How to Master Business Assets Disposal Relief (BADR): A Guide for Entrepreneurs Planning Their Next Big Move

If you’re a business owner contemplating the end of your entrepreneurial journey—whether to retire to sunny beaches or embark on a new venture—you’ve likely come across Business Assets Disposal Relief (BADR). This nifty piece of tax legislation can soften the blow of a capital gains tax (CGT) bill when you sell or wind up your business. But what exactly is BADR, how does it work, and most importantly, how can it help you save money? Let’s break it down, with just the right mix of insight and wit.

What is BADR (and Why Should You Care)?

Previously known as Entrepreneurs’ Relief, BADR was renamed in 2020, possibly because "entrepreneurs" sounds a bit too glamorous for the taxman’s liking. The principle, however, remains: BADR allows you to pay a reduced CGT rate of 10% on qualifying business disposals. That’s a considerable saving compared to the standard rates, which can soar to 20% or more for higher earners. 

It’s a sweetener for those brave enough to start, run, and eventually part with a business. Think of it as the government’s way of saying: “Thanks for the memories—and the tax revenue.”

Qualifying for BADR: Not as Easy as Selling the Office Printer 

To claim BADR, the disposal must involve a material reduction in business operations. This isn’t about flogging old office chairs or upgrading your IT equipment—it’s about big decisions like: 

- Selling the business outright. 

- Winding it up to release capital. 

- Passing it on as a gift (perhaps to those suspiciously eager offspring). 

For sole traders and partnerships, selling part of your business can qualify, but only if the part sold can operate independently. For instance, selling one of two bakeries might qualify; selling the smaller bakery that depends on the larger one for supplies probably won’t.

The BADR Arsenal: What Assets Are Eligible?

Business Interests: Sole traders or partners selling all or part of their business are eligible if they’ve owned it for at least two years. 

Shares in a Limited Company: If you own at least 5% of a "personal company" (shares and voting rights) and have held them for two years, you’re good to go. 

EMI Shares: For employees with EMI options, the qualifying period begins when the options are granted, not exercised—a rare gem in the tax world! 

Non-trading assets, such as buy-to-let properties or investment portfolios, don’t make the cut unless the business remains primarily trading (no more than 20% of activity being non-trading).

How Much Can You Claim?

The current lifetime limit for BADR is £1 million, slashed from a generous £10 million when it was Entrepreneurs’ Relief. While it’s still a substantial saving, the writing’s on the wall that BADR’s days might be numbered. If you qualify, now’s the time to take advantage before the Treasury changes its mind.

Claiming BADR: A Practical Guide 

After determining that your disposal qualifies, you can claim BADR through your self-assessment tax return, due by 31 January following the tax year of disposal.

Alternatively, you can submit a paper claim using form HS275. Be sure to include detailed calculations—this isn’t a time for creative accounting. 

Why Get Professional Advice? 

Tax reliefs like BADR are invaluable but fraught with complexity. Missteps can cost you dearly, not just in CGT but potentially in other areas like inheritance tax. Seeking expert guidance can ensure you don’t leave money on the table—or hand over more to HMRC than necessary.

If you’re planning an exit, or even just toying with the idea, it’s worth having a conversation about tax planning. After all, the best part of entrepreneurship is finishing your journey on your terms—preferably with the lowest possible tax bill.