The Chancellor’s Budget on 30 October 2024 introduced several significant tax changes, particularly affecting Capital Gains Tax (CGT), Employer National Insurance Contributions (NICs), and Income Tax for Non-Domiciled Individuals. There were also important announcements on VAT, Business Taxes, and Property Taxes. Below is a…
Business Asset Disposal Relief (BADR) is a tax relief in the UK that allows individuals to pay a reduced capital gains tax (CGT) rate of 10% on gains from qualifying business disposals. It was previously called Entrepreneurs’ Relief until the 2019/20 tax year. BADR is available only to individuals (not companies) and applies to certain types of business-related disposals.
What are the Qualifying Disposals?
A disposal qualifies for BADR if it involves any of the following:
BADR can also apply to individuals who carry on business as part of a partnership; for CGT purposes, the partnership business is treated as being owned by each partner.
Trustees of a settlement may also qualify for BADR if they dispose of shares in a company that meets specific requirements related to a beneficiary, or if they dispose of assets used in a business carried on by a beneficiary who has ceased trading.
Limitations and Restrictions
Lifetime Limit: BADR is subject to a lifetime limit of £1 million, which means the maximum tax saving is £100,000 (i.e., a 10% rate on gains, versus the standard CGT rate of 20%). This limit was previously £10 million but was reduced after 11 March 2020.
Goodwill and Deferred Gains: Restrictions apply to goodwill disposals and to gains that have been deferred or reorganised. For example, if shares are reorganised, BADR may still apply under specific conditions outlined in transitional rules.
Elections for Preserving Relief
Individuals may elect to preserve BADR if their company ceases to be their “personal company” (e.g., due to issuing new shares) by crystallising a gain at that time. This election allows the gain to qualify for relief, and another election can be made to defer the gain until the actual disposal of the shares or securities.
Contact us today if you need assistance with the disposal of your business/business assets and need help with claiming with BADR.
A UK tax year runs from 6 April to the following 5 April. The last tax year started on 6 April 2023 and ended on 5 April 2024. When we talk about important dates for tax, these include the dates ‘during the tax year’…
Landlords can claim certain allowable expenses from their rental property income when calculating their taxable profits and can reduce their tax bill.
All the exepnses other than the capital expenditures (for improvements to the property) are allowable expenses, as long as they are incurred ‘wholly, exclusively and necessarily’ for the the rental ‘business’ purposes.
Some examples of allowable expenses:
It is important to keep records and receipts for all expenses claimed.
If you let only part of the property and also live yourself in the same property, you must apportion expenses.
* Restrictions on Relief for Mortgage Interest: Since April 2020, tax relief on residential property finance costs has changed. Instead of deducting the interest directly from rental income, landlords receive a basic rate tax credit of their finance costs. This applies to individuals and some partnerships.
For specific guidance tailored to your situation, contact us today.
You must send a tax return if in last tax year you : worked as a Self Employed and earned more than £1000 ; were a partner in a business partnership ; received income from renting out a property, tips and commission, income from…
CGT is a tax which is charged when you sell, give away as a gift, exchange for something else or in any other way dispose of an asset for profit or gain.