General FAQs about shares and equity
      Back to home
      1. Vestd Help Centre
      2. General FAQs about shares and equity

      When are you eligible for Business Asset Disposal Relief (BADR)?

      Understanding what BADR is and when you’re eligible for it when selling all or part of your business.

      Updates as per the Autumn Budget 2024:

      • The BADR (Business Asset Disposal Relief) rates will stay the same for the rest of the current tax year but are set to rise to 14% in the 2025/26 tax year and 18% in 2026/27.
      • Standard Capital gains tax is now charged at 18% for basic rate taxpayers, or 24% for higher or additional rate taxpayers.
      • It’s also worth noting that the current CGT (Capital Gains Tax) annual allowance is £3,000. 

      When Can You Benefit from Business Asset Disposal Relief (BADR)?

      Business Asset Disposal Relief (BADR)—previously known as Entrepreneurs' Relief—can significantly reduce the Capital Gains Tax (CGT) you pay when selling qualifying business assets. 💼

      This valuable tax break can make a big difference to your net gain, so let’s break it down. 📊


      Contents📋

       

      What’s New?

      The Autumn 2024 Budget brought a few important updates:

      • BADR rates remain at 10% for now but are set to rise:
        • 14% in 2025/26 📈
        • 18% in 2026/27 🚀
      • Standard CGT rates are now:
        • 18% for basic rate taxpayers
        • 24% for higher/additional rate taxpayers
      • The annual CGT allowance is £3,000.
        For more information, please refer to HMRC guidelines

      Who Qualifies for BADR?

      To take advantage of BADR, you must:

      • Be an employee, office holder, or business owner.
        (BADR doesn’t apply to shareholders or investors who aren’t involved in the company.)
      • Meet these conditions for at least 2 years before selling your shares:
        • The company must be primarily trading (not investment-focused).
        • For non-EMI shares, you must meet the ‘personal company’ test:
          • Own 5% or more of shares and voting rights 🗳️
          • Be entitled to 5% or more of profits, wind-up assets, or sale proceeds.

      What Else Should You Know?

      • Dilution of Ownership:
        If your ownership falls below 5% due to new share issuances, you might still qualify—if you sell before the issuance.
      • Post-Trading Period:
        You can still claim BADR if you sell your shares within 3 years of the company ceasing to trade.
      • Deferring Tax:
        You can postpone paying CGT on the gain by notifying HMRC. ✉️

      What About EMI Shares?

      Good news—EMI-eligible shares qualify for BADR if:

      • The EMI option was granted over 2 years ago.
      • Shares were acquired after 5 April 2013.
      • You’re still employed by the granting company when you sell the shares.

      For more information, check out our guide on EMI tax

      💡 Don't forget, BADR doesn’t apply to unapproved options or CSOP. 

      Do Growth Shares Qualify for BADR?

      Growth shares can qualify, but there’s a catch—they must meet the 5% capital rights threshold for at least 2 years. Here’s how it works:

      • If your shares gain more than 5% of the company’s capital after surpassing the hurdle rate, the 2-year clock starts.
      • You’ll need to hold your shares long enough to qualify.

      📊 Example:

      • You hold 10% growth shares in a company with a hurdle rate of £1.20.
      • The company’s value grows to £3 per share, giving your shares >5% of the capital.
      • If you meet this threshold for 2 years, your gain may qualify for BADR.

      ✅ Next Steps

      BADR can be a game-changer, but the rules—especially for growth shares—can get tricky. ⚠️ To make sure you qualify, consult HMRC guidelines and a tax professional. It’s worth the effort to unlock these savings!


      Our team, content and app can help you make informed decisions. However, any guidance and support should not be considered as 'legal, tax or financial advice.'