If you’re planning to sell your business, close it down, or dispose of shares in your company, entrepreneurs relief is probably already on your radar. The relief — formally known as Business Asset Disposal Relief (BADR) since 2020 — reduces the amount of Capital Gains Tax you pay when you dispose of qualifying business assets. For years it sat at 10%, making it one of the most valuable reliefs available to owner-managers.

But from 6 April 2026, that rate rose to 18%. It’s still lower than the standard CGT rates, and the £1 million lifetime limit remains in place, but the landscape has changed enough that it’s worth revisiting how the relief works, whether you qualify, and what mistakes to avoid. We’ve had a number of conversations with clients recently about exactly this — so here’s our current thinking.

Business Asset Disposal Relief reduces the Capital Gains Tax rate you pay when you sell or dispose of certain qualifying business assets. As of 6 April 2026, the rate is 18% — still meaningfully lower than the 24% standard CGT rate that applies to most asset sales for higher-rate taxpayers.

The relief applies to a lifetime total of £1 million in qualifying gains. That limit has been in place since March 2020, when it was cut from the previous £10 million. Once you’ve used your lifetime allowance, any further qualifying gains are taxed at the standard rate.

It’s worth being clear that the relief is not automatic. You have to actively claim it — either through your Self Assessment tax return or by writing to HMRC. The deadline for claims is 31 January following the end of the relevant tax year. For disposals made in the 2025-26 tax year, that means you have until 31 January 2028 to make your claim.

One thing we see regularly: business owners assuming they can claim without ever checking whether they actually meet the qualifying conditions. The relief has strict rules, and it’s easy to miss out entirely if the structure of your exit isn’t set up correctly in advance.

Qualifying for entrepreneurs relief isn’t simply a matter of having run a business for a while. The conditions are specific, and they have to be met for a continuous period of at least two years ending on the date of disposal.

For a sole trader or business partner

You need to have owned and operated the business for at least two years. The business must be a trading business — not, for example, an investment holding company or a property rental business.

For limited company shareholders

You must hold at least 5% of the ordinary share capital and voting rights, be an employee or officer of the company, and be entitled to at least 5% of the distributable profits and assets on a winding-up. All of these conditions must be met throughout the two-year qualifying period — not just at the point of sale.

The two-year rule catches people out more than almost anything else. If you’ve grown a business quickly and are looking to exit within the first couple of years of incorporating, the timing may simply not work in your favour. Planning ahead matters here — and it’s the kind of thing worth discussing with an accountant well before any sale conversation begins, not during it.

It’s also worth noting that some taxpayers have previously exceeded the £1 million lifetime limit — often without realising it — after claiming the relief on multiple business disposals over the years. If you’ve claimed before, it’s essential to check where you stand against that limit before assuming full relief is available.

For much of its history, entrepreneurs relief offered a 10% CGT rate — a figure that made it genuinely transformative for business owners exiting with significant gains. The 18% rate that now applies from 6 April 2026 is a substantial step up.

To put that in concrete terms: on a £500,000 qualifying gain, the tax under the old 10% rate would have been £50,000. At 18%, that becomes £90,000. That’s a £40,000 difference on a single disposal. On gains approaching the £1 million lifetime limit, the impact is obviously larger.

That said, 18% is still significantly lower than the 24% standard CGT rate for higher and additional rate taxpayers. For business owners with gains that qualify, the relief is still worth claiming — it’s just less of a windfall than it used to be.

What this rate change does change is the calculus around certain exit planning decisions. Strategies that were primarily motivated by accessing the 10% rate may need revisiting. If you’re planning a business sale or a company wind-down in the coming years, now is a good time to look at the full picture — including other reliefs, the timing of disposal, and how proceeds are structured — rather than assuming BADR does all the heavy lifting.

In our experience, most errors around entrepreneurs relief fall into a few predictable categories. None of them are inevitable — they’re all avoidable with a bit of forward planning.

Not meeting the two-year qualifying period

The most common issue. Business owners who incorporate a new company and then sell or wind it up within two years often find the relief simply isn’t available. The qualifying period runs to the date of disposal, so timing matters. If a sale is approaching and you’re close to the two-year mark, the timing of completion can make a significant difference.

Failing to meet the 5% shareholding test

Share dilution — through investment rounds, employee share schemes, or restructuring — can inadvertently push a founder’s stake below the 5% threshold. It’s worth auditing your shareholding structure well before any exit event.

Setting up a similar business too soon afterwards

HMRC can challenge a BADR claim if you close a business and promptly start a substantively similar one. The relief is intended for genuine disposals, not restructures dressed up as exits. This is an area where getting professional advice before acting is much cheaper than trying to correct things afterwards.

Missing the claim deadline

The deadline is strict. For the 2025-26 tax year, you have until 31 January 2028 — but leaving it that long creates unnecessary risk. We’d always recommend claiming as part of your Self Assessment return in the year the disposal occurs.