Business Asset Disposal Relief – Increase in Tax Rate

From 6 April 2025 the rate of Capital Gains Tax (CGT) that applies on disposals that are eligible for Business Asset Disposal Relief (BADR), will increase from 10% to 14%. From 6 April 2026, it is planned for this rate to increase further to 18%. To save CGT, an individual may therefore wish to bring forward any disposals that may be eligible for BADR.

By way of reminder, each individual had a BADR lifetime limit of £1m that can be made on qualifying disposals.

This means an individual can save up to £40,000 (£1m X 4%), by bringing forward a qualifying disposal prior to 6 April 2025 that they originally planned to make in the 2025-26 tax year. Furthermore, an additional £40,000 could be saved if the disposal was made in the 2025-26 tax year compared to the 2026-27 tax year (where the rate is expected to increase by a further 4%).

BADR qualifying disposals can include the following assets subject to certain conditions being met:

• The disposal of a business or part of a business that has been owned two years prior to the disposal date.
• Assets disposed within three years of the business ceasing that were part of the business.
• The sale of a 5% or more qualifying shareholding in a trading company where the shares have been held for two years.
• The sale of EMI shares. The 5% shareholding condition does not need to apply but there must be at least two years between when the share options were granted and the date of disposal.

If you wish to know more on this matter, please feel free to contact Joe Wilson  on 023 8046 1237 or email Joe Wilson.