What is entrepreneurs relief on a business sale?
Answered 17 March 2026
Here is a comprehensive answer on Entrepreneurs' Relief (now called Business Asset Disposal Relief) on a business sale.
⚠️ Important naming note: Entrepreneurs' Relief was renamed "Business Asset Disposal Relief" (BADR) in Finance Act 2020, with effect from 6 April 2020. The rules described below apply under both names.
What the law says
1. The Basic Provision
Entrepreneurs' Relief (now BADR) is provided by TCGA 1992, ss.169H–169S. Section 169H provides for a lower rate of capital gains tax in respect of "qualifying business disposals."
The following are qualifying business disposals:
- (a) A material disposal of business assets (s.169I)
- (b) A disposal of trust business assets (s.169J)
- (c) A disposal associated with a relevant material disposal (s.169K)
2. What is a "Material Disposal of Business Assets"?
Under s.169I TCGA 1992, a material disposal of business assets occurs where an individual makes a disposal of:
- (a) The whole or part of a business
- (b) Assets in use at the time a business ceases, for the purposes of that business
- (c) Shares or securities in a company
3. The 2-Year Ownership Condition
- For a disposal of the whole or part of a business: the business must have been owned by the individual throughout the 2 years ending with the date of disposal.
- For a disposal of assets on cessation: the business must have been owned for 2 years ending with the cessation date, and that cessation date must be within 3 years of the disposal.
4. Conditions for Share Disposals (Personal Company)
For a disposal of shares, Condition A requires that throughout the 2 years ending with the date of disposal:
- The company is the individual's personal company and is either a trading company or the holding company of a trading group, and
- The individual is an officer or employee of the company (or of a group member).
A company is an individual's "personal company" if they hold at least 5% of the ordinary share capital and at least 5% of the voting rights are exercisable by virtue of that holding.
5. The Rate of Tax and Lifetime Limit
Under s.169N TCGA 1992, qualifying gains are aggregated and net losses deducted. The resulting amount is charged at the relief rate, subject to a lifetime limit:
| Disposal date | Rate |
|---|---|
| 6 April 2008 – 22 June 2010 | 4/9ths reduction applied |
| 23 June 2010 – 5 April 2025 | 10% |
| 6 April 2025 – 5 April 2026 | 14% |
| On or after 6 April 2026 | 18% |
The lifetime limit on qualifying gains is currently £1 million (reduced from £10 million on 11 March 2020).
Any gains above the lifetime limit are charged at the normal CGT rate.
HMRC guidance / practice
Naming and History
HMRC confirms that Entrepreneurs' Relief was introduced by FA 2008, s.7 and Sch.3, inserting ss.169H–169S into TCGA 1992, and applies to disposals made on or after 6 April 2008. It was renamed Business Asset Disposal Relief in Finance Act 2020 from 6 April 2020.
What the Relief Does
HMRC is clear that BADR does NOT give a blanket exemption from CGT. For disposals from 23 June 2010, qualifying gains are simply charged at the relief rate of 10% (now 14% from April 2025) rather than the standard CGT rate.
Lifetime Limit — Multiple Disposals
A person may claim the relief on more than one occasion (e.g. selling a second business, or shares in instalments). However, the cumulative lifetime limit applies across all qualifying disposals. Earlier qualifying gains already relieved must be taken into account when calculating the remaining limit available.
Scope: Sole Traders, Partnerships and Companies
- For sole traders/partnerships: relief is available on the disposal of the whole or part of a business.
- For partnerships: an individual may qualify when their business becomes a partnership, or on disposal of all or part of the partnership business.
- For companies: the individual must hold at least 5% of ordinary share capital and voting rights (the "personal company" test) and be an officer or employee.
Associated Disposals
Relief may also be available where an individual owns an asset personally (e.g. business premises) that is used by a partnership or their personal company, provided there is also a qualifying material disposal of the business interest or shares.
Citation sources
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
An individual may qualify for entrepreneurs’ relief (TCGA92/S169H) when their business becomes a partnership. A partner may also qualify for entrepreneurs’ relief when there is a disposal of part or all of the partnership business. A partner may qualify for entrepreneurs’ relief (subject to the normal conditions) when he disposes of all or part of a fractional share in shares which are held as partnership assets. Guidance on entrepreneurs’ relief in relation to partnerships is at CG64040.
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