Help
At Eclat Accountancy, we guide business owners through:
- Assessing BADR eligibility
- Structuring business exits for maximum tax efficiency
- Preparing accurate documentation and records
- Filing claims with HMRC on time
Final Thoughts
Understanding the Business Asset Disposal Relief (BADR) rules in 2025 is essential if you’re planning to exit your business. With careful planning and expert advice, you can take full advantage of this valuable tax relief and avoid costly mistakes.
Speak to Eclat Accountancy today to plan your business exit strategy and claim BADR with confidence.
