Are you thinking of winding down your business? You may be eligible for BADR.
Business Asset Disposal Relief (BADR) was previously called Entrepreneurs’ Relief, and is intended to help you reduce the rate of tax paid on the disposal (sale) of ‘qualifying business assets’ for higher and additional rate taxpayers. BADR is applicable only to individuals and trustees, so disposals by companies will not qualify for relief. It is also only for qualifying disposals of business assets – not the disposal of investment or non-business assets.
Since the Autumn budget last year, there have been some changes to CGT and BADR rules, however, the relief is still available and can provide valuable tax savings designed to incentivise individuals to invest in their business.
There is currently a lifetime limit of £1,000,000 on BADR that any individual may claim, and the current CGT rate on qualifying assets is 10% versus the 20% standard CGT rate for higher and additional rate taxpayers. However, you should be aware that the CGT rate for BADR-qualifying assets will increase slightly to 14% from 6th April 2025, and then again to 18% from 6th April 2026, so take advantage of this relief whilst the discount rates are still generous.
There are many different ways in which asset disposals may qualify for relief. Your accountant will be able to assist you on whether or not you qualify, but broadly speaking, BADR can apply to the disposal of business assets, partnership interest and assets, shares in your own company or joint venture interests.
If you wind down your business and sell the assets, you need to identify the best way to take money from the business. Claiming BADR will require a formal insolvency, known as a Members Voluntary Liquidation, please get in touch if you would like to know about how it would work.
