A sole trader selling the business they have spent years building — the goodwill, the van, the tools, the client list — usually knows Business Asset Disposal Relief (BADR) by its old name, Entrepreneurs' Relief, and usually remembers it as the thing that taxed a sale at 10% instead of the normal rate. That memory is now two rate rises out of date. BADR moved to 14% on 6 April 2025, and moved again to 18% on 6 April 2026. The number that actually matters this year is not the rate itself, but what it is now equal to: the ordinary basic-rate band's Capital Gains Tax rate. BADR has not been abolished, but for a large slice of the sole traders who still assume it is worth claiming, it no longer changes their bill at all.

What BADR actually requires

For a sole trader, BADR applies to the disposal of the whole or a substantial part of a business you have run yourself — not just shares in a company. To qualify, you generally need to have owned and run the business for at least two years up to the date of sale or cessation, and the assets being sold need to be business assets used in that trade: goodwill, premises, equipment, and similar. It is not automatic. You have to actively claim it on your Self Assessment return, and the claim deadline is the first anniversary of the 31 January filing deadline for the tax year of disposal — so a sale in the 2026/27 tax year has until 31 January 2029 to be claimed, not the ordinary 31 January 2028 filing date for that year's return. Miss that second, later deadline and the relief is gone even if the return itself was filed on time.

Why the saving has shrunk

Standard Capital Gains Tax on the disposal of a business (shares, goodwill, equipment — anything that is not residential property gets the same treatment since the October 2024 Budget) is charged at 18% on gains that fall within your remaining basic-rate band for the year, and 24% on anything above it. BADR charges a flat 18% on qualifying gains up to the lifetime limit, regardless of which band they would otherwise sit in. Read those two numbers again: the BADR rate and the basic-rate CGT rate are now identical. BADR's entire remaining purpose is to stop a large gain spilling into the 24% band. If your whole gain would have fitted inside your basic-rate band anyway, claiming BADR this year costs you nothing to do and saves you nothing either — the bill is the same with or without it.

Worked example, illustrative figures, 2026/27 rates. A sole trader sells the goodwill, van and tools of a business run for six years, for a chargeable gain of £180,000. After the £3,000 Annual Exempt Amount, £177,000 is taxable. Their trading profit for the year has already used most of their basic-rate band, leaving £30,000 of band room before the 24% rate would start to apply.
  • Without claiming BADR: £30,000 taxed at 18% (£5,400), plus the remaining £147,000 at 24% (£35,280). Total: £40,680.
  • Claiming BADR: the full £177,000 taxed at a flat 18%. Total: £31,860.

Claiming BADR here saves £8,820 — entirely because £147,000 of the gain would otherwise have fallen into the 24% band. A smaller sale, say a £25,000 gain that fits inside the same £30,000 of band room, is taxed at 18% either way: BADR changes nothing, though it is still worth claiming in case it protects headroom for a future, larger disposal against the lifetime limit — see below.

Tax on a £177,000 taxable gain: £40,680 without claiming Business Asset Disposal Relief versus £31,860 with it claimed, an £8,820 difference that comes entirely from the slice of the gain that would otherwise sit in the 24% band Tax on a £177,000 taxable gain, 2026/27 £30,000 of basic-rate band room already available before the sale. Without BADR £40,680 With BADR claimed £31,860 £8,820 saved — all of it from the £147,000 slice that would otherwise be taxed at 24% rather than 18%.

The £1m lifetime limit is cumulative, not per sale

The lifetime limit is £1 million of gains, per person, across every BADR claim you ever make — not £1 million per business and not £1 million per disposal. Sell a business this year and use £400,000 of the limit; sell another one in eight years' time and you have £600,000 of headroom left, not a fresh £1 million. Sole traders who ran one business, incorporated it, and later sold shares in the resulting company sometimes assume incorporation resets the counter. It does not: HMRC tracks the limit against the individual, across every qualifying disposal of any kind, for life. Once it is used up, every further qualifying gain is taxed at the ordinary 18%/24% rates with no relief available at all, however small the gain or however long the business was owned.

The two-year test catches people who sell too early

The two-year ownership and trading period is measured to the date of sale or cessation, and there is no partial relief for falling short — a sole trader who sells after 23 months gets no BADR at all on that disposal, not a reduced amount. This catches people who took over an existing business partway through its life, or who incorporated and then sold shares in the new company before two years had passed since incorporation (a separate two-year clock starts again at that point, measured against the shareholding, not against how long the underlying trade has existed). If a sale is being planned and the two-year point is close, it is worth checking the actual qualifying date before agreeing a completion date, not after.

What to do this week

  1. If you are planning to sell or wind down your business within the next year or two, estimate the gain now and check whether it would fall inside your basic-rate band anyway — that tells you whether BADR is actually worth claiming or just worth filing for the record.
  2. Check how much of your £1 million lifetime limit you have already used on any previous qualifying disposal, including shares sold in a company you incorporated into.
  3. If you are close to the two-year ownership mark, get the exact qualifying date confirmed before you agree a completion date with a buyer.
  4. Diarise the real claim deadline — the first anniversary of the 31 January filing deadline for the tax year of disposal — rather than assuming it falls on the ordinary return deadline. Our sole trader tax guide covers how Self Assessment deadlines generally work if you want the fuller picture.

Selling up is usually a once-in-a-business decision, which is exactly why it is worth getting the claim right rather than assuming the relief works the way it used to. We check whether BADR actually changes your bill before you claim it, track your lifetime limit, and make sure the claim is filed inside the real deadline rather than the one most people guess at. If you are weighing selling up against incorporating first, our sole trader vs limited company guide covers the wider structure decision. Fixed fees from £19 + VAT a month. Get started.