CGT and Business Asset Disposal Relief (BADR) for directors – explained

On the face of it, Capital Gains Tax (CGT) is pretty easy to understand: it’s the tax you pay when you sell an asset that has grown in value. You only pay CGT on the profit you made from the sale, not the overall sum you received.

Assets may include a business, shares, a second property (including overseas property, if you’re registered to pay tax in the UK), and even a family heirloom. As usual with tax matters, the devil’s in the detail.

One important relief to be aware of is Business Asset Disposal Relief (BADR), formerly known as Entrepreneurs’ Relief.

This reduces the rate of CGT you pay when disposing of qualifying business assets, subject to strict conditions and a lifetime limit of £1m. Because of its significance to company owners, we cover both CGT and BADR in this guide.

What’s in this guide?

• How much CGT will you pay?
• CGT-free disposals and exemptions
• Examples of CGT in practice
• What is Business Asset Disposal Relief (BADR)?
• BADR rates from April 2026
• Will I qualify if I sell my business?
• What about shares, loans and other disposals?
• How do I claim BADR?

How much CGT will you pay?

The amount of CGT you pay depends on the asset in question and your income.

For 2026/27, the main CGT rates for individuals are 18% and 24%. If your taxable income and gains remain within the basic rate band, gains are generally taxed at 18%. Any part of the gain falling above the basic rate band is generally taxed at 24%.

These rates increased from 10% and 20%, respectively, following the 2024 Autumn Budget.

The same 18% and 24% rates now generally apply to gains on residential property. The previous 28% higher rate for residential property was reduced to 24% from 30 October 2024.

Capital gains below the 2026/27 level of £3,000 per year are tax-free.

Investments held within tax-advantaged wrappers such as ISAs and registered pensions are generally CGT-free. If you inherit an asset, there is normally no CGT to pay simply because you inherited it. However, you may have to pay CGT on any increase in value between its value when you inherited it and the amount you later receive when you dispose of it.

Try our BADR Calculator.

CGT-free disposals and exemptions

Some gifts, such as those exchanged by a husband and wife and/or civil partners in a given tax year, may also be considered CGT-free. Transfers between spouses and civil partners who are living together are normally made on a no gain/no loss basis.

Different rules can apply following separation or divorce.

Gifts made to charities are also generally CGT-free, and you won’t have to pay CGT on lottery winnings, premium bonds, betting wins, or government gilts.

Examples of CGT in practice

Selling a property

If you sell a property other than your own home, such as a holiday home or a buy-to-let property, you may have to pay CGT on the profit.

You can deduct allowable costs associated with buying and selling the property, such as certain legal fees, Stamp Duty Land Tax and estate agent’s fees, when calculating your gain. Your £3,000 annual exempt amount for 2026/27 can then be set against your net taxable gains for the year.

You pay CGT on the taxable balance at either 18% or 24%, depending on how your gains interact with your taxable income and the basic rate band. You also have to report and pay CGT on a UK residential property disposal to HMRC within 60 days of completion if CGT is due.

Shares

If you buy shares in a quoted company and then sell them, you will pay CGT on your gain if it exceeds any available exemptions and allowable losses.

For example, if you buy £10,000 worth of shares and sell them for £100,000, your initial gain is £90,000. You would then take account of the annual exempt amount, any allowable losses and your taxable income when calculating the CGT due at 18% and/or 24%.

Selling a business

If you sell a part or all of a company you own, you’ll have to pay tax on your gain. However, if the relevant conditions are met, you may qualify for Business Asset Disposal Relief (see below).

Selling valuables and heirlooms

Except for gains made from the sale of your private car, which is normally CGT-free, special CGT rules apply to personal possessions worth more than £6,000. This could include artwork, jewellery, stamps, and coins. Once you calculate any taxable gain and take account of your annual exempt amount, you’ll be able to see if any CGT is payable.

What is Business Asset Disposal Relief (BADR)?

To encourage entrepreneurship in the UK, eligible individuals pay a lower rate of CGT on the disposal of business assets, subject to a lifetime limit.

Entrepreneurs’ Relief is now known as Business Asset Disposal Relief (since April 2020).

Usually, when you dispose of an asset you own, you have to pay CGT.

For valuable assets, this tax burden can be large – sometimes even dissuading people from developing them. BADR exists to encourage people to build successful businesses without worrying about excessive taxation on disposal.

If you qualify, you pay CGT at a reduced rate on the gains you make from selling qualifying business assets. This is subject to a lifetime limit of £1m.

BADR rates from April 2026

In the 2024 Autumn Budget, the Chancellor announced that the CGT rate for BADR disposals would rise from the historic 10% rate.

• From April 2025, the BADR rate rose to 14%.
• From 6 April 2026, the BADR rate is 18%.

The £1m lifetime limit remains unchanged.

Will I qualify if I sell my business?

Not everyone who sells a business qualifies for BADR – it’s important to check in advance rather than assume and risk an unwelcome surprise later.

If you dispose of either part or all of a business which you owned as a sole trader or business partner, you may qualify – even if you dispose of qualifying assets after the business has closed down.

For a disposal of all or part of a business, you generally need to have owned the business for at least 2 years before the date you sell or close it. If the business has ceased, qualifying business assets generally need to be disposed of within 3 years of cessation.

What about shares, loans and other disposals?

If you sell shares in your company, you may qualify for BADR if the conditions have been met for at least 2 years before the sale.

Broadly, the company must be a trading company (or the holding company of a trading group), and you must be an employee or office holder. The company must also normally be your ‘personal company’, which includes requirements concerning your shareholding, voting rights and economic interest in the company.

For most share disposals, this includes holding at least 5% of the ordinary share capital and 5% of the voting rights, together with one of the additional 5% economic entitlement tests. There are different rules for some EMI shares.

If you dispose of an asset that you personally owned but which was used by your business or company, BADR may also be available as an ‘associated disposal’ in certain circumstances. The conditions are more detailed, so check HMRC’s BADR guidance before relying on the relief.

Some entrepreneurship schemes also qualify. For example, special BADR rules apply to qualifying shares acquired through an Enterprise Management Incentive (EMI) scheme.

How do I claim BADR?

The process for claiming is straightforward. Work out your total profit from the sale of all the assets you believe qualify for BADR.

You may benefit from seeking your accountant’s advice to ensure the numbers are correct.

Deduct any qualifying losses and take account of your available CGT annual exempt amount (currently £3,000 for 2026/27).

You then apply the reduced BADR rate to the qualifying taxable gain. For disposals made from 6 April 2026, the BADR rate is 18%.

Try our BADR Calculator.

Most individuals can claim BADR via their Self Assessment tax return. HMRC provides more details on the official BADR guidance pages.