How does entrepreneurs relief work?
Answered 11 March 2026
Entrepreneurs' Relief (now Business Asset Disposal Relief)
Important note on naming: Entrepreneurs' Relief was renamed Business Asset Disposal Relief (BADR) by Finance Act 2020 with effect from 6 April 2020. The rules are otherwise the same.
What the law says
Overview
The relief is provided by Chapter 3 of Part 5 of TCGA 1992 (ss.169H–169S). It provides for a lower rate of capital gains tax in respect of "qualifying business disposals."
Qualifying Business Disposals
There are three categories of qualifying business disposal:
- A material disposal of business assets (s.169I)
- A disposal of trust business assets (s.169J)
- A disposal associated with a relevant material disposal (s.169K)
Material Disposal of Business Assets (s.169I)
A "disposal of business assets" covers:
- (a) disposal of the whole or part of a business
- (b) disposal of assets in use when a business ceases, or
- (c) disposal of shares or securities in a company
For the disposal to be material:
- For (a): the business must be owned by the individual for 2 years ending with the date of disposal
- For (b): the business must be owned for 2 years ending with cessation, and cessation must be within 3 years of the disposal
- For (c) (shares): one of Conditions A–D must be met. Condition A requires that throughout the 2 years ending with disposal: (i) the company is the individual's personal company and is a trading company or holding company of a trading group, and (ii) the individual is an officer or employee of the company
Associated Disposals (s.169K)
A disposal of a personally-owned asset used in a partnership or company business can also qualify, provided the individual simultaneously makes a qualifying material disposal of at least a 5% interest in the partnership assets or at least 5% of ordinary share capital carrying 5% of voting rights.
Amount of Relief (s.169N)
- Relevant gains are aggregated and relevant losses deducted; the net amount is treated as a chargeable gain
- The rate of CGT on that gain is currently 14% (for disposals on or after 6 April 2025, rising to 18% from 6 April 2026)
- This preferential rate applies only up to the lifetime limit of £1 million; gains above that limit are taxed at the normal CGT rates
Claim Requirement (s.169M)
- Relief is given only on the making of a claim
- The claim must be made on or before the first anniversary of 31 January following the tax year of the disposal
- For trust business assets, the claim must be made jointly by the trustees and the qualifying beneficiary
HMRC guidance / practice
History of the Lifetime Limit
HMRC's Capital Gains Manual confirms the lifetime limit has changed several times:
| Period | Lifetime limit |
|---|---|
| 6 April 2008 – 5 April 2010 | £1,000,000 |
| 6 April 2010 – 22 June 2010 | £2,000,000 |
| 23 June 2010 – 5 April 2011 | £5,000,000 |
| 6 April 2011 – 10 March 2020 | £10,000,000 |
| On or after 11 March 2020 | £1,000,000 |
How the Lifetime Limit Works
The limit applies cumulatively across all qualifying disposals in a person's lifetime. If an individual had previously claimed relief against £4 million of earlier gains, no further relief is available under the current £1 million limit.
Rate History
For disposals made up to 22 June 2010, the relief operated by reducing qualifying gains by 4/9ths. For disposals on or after 23 June 2010, qualifying gains were charged at a flat 10% rate. From 6 April 2025 the rate increased to 14%, and will rise further to 18% from 6 April 2026.
Does Not Apply to Companies
BADR/Entrepreneurs' Relief does not apply to disposals by corporate producers — it is available only to individuals (and trustees in limited circumstances).
Partnerships
An individual may qualify when their business becomes a partnership, or on disposal of part or the whole of a partnership business. A partner may also qualify on disposal of a fractional share in company shares held as partnership assets.
