What BADR does
When you sell your business or your shares in your personal company, or wind the company up and take the reserves as capital, you make a capital gain. BADR applies a reduced Capital Gains Tax rate to qualifying gains, subject to a £1 million lifetime limit. It’s a lifetime allowance, not per-transaction — once you’ve used it, it’s gone.
The rate — and why it's changed
BADR was famously a 10% rate for years. It rose to 14% from 6 April 2025 and rises again to 18% from 6 April 2026. That still sits below the standard higher rate of CGT on shares, so the relief remains valuable — but the narrowing gap changes the sums, and the timing of a sale can now matter more than ever.
Qualifying conditions (for company shares)
For at least two years up to the disposal, you generally must have:
- held at least 5% of the ordinary shares and voting rights
- been entitled to at least 5% of the profits and assets
- been an officer or employee of the company
- and the company must be a trading company (or holding company of a trading group)
The two-year clock is strict, so this is something to plan around well before any sale.
BADR when you close the company
For a solvent company with significant reserves, winding up through a Members’ Voluntary Liquidation and taking the funds as capital can bring the reserves within BADR — often far better than extracting them as dividends. Beware the anti-avoidance rules that can tax the distribution as income if you start a similar business within two years. This is exactly where advice pays for itself.
Plan the disposal properly
The conditions are precise and the timing matters more each year as the rate rises. We check your eligibility and structure a sale or wind-up to preserve the relief. Call 0114 327 1480.