Business Asset Disposal Relief, formerly known as Entrepreneurs’ Relief

Understanding Business Asset Disposal Relief (formerly Entrepreneurs’ Relief)

Business Asset Disposal Relief, formerly known as Entrepreneurs’ Relief, allows individuals to pay a reduced rate of Capital Gains Tax (CGT) when they sell or dispose of part or all of their business. This valuable tax relief rewards entrepreneurs and business owners who have invested time, effort, and capital in building a business by offering a lower CGT rate on qualifying gains.

From 6 April 2025, the tax rate under Business Asset Disposal Relief is 14%, while gains realised on or before 5 April 2025 qualify for the historic 10% rate.

In simple terms, if you meet the qualifying conditions, you could significantly reduce the tax you pay when selling your business, shares, or certain business assets.

Who Can Claim Business Asset Disposal Relief?

You may be eligible to claim Business Asset Disposal Relief, formerly known as Entrepreneurs’ Relief, if you are:

A sole trader or business partner selling all or part of your business, or

An employee or office holder selling shares or securities in a trading company (or the holding company of a trading group).

The key requirement is that you must meet the qualifying conditions for at least two years leading up to the date of disposal.

Eligibility When Selling All or Part of a Business

If you are selling or closing down your business, the following must apply:

You are a sole trader or business partner, and

You have owned the business for at least two years prior to the sale.

If you are closing your business rather than selling it, you must dispose of your business assets within three years of cessation to qualify for the relief.

This ensures that genuine business owners who wind down their operations are not penalised compared to those who sell their business outright.

Eligibility When Selling Shares or Securities

If you’re selling shares, the qualifying conditions depend on whether they are from an Enterprise Management Incentive (EMI) scheme or not.

If the Shares Are from an EMI

You must have:

Purchased the shares after 5 April 2013, and

Been granted the option to buy them at least two years before the sale.

This makes Business Asset Disposal Relief, formerly Entrepreneurs’ Relief, particularly valuable for employees participating in long-term incentive schemes.

If the Shares Are Not from an EMI

To qualify, all of the following must apply for at least two years before disposal:

The company must be your personal company, meaning you hold at least 5% of both shares and voting rights, and

You are entitled to at least 5% of distributable profits and assets on winding up or 5% of disposal proceeds if the company is sold.

The company’s main activities must be trading, not investment or other non-trading activities.

If Your Shareholding Falls Below 5%

Even if your shareholding falls below 5% due to the issue of new shares, you may still qualify for Business Asset Disposal Relief (formerly Entrepreneurs’ Relief).

You can elect to be treated as if you sold and immediately repurchased your shares before the dilution occurred. This creates a notional gain that qualifies for the relief, and you can also choose to defer paying tax on that gain until you sell your actual shares.

You can make this election by:

Completing the Capital Gains Summary section of your tax return, or

Writing to HMRC if you do not usually complete a return for that year.

If the Company Stops Trading

If your company ceases to be a trading company (for example, it shifts focus to investments), you can still benefit from Business Asset Disposal Relief, formerly Entrepreneurs’ Relief, provided you sell your shares within three years of cessation.

Business Assets You Lent to the Company

If you personally own assets that were used by your partnership or personal company (such as property, machinery, or vehicles), you may also qualify for Business Asset Disposal Relief when these are sold.

The conditions are:

You’ve sold at least 5% of your shares in your personal company or your interest in a partnership, and

You owned the asset and let the business use it for at least one year prior to the sale.

Business Asset Disposal Relief for Trustees

Trustees may also be eligible for Business Asset Disposal Relief when selling assets held in trust, provided the underlying beneficiary and trust structure meet the relevant qualifying criteria.

How Much Tax You’ll Pay

Under Business Asset Disposal Relief (formerly Entrepreneurs’ Relief), qualifying capital gains are taxed at a reduced CGT rate rather than the standard rates of up to 20%.

10% rate applies to qualifying disposals made on or before 5 April 2025.

14% rate applies to qualifying disposals made from 6 April 2025 onwards.

This rate applies up to the lifetime limit on qualifying gains (currently £1 million per individual).

