Business Asset Disposal Relief

What is Business Asset Disposal Relief​?

Business Asset Disposal Relief allows you to pay a reduced rate of capital gains tax on gains arising on the disposal of qualifying assets.  The relief is restricted to £1m of qualifying lifetime gains, reducing the rate of tax to 14% for the 2025/26 tax year.  This is, however, an increase from the previous tax year where the rate was 10%, with the rate set to increase again to 18% for disposals on or after 6^th April 2026.

As long as all qualifying criteria are met, it is claimed when you sell your business and can also apply to proceeds received via a Members Voluntary Liquidation (MVL).

Am I eligible for the relief?

To qualify for Business Asset Disposal Relief, you must meet one or more of the following criteria:

1. You must be disposing all or a part of a business, where you were a sole trader or business partner. Even if you dispose of the assets after, you may still be eligible. However, you must have owned the business for at least two years prior to the disposal and any assets must be disposed of within three years of the cessation of trade to qualify.
2. You hold at least 5% of the ordinary share capital of the company, with rights to capital and voting rights attached. You must have held the shares for at least two years prior to the date of disposal.  In addition, you must have been an officer or employee of the company for at least two years.  The company’s activities must relate to ordinary trading activities rather than investment activities and advice must be taken prior to disposal if the company undertakes any investment activities to ensure the company is a qualifying company.
3. You are disposing of shares that you obtained through an Enterprise Management Incentive scheme.  Note that the minimum 5% holding requirement does not need to apply.

How do I actually claim for Business Asset Disposal Relief ?

To claim for Business Asset Disposal Relief you must report the disposal of your qualifying assets and claim the relief via your self assessment tax return for the year in which the disposal took place.  Any capital gains tax liability will fall due for payment on 31 January following the tax year of the disposal.

For example, a disposal of a qualifying asset on 1 October 2025 will fall into the 2025/26 tax year.  The relevant tax return must be filed and the tax settled on 31 January 2027.

We recommend that anyone who is looking to potentially dispose of their business or are looking to explore an MVL, obtain advice in relation to their personal tax position and the availability of Business Asset Disposal Relief.