Business Asset Disposal Relief
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1. Eligibility
You may be able to pay less Capital Gains Tax when you sell (or 鈥榙ispose of鈥�) all or part of your business.
Business Asset Disposal Relief means you鈥檒l pay tax at 10% on all gains on qualifying assets.
Business Asset Disposal Relief was known as Entrepreneurs鈥� Relief before 6 April 2020.
If you鈥檙e selling all or part of your business
To qualify for relief, both of the following must apply for at least 2 years up to the date you sell your business:
- you鈥檙e a sole trader or business partner
- you鈥檝e owned the business for at least 2 years
The same conditions apply if you鈥檙e closing your business instead. You must also dispose of your business assets within 3 years to qualify for relief.
If you鈥檙e selling shares or securities
To qualify, both of the following must apply for at least 2 years up to the date you sell your shares:
- you鈥檙e an employee or office holder of the company (or one in the same group)
- the company鈥檚 main activities are in trading (rather than non-trading activities like investment) - or it鈥檚 the holding company of a trading group
There are also other rules depending on whether or not the shares are from an Enterprise Management Incentive (EMI).
If the shares are from an EMI
You must have both:
- bought the shares after 5 April 2013
- been given the option to buy them at least 2 years before selling them
If the shares are not from an EMI
For at least 2 years before you sell your shares, the business must be a 鈥榩ersonal company鈥�. This means that you have at least 5% of both the:
- shares
- voting rights
You must also be entitled to at least 5% of either:
- profits that are available for distribution and assets on winding up the company
- disposal proceeds if the company is sold聽
If the number of shares you hold falls below 5% because the company has issued more shares, you may still be able to claim Business Asset Disposal Relief.
You need to choose or 鈥榚lect鈥� to be treated as if you had sold and re-bought your shares immediately before the new shares were issued. This will create a gain on which you can claim Business Asset Disposal Relief.
You can also choose or 鈥榚lect鈥� to postpone paying tax on that gain until you come to sell your shares.
You can do this by:
- completing the additional information section of the Capital Gains summary form of your tax return
- writing to HMRC if you do not have to complete a tax return for the year
If the company stops being a trading company
If the company stops being a trading company, you can still qualify for relief if you sell your shares within 3 years.
If you鈥檙e selling assets you lent to the business
To qualify, both of the following must apply:
- you鈥檝e sold at least 5% of your part of a business partnership or your shares in a personal company
- you owned the assets but let your business partnership or personal company use them for at least one year up to the date you sold your business or shares - or the date the business closed
If you鈥檙e a trustee
You may also qualify if you鈥檙e a trustee selling assets held in the trust.
2. Work out your tax
How you work out your tax depends on whether all your gains are eligible for Business Asset Disposal Relief.
If all your gains qualify for Business Asset Disposal Relief
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Work out the gain for all qualifying assets.
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Add together the gains (and deduct qualifying losses) to work out the total taxable gain that鈥檚 eligible for Business Asset Disposal Relief.
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Deduct your tax-free allowance.
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You鈥檒l pay 10% tax on what鈥檚 left.
If you have other gains
How much tax you pay on your other gains depends on what Income Tax rate you pay.
Higher rate Income Tax payers
For gains that do not qualify for Business Asset Disposal Relief, you鈥檒l pay:聽
- 24% on gains from residential property
- 24% on other chargeable assets (or 20% for gains made between 6 April 2024 to 29 October 2024)
You can use your tax-free allowance against the gains that would be charged at the highest rates (for example where you would pay 24% tax).
For the tax years 6 April 2019 to 5 April 2024, you鈥檒l pay 28% on gains from residential property and 20% on gains made from other chargeable assets.
Basic rate Income Tax payers
If you鈥檙e a basic rate taxpayer, you need to work out the tax rate you鈥檒l pay on gains that are not eligible for Business Asset Disposal Relief.
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Work out how much taxable income you have - deduct your Personal Allowance and any other Income Tax reliefs you鈥檙e entitled to.
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Deduct this amount from the basic rate tax band for the year you made the gains (拢37,700 for the 2024 to 2025 tax year). This gives you the amount of basic rate band you can use against your gains.
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Work out your total taxable gain.
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Use your basic rate band first against any gains eligible for Business Asset Disposal Relief. You鈥檒l pay 10% tax on these.
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Use any remaining basic rate band against your other gains. You鈥檒l pay 18% on gains made from 30 October 2024. You鈥檒l pay 18% on gains made on residential property and 10% on gains from all other chargeable assets between 6 April 2024 and 29 October 2024.
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For gains above the basic rate band, you鈥檒l pay 24% on gains made from 30 October 2024. You鈥檒l pay 24% on gains made on residential property and 20% on gains from all other chargeable assets between 6 April 2024 to 29 October 2024.
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You can use your tax-free allowance against the gains that would be charged at the highest rates (for example where you would pay 24% tax).
Disposals between 6 April 2024 to 29 October 2024
At the basic rate you鈥檒l pay 18% on gains made on residential property and 10% on gains from all other chargeable assets. Above the basic rate, you鈥檒l pay 24% on gains from residential property and 20% on gains from other chargeable assets.
Disposals between 6 April 2019 to 5 April 2024
At the basic rate you鈥檒l pay 18% on gains made on residential property and 10% on gains from all other chargeable assets. Above the basic rate, you鈥檒l pay 28% on gains from residential property and 20% on gains made from other chargeable assets.
Get help
Contact HM Revenue and Customs (HMRC) or get professional tax help if you need advice.
3. How to claim
You can claim Business Asset Disposal Relief either:
- through your Self Assessment tax return
- by filling in Section A of the Business Asset Disposal Relief helpsheet
There鈥檚 no limit to how many times you can claim Business Asset Disposal Relief.
You can claim a total of 拢1 million in Business Asset Disposal Relief over your lifetime.
You may be able to claim more if you sold your assets before 11 March 2020. Contact HMRC to find out.
Deadline
| Tax year when you sold or closed your business | Deadline to claim Business Asset Disposal Relief |
|---|---|
| 2023 to 2024 | 31 January 2026 |
| 2022 to 2023 | 31 January 2025 |
| 2021 to 2022 | 31 January 2024 |