Can you claim Business Asset Disposal Relief when you sell your business?
Business Asset Disposal Relief reduces the Capital Gains Tax rate on qualifying business disposals, subject to a £1 million lifetime limit. The rate is no longer the 10% it was for years: it is 14% for disposals between 6 April 2025 and 5 April 2026, and 18% from 6 April 2026 onwards.
- The rate: 14% for 2025-26 disposals, 18% from 6 April 2026.
- The limit: £1 million of qualifying gains across your lifetime, not per disposal.
- The period: the qualifying conditions must be met for at least two years before the disposal.
- The comparison: the standard higher rate on other assets is 24%, so the relief is worth 6 points.
01 What it is worth now
Business Asset Disposal Relief taxes qualifying gains at a reduced rate, applied to the first £1 million of such gains across your lifetime. The rate was 10% for many years and has risen twice: to 14% for disposals from 6 April 2025, and to 18% for disposals from 6 April 2026.
Against a standard higher rate of 24% on gains outside the relief, that leaves the benefit at six percentage points — £60,000 on a £1 million gain. Worth having, and a long way from what it used to be, which matters for anyone whose exit plan was built on the older figure.
The lifetime limit was reduced from £10 million to £1 million in March 2020 and counts all qualifying disposals you have ever made, so an earlier sale can have used it up.
Shows: the Capital Gains Tax on a business disposal with and without the relief, at the rate for the year you enter. Ignores: the annual exempt amount, whether the conditions are met, gains above the lifetime limit, and any earlier claim.
On the defaults above, the worked example shows £162,000. Without the relief the bill would be £216,000, so the claim is worth £54,000.
Source: Business Asset Disposal Relief
02 The two-year conditions
For a company disposal, you must have held at least 5% of the ordinary share capital and voting rights, been entitled to at least 5% of distributable profits and assets on a winding up, and been an officer or employee of the company — all for at least two years ending with the disposal.
For a sole trade or partnership share, you must have owned the business for at least two years before disposal. Selling assets used in a business you have ceased has its own three-year window from cessation.
Two years is the trap for anyone restructuring shortly before a sale. Issuing shares to a spouse or manager weeks before an exit gives them a holding that does not qualify, and diluting your own holding below 5% can lose the relief entirely.
Source: Business Asset Disposal Relief
03 How it fits a retirement plan
For many owner-managers the business is the largest single retirement asset, and the disposal is the moment it becomes a portfolio. The relief affects how much survives that conversion, and the rate rises have made the pension route relatively more attractive by comparison.
That is worth stating plainly: extracting profit through employer pension contributions over years, at no tax at all on the way out of the company, now compares favourably with retaining profit for an eventual disposal taxed at 18%. It also spreads the timing risk, since a sale is a single date and a contribution schedule is not — and the same logic applies to an unincorporated business whose owner is choosing between drawing profit and funding a pension.
Excess cash held in a company can additionally jeopardise the relief, because a company holding substantial non-trading assets may fail the trading company test. Draining surplus cash into a pension addresses both problems at once.
Source: Capital Gains Tax rates
Most of what is written about this relief still says 10%, and it has not been 10% since April 2025. At 18% it is worth six points against the standard rate, which is a useful saving and not a plan. What has changed underneath is the comparison: taking profit out as company pension contributions along the way, tax free on the way out of the company, now looks better against an eventual disposal than it did when the relief was 10%. If your exit is more than a couple of years off, that is the arithmetic to redo.
FAQ
What rate applies now?
18% for disposals from 6 April 2026. Disposals between 6 April 2025 and 5 April 2026 were taxed at 14%, and the 10% rate that most published guidance still quotes applied to earlier years.
Is the £1 million limit per sale?
No, it is a lifetime limit across all qualifying disposals you have ever made. It was reduced from £10 million in March 2020, so an earlier sale under the old limit can have consumed a large part of it.
How long do the conditions have to be met?
At least two years ending with the disposal — the 5% shareholding, voting rights, profit entitlement and officer or employee status for a company, or ownership of the business for a sole trade. Restructuring shortly before a sale is how the relief is most often lost.
Sources
Regulator references
- Business Asset Disposal Relief · GOV.UK · 2025The lifetime limit and the qualifying conditions for the reduced CGT rate on a business sale.Last verified: 2026-09-07
- Capital Gains Tax rates · GOV.UK · 2025The rates by asset class and taxpayer band used in the arithmetic.Last verified: 2026-09-07
Calculator unit tests · the assertions this page's worked example is checked against, and their last result
Changelog
- 2026-09-07 — initial publish (new format)
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Jordan Reeves
Founder of Talk Through Wealth. A software engineer for over a decade before turning to retirement planning, Jordan built the projection engine after watching family members get fragmented, country-by-country advice that never reconciled. He writes about retirement the way the engine computes it: month-by-month, lifetime-long, and skeptical of any rule of thumb that hasn't been run through the math.