Business Asset Disposal Relief lowers the capital gains tax rate on qualifying business sales, up to a £1m lifetime limit per person. The rate has risen twice recently: 10% up to 5 April 2025, 14% from 6 April 2025, and 18% from 6 April 2026. To qualify, you generally need two years of ownership (sole traders and partners) or two years as an employee or office holder of a trading company (shareholders), running up to the sale date.
The £1m limit is a genuine lifetime limit, not annual, and counts relief used on earlier sales. Common mistakes before a sale include letting cash build up inside a trading company, adding shareholders too late to meet the two-year test, and assuming the limit has reset. Selling also changes your estate for inheritance tax, since Business Relief no longer applies once the business becomes cash. Get tax and estate advice early, before heads of terms are agreed.