How to Claim Business Asset Disposal Relief

You can claim Business Asset Disposal Relief through your Self-Assessment tax return by completing the Capital Gains Summary pages.

Alternatively, if you do not usually file a return, you can write to HMRC to make your claim.

Claims must be made within 12 months of 31 January following the tax year of the disposal.
For example, if you sold your business in June 2025, your claim must be made by 31 January 2027.

Why Seek Professional Advice

The qualifying conditions for Business Asset Disposal Relief, formerly known as Entrepreneurs’ Relief, can be complex — especially for individuals with multiple shareholdings, group structures, or mixed trading and investment activities.

At Naail & Co Chartered Certified Accountants & Tax Advisors, we regularly advise business owners, company directors, and entrepreneurs on how to structure disposals and reorganisations to maximise relief and minimise tax exposure.

Our team can:

Assess your eligibility for the relief,

Plan disposals to meet the qualifying criteria,

Handle your HMRC submission, and

Ensure full compliance with the latest tax rules.

Get Expert Help Today

If you are planning to sell your business, dispose of shares, or close down a company, it’s essential to take professional tax advice early. The right planning can make the difference between paying 14% and paying up to 20% in CGT.

Get in touch with Naail & Co Chartered Certified Accountants & Tax Advisors to book a free initial consultation and discuss how Business Asset Disposal Relief (formerly Entrepreneurs’ Relief) can work for you.

Book Your Free Consultation

FAQs - Business Asset Disposal Relief (formerly known as Entrepreneurs’ Relief)

Business Asset Disposal Relief, formerly known as Entrepreneurs’ Relief, is a special UK tax relief that reduces the rate of Capital Gains Tax (CGT) when you sell or dispose of all or part of your business, shares, or qualifying assets. It rewards genuine business owners by taxing qualifying gains at 10% (before 6 April 2025) or 14% (from 6 April 2025) instead of the standard 20% rate.

You may qualify if you are a sole trader, business partner, or company shareholder and meet the two-year ownership and trading conditions before selling your business or shares. The company must be a trading business, and you must hold at least 5% of shares and voting rights in the case of a personal company.

To qualify for Business Asset Disposal Relief, formerly Entrepreneurs’ Relief, when selling shares:

You must be an employee or office holder in the company.

The company must be a trading company or a holding company of a trading group.

You must own at least 5% of shares, voting rights, and entitlement to profits or proceeds for at least two years prior to sale.

Qualifying gains are taxed at a reduced CGT rate:

10% for disposals made on or before 5 April 2025.

14% for disposals made from 6 April 2025 onwards.
This is significantly lower than the standard CGT rates of 20% for higher-rate taxpayers.

Yes. The lifetime limit for Business Asset Disposal Relief (formerly Entrepreneurs’ Relief) is £1 million per individual. This means you can claim the relief on multiple qualifying disposals up to this cumulative amount.

Yes. If you close your business, you can still claim Business Asset Disposal Relief provided you dispose of your business assets within three years of cessation, and you met all qualifying conditions for at least two years before the business closed.

If your shareholding falls below 5% due to new shares being issued, you can still claim Business Asset Disposal Relief by making an election to be treated as if you sold and repurchased your shares before dilution. You can also defer the tax on this gain until you actually sell your shares.

You can claim Business Asset Disposal Relief via your Self-Assessment tax return by completing the Capital Gains Summary section.
If you don’t usually file a tax return, you can write directly to HMRC. Claims must be made within 12 months of 31 January following the end of the tax year in which the disposal occurred.

Yes, it can. If you personally own assets (such as property or machinery) that were used by your partnership or personal company, and you sell both the asset and your interest in the business, you may qualify for Business Asset Disposal Relief, formerly Entrepreneurs’ Relief, provided the asset was used in the business for at least one year.

Because the qualifying rules are complex, and errors in timing or structure can cost thousands in unnecessary tax. At Naail & Co Chartered Certified Accountants & Tax Advisors, our experts can help you:

Confirm your eligibility,

Structure your disposal efficiently, and

Handle your HMRC claim accurately and on time.

Get in touch today to book a free initial consultation and maximise your tax savings through Business Asset Disposal Relief (formerly Entrepreneurs’ Relief).

Book Your Free Call