Business Asset Disposal Relief in 2026: What the 18% Rate Rise Means for Your Accountancy Practice Sale

Without BADR, higher-rate taxpayers pay 24% CGT on most business gains. With BADR, you pay less. The aim is to reward people who build and run real businesses. It’s not for passive investors or short-term holders. 

It’s not a blanket deal, though. There are conditions to meet. The relief is capped at a lifetime limit of one million pounds in qualifying gains. Gains above that cap are taxed at the standard CGT rate. 

Capital Gains Tax on Business Sales: The Basics 

It helps to see BADR in the context of CGT as a whole. When you sell a business asset at a profit, you pay Capital Gains Tax on the gain. The gain is the sale price minus what you paid for it and any allowable costs. 

The CGT annual exemption is three thousand pounds. That reduces your taxable gain a little. But on a practice sale, the big number usually far exceeds that. The exemption is a small help, not a solution. 

BADR is what makes the real difference. It cuts the rate on qualifying gains from 24% down to 18%. For a practice worth several hundred thousand pounds, that gap matters. Know it before you start talking to buyers. 

How the Rate Has Changed 

The history here matters a lot. For years, BADR sat at a flat 10%. It was generous. Many practice owners built their exit plans around it. 

Then came the Autumn 2024 Budget. The rate rose to 14% from 6 April 2025. From 6 April 2026, it went up again to 18%. That’s three rate rises in under two years. 

In real terms: a one million pound gain at 10% cost you one hundred thousand in CGT. At 14%, that rose to one hundred and forty thousand. At 18%, it’s now one hundred and eighty thousand. That’s eighty thousand more than the old rate, on the same deal. 

The gap between BADR and the standard 24% CGT rate is closing. BADR still saves you money. But less than before, and the trend is clear. 

What the Term Capital Gains Entrepreneurs Relief Means Today 

Some people still search for capital gains entrepreneurs relief or capital gains tax entrepreneurs relief. These terms all point to BADR. The relief was renamed in 2020 but the old name still shows up. 

If your accountant or a buyer mentions entrepreneurs relief, they mean BADR. The conditions, limits, and rates are the same. Don’t let the different name confuse you when reading older guides. 

Business Asset Disposal Relief Conditions: What You Need to Qualify 

People often assume they’ll qualify without checking. That can be a costly error. 

For shares in a trading company, you must meet four tests in the 24 months before the sale. You need to hold at least 5% of the ordinary shares and 5% of the voting rights. You need to be entitled to at least 5% of profits or net assets. You must be a director, officer, or employee. The company must be a trading company, not an investment business. 

For sole traders and partners, you need to own the business for at least two years. It must have been trading at that time. The assets sold must also be genuine business assets. 

Two years sounds easy. But timing matters. If you changed your ownership or employment status in the past two years, your eligibility may be at risk. 

The BADR Lifetime Allowance 

This is the one that catches most people out. BADR has a lifetime limit of one million pounds. That covers your whole life, not just one sale. 

If you sold a business before and used part of your limit, you may have less left than you think. Once it’s gone, it’s gone. Any gains above get taxed at the full CGT rate. 

You can claim BADR more than once, across different sales, until you hit the ceiling. Couples each have their own limits. If both you and your spouse hold qualifying shares and both meet the tests, you each get one million pounds. In the right setup, that doubles your total relief. 

What the 18% Rate Means for a Practice Sale 

Say you sell your accountancy practice, and the gain is six hundred thousand pounds. Under BADR, you’d pay 18%: one hundred and eight thousand in CGT. 

Without BADR, a higher-rate taxpayer pays 24%: one hundred and forty-four thousand. BADR saves you thirty-six thousand in this case. 

On a full one-million-pound gain, BADR saves you sixty thousand compared to the 24% rate. That’s still real money. But it’s much less than the ninety thousand you’d have saved at the old 10% rate. 

The math’s has shifted. Your net proceeds are lower than they’d have been two years ago, for the same deal, same buyer, same price. It’s worth knowing the numbers before you go to the market. 

BADR and Liquidation 

Some practice owners close their firm through a Members’ Voluntary Liquidation, or MVL, rather than a sale. BADR can apply here too. That’s why liquidation often comes up in BADR discussions. 

In an MVL, the company is a solvent. Assets go to shareholders. Those payments are often treated as capital, not income. If you meet the BADR tests, the 18% rate can apply to qualifying gains on those payments. 

This route suits owners who want a clean close rather than a full sale process. But the conditions still apply. The company must have been a trading company for the full two-year period. Getting this wrong is very costly. 

The Anti-Forestalling Rules: The Detail Most Articles Skip 

Here’s something that has caught people off guard. Signing a contract before 6 April 2026 doesn’t lock in the old 14% rate on its own. Many sellers assumed it would. 

The government added anti-forestalling rules. A contract must have been unconditional before 6 April 2026 to count as an excluded contract. If it still had open conditions, such as signoffs, earn-out terms, or warranty talks, it likely won’t qualify. 

There’s also a rule that the contract must not have been signed mainly to gain from the timing. If the two parties are connected, the deal must be purely commercial. 

A signed contract doesn’t always mean protection. If your deal still had open terms at the April 2026 cut-off, get advice before assuming a lower rate applies. The numbers are big enough to check carefully. 

Who Doesn’t Qualify for BADR 

Not everyone can use BADR. It helps to know where relief doesn’t apply. 

If you’ve used your full one-million-pound lifetime limit on past sales, there’s no further BADR benefit. Extra gains go to the 24% standard rate. 

Non-UK residents face different rules. BADR is a UK relief. Your tax status depends on your residency. Don’t assume it applies without taking advice first. 

If you hold fewer than 5% of the shares, you can’t claim on a company sale. BADR is aimed at people who work in the business. Passive holders don’t get it. 

If you changed your share structure in the last 24 months, the two-year test may have reset. This includes changes made during a funding round. It can happen without you realizing the impact on your BADR clock. 

What Can Actually Go Wrong 

These are real problems, not invented ones. 

The most common issue is finding the lifetime allowance is already partly or fully used. Sellers who exited a past business often forget how much BADR they claimed at the time. Check your old tax returns before you plan your exit. 

Earnouts cause problems regularly. If a deferred payment looks like employment income rather than a capital receipt, HMRC taxes it under PAYE. BADR won’t apply to that part. Sort the earn-out structure with your accountant before heads of terms are signed.