Citation sources
14.1 An individual may qualify for entrepreneurs’ relief when their business becomes a partnership. A partner may also qualify for entrepreneurs’ relief on a disposal of part or the whole of a partnership business. 14.2 A partner may qualify for entrepreneurs’ relief (subject to the normal conditions relating, for example, to a personal company) when he disposes of all or part of a fractional share in company shares which are held as partnership assets. 14.3 Guidance concerning partnerships and
Part V Transfer of business assets , business asset disposal relief and investors' relief Chapter 3 business asset disposal relief Material disposal of business assets 169I 1 There is a material disposal of business assets where— a an individual makes a disposal of business assets (see subsection (2)), and b the disposal of business assets is a material disposal (see subsections (3) to (7)). 2 For the purposes of this Chapter a disposal of business assets is— a a disposal of the whole or part of
r example, there was no evidence before the Tribunal as to the nature of the electricity contract save the appellant’s assurance that it was only conditional on terms that were described as “similar” to the Feedstock Agreement. I do not take as read that a contract with a supplier of surplus wood and a contract with a major energy company are on “similar” terms. 42. As Mr Simpson pointed out during the hearing he has been unable to scrutinise these contracts. I have found the appellant to be hon
Part V Transfer of business assets , business asset disposal relief and investors' relief Chapter 3 business asset disposal relief Amount of relief: general 169N 1 Where a claim is made in respect of a qualifying business disposal— a the relevant gains (see subsection (5)) are to be aggregated, and b any relevant losses (see subsection (6)) are to be aggregated and deducted from the aggregate arrived at under paragraph (a). 2 The resulting amount is to be treated for the purposes of this Act as
For disposals made on or after 6 April 2008 by individual producers FA08/SCH3 introduced Business Asset Disposal Relief (originally called Entrepreneurs’ Relief. This is now embodied in TCGA92/S169H - S, see CG63950+. If the relevant conditions are met by the individual producer Entrepreneurs’ relief may be due to reduce the amount of gain chargeable. Business Asset Disposal Relief does not apply to disposals by corporate producers.
Part V Transfer of business assets , business asset disposal relief and investors' relief Chapter 3 business asset disposal relief Relief to be claimed 169M 1 Business asset disposal relief is to be given only on the making of a claim. 2 A claim for business asset disposal relief in respect of a qualifying business disposal must be made— a in the case of a disposal of trust business assets, jointly by the trustees and the qualifying beneficiary, and b otherwise, by the individual. 3 A claim for
Entrepreneurs’ relief was renamed in Finance Act 2020 with effect from 6 April 2020. The new name is generally used in this guidance but should be read as applying to times before that date. The maximum amount of gains which may benefit from Business Asset Disposal Relief is subject to a lifetime limit for all qualifying disposals. This lifetime limit has been revised as follows: For qualifying disposals made: from 6 April 2008 to 5 April 2010 £1,000,000 from 6 April 2010 to 22 June 2010 £2,000
Entrepreneurs’ Relief was renamed in Finance Act 2020 with effect from 6 April 2020. The new name is generally used in this guidance but should be read as applying to times before that date. The guidance between CG64125 to CG64145 deals with calculation of the amount of the “chargeable gains” after Business Asset Disposal Relief. The following are covered: Manual page - - CG64125 Amount of the relief - General TCGA92/S169N CG64130 Amount of the relief - General - Examples - CG64135 Amount of the
PART 1 Income tax, corporation tax and capital gains tax CHAPTER 4 Other provisions Capital gains tax Entrepreneurs' relief: associated disposals 41 1 Section 169K of TCGA 1992 (disposal associated with relevant material disposal) is amended as follows. 2 For subsections (1) and (2) substitute— 1 There is a disposal associated with a relevant material disposal if— a condition A1, A2 or A3 is met, and b conditions B and C are met. 1A Condition A1 is that an individual (“P”) makes a material dispo
Entrepreneurs’ relief was renamed in Finance Act 2020 with effect from 6 April 2020. The new name is generally used in this guidance but should be read as applying to times before that date. As explained at CG63955, the lifetime limit for Business Asset Disposal Relief was reduced to £1 million from Budget day 11 March 2020. The limit of £1 million applies to disposals on or after 11 March 2020 and takes into account any previous gains on which the relief has been claimed. So that if an individu