Business Asset Disposal Relief (BADR), formerly known as Entrepreneurs’ Relief, helps business owners reduce their Capital Gains Tax (CGT) liability when selling qualifying assets.
However, you will need to consider adjustments to BADR, that are coming in April 2025, if you are currently planning, or thinking of beginning to plan your exit strategy.
When it comes to planning how you will make an exit from your business, timing has a crucial role to play.
Current BADR rules and the upcoming change
BADR currently allows eligible sellers to pay a reduced CGT rate of 10 per cent on gains up to £1 million over their lifetime. This is a substantial saving compared to the standard CGT rate of up to 24 per cent.
However, from April 2025, this preferential rate rises to 14 per cent, and from April 2026, it increases again to 18 per cent.
Consider your options when planning a business sale
If you are considering selling your business, the current rate of CGT isn’t the only factor youshould be basing any decisions on.
Other factors like whether or not the market is favourable, how likely your business is to attract buyers in its current state, and if the timing of any sale coincides with your own personal financial goals, should all be looked at in turn.
When rates change, it is often the case that anti-forestalling rules prevent certain transactions, such as share reorganisations, loan notes or sales to connected parties, from being eligible for the advantageous tax rates